Analysis of English Proficiency vs Wage Expectations in main offshoring locations
During the past decade, offshored call centers have been gaining a lot of attention, especially from Western companies. While training people in highly developed countries such as the United Kingdom, United States involves a large amount of investment and using local sources for repetitive jobs could be a waste of money, setting up offshored call centers in developing countries is an effective, practical idea.
To choose your next offshoring destination, you should consider some key factors such as English proficiency and Wage Expectations.
Over the years, India has been a preferred country for offshoring. A lot of global organisations such as Google, IBM, General Electric, Ford Motor offshored their businesses here. Key drivers to India’s great attraction are: the politically stable environment, advanced communication facilities, flexible costs, multilingual capabilities, a large pool of computer-literate and English-speaking people. Research indicates that the cost of handling a call or paying for an employee for 1 hour in India is normally half (or even one third) the cost of delivering the same work in the United States.
However, the wage expectation in India is on top of the Asian offshoring country list and continues to increase. Reports from IDG Communications showed that India continues to experience strong upward pressure on salaries and have a negative wage inflation rate towards the corporate business environment. On the other hand, skill gap among the vast talent pool is also an issue yet to be resolved in a day or two.
For nearly a decade, China has been touted as the biggest threat India's supremacy in offshoring and outsourcing industries. China is a major player in the global economy as the top country for industrial output and its major cities have some of the best telephone and internet systems in the world.
China's labor costs are cheaper than India, according to data from Neo Advisory. An entry-level ITO worker earns $7,000 a year versus $8,400 in India while a Chinese team leader with two to five years of experience earns $14,700 compared to $17,000 in India. At management levels, wage disparity increases even more, with Indian managers earning $30,800 a year, 36 percent more than their Chinese counterparts making $22,600.
Nonetheless, China has a shortage of middle and senior managers with experience managing client expectations, Western business acumen, leading large teams, and communicating effectively with customers. Additionally, English Proficiency of China in 2018 only ranked at medium level in Asia (behind Singapore, Philippines, Malaysia, India, Hongkong, Korea, Vietnam, Macau). While in the contact center industry, delivering fluent conversations and conveying clear, thoughtful messages for your customers is extremely important, workforce in China may not be in a position to meet your customers' expectations consistently.
Over the last several years, a revolution has been reshaping the call center industry: the rise of the Philippines, a former United States colony that has a large population of young people who speak lightly accented English.
The New York Times website revealed that Filipino call center agents typically earn more than their Indian counterparts ($300 a month, rather than $250, at the entry level), but executives say they are worth the extra cost because American customers find them easier to understand than Indian agents, whose accents are stronger and use unfamiliar idioms. Indians, for example, might say, “I will revert on the same,” rather than, “I will follow up on that.”
The Philippines has “a unique combination of Eastern, attentive hospitality and attitude of care and compassion mixed with what I call Americanization,” said Aparup Sengupta, chief executive of Aegis Global, an outsourcing firm based in Mumbai, India, that acquired Manila-based People Support in 2008 and now employs nearly 13,000 Filipinos.
However, companies in the Philippines are grappling with higher costs and losing their best workers because of high domestic inflation and a shortage of skilled professionals. In the last two years, the Philippine peso climbed nearly 10 percent against the dollar, to 42.14, before weakening recently. If the peso appreciates to 35 to the dollar, many of the call centers in the Philippines will not survive, said Narasimha Murthy, president of HGS USA, the American arm of an Indian outsourcing company that employs 4,000 people here. But things will look upbeat soon, thanks to its effective government’s management.
Despite a lack of market awareness, Vietnam is a strong combination of the strengths from India, China and Philippines: good English levels, positive infrastructure, high labor productivity, attractive costs, lower rental payments and building costs, attractive attrition rate. According to Tower Watson - Services Offshoring Ranking in 2013, Vietnam is #3 in global offshoring hotspot and #1 in competitive cost. Gartner’s Leading Global Locations for Offshore Services in 2016 even considered Vietnam as Asia Tier 1 emerging-market location and one in top 5 locations for outsourcing.
For more details, this growing market has a low turnover rate of less than 10% compared to 10% to 20% in other Asian countries. The labor cost here is approximately 50% lower than that of India, China or South-East Asian neighbors while quality and output remain high. While India and Filipinos agents change roles frequently for either better remunerate or incentives; the attrition rate in Vietnam is only 6 - 8%. For IT and outsourcing in India, the attrition rate regularly climbs beyond 40%, and the trend is driving wages higher.
Additionally, the English proficiency of Vietnamese are excellent thanks to the robust Foreign Investment and huge number of returning Vietnamese. For more details, click HERE.
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