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Last Updated: Tuesday, 2 December, 2003, 16:53 GMT
UK firms size up Indian benefits
By Bill Wilson
BBC News Online business reporter

Norwich Union offices
Unions are fighting the proposed Norwich Union move

"This deplorable announcement by Aviva is based purely on greed," fumed David Fleming, Amicus national secretary, on hearing that Norwich Union was the latest in a long line of UK companies to move call centre operations to India.

The company would probably not deny that the decision was about money. It is indeed the lure of savings that is causing a growing number of companies to transfer jobs to offshore bases 5,000 miles away.

Despite a high-profile counter campaign being run by many British unions, research shows 28 firms have outsourced more than 50,000 jobs serving UK customers to India over the past two years.

Recent announcements have included proposals by the national rail enquiry service to move 600 jobs to India as part of cost cutting measures, while HSBC intends to outsource 4,000 jobs over two years.

Lloyds TSB plans to transfer work from its Newcastle call centre to India, with the loss of 1,000 Tyneside jobs.

And offshore outsourcing of call centre work is expected to grow by 25% over the next five years.

Very persuasive

Mark Kobayashi-Hillary, author of a forthcoming book about the issue, says the principal reasons for outsourcing are wage cost savings and improved customer service levels.

"There is double-digit savings to be made on costs. And the staff are very professionally qualified people, and educated to a much-higher level then their UK counterparts," he explains.

At the moment it is all very cost driven, but in the long-term companies will see savings diminish
Stephen Peattie, Kinetic offshoring consultants

Chris Scoggins, chief executive of National Rail Enquiries, has said Indian call centre workers also do a better job than those in Britain because they are more motivated and more accurate in their work.

However, more importantly, he said the move could also save rail firms up to 25m over several years.

As Graham Hoskins, managing partner of call centre consultancy Kinetic, which produces a guide to outsourcers in India, says "the commercial arguments could be very persuasive".

'Corporate family'

But while there are cost savings to be made now, there are fears that the increased demand will eventually push salaries higher in the main outsourcing centres of Bangalore, New Delhi, and Bombay.

Indian call-centre staff
Wages in Indian call centres are about 10% of UK rates

"At the moment it is all very cost driven, but in the long-term companies will see savings diminish," warns Kinetic management partner Stephen Peattie.

Although it is possible to subcontract the new operation to specialist third-party infotech firms in India, large corporations such as GE, Dell and HSBC, prefer to set up their own operations in India, through a subsidiary company.

"This then allows them to install their own mangers, impose their own style of doing things, impose a corporate ethos, and at the same time make staff feel they are part of the company's global family," Mr Kobayashi-Hillary says.

Legal work

The list of business processes that can now be moved to India is almost endless, and includes customer reservations, telemarketing, payroll processing, insurance claims, and credit card and loan applications.

But there is also a growing market in more complex jobs, such as research or accounting.

This ignores Aviva's corporate social responsibility towards both its UK employees and customers
David Fleming, Amicus

"In India offshore work now includes accountancy services, equity research for banks, para-legal research for lawyers, and medical graduates writing up UK-based health research work.

"I was out in Bangalore recently and visited one engineering and design company which is carrying out all the R & D development for Pratt and Whitney aircraft engines in the USA," says Mr Kobayashi-Hillary.

Despite the lure of cost-savings, the decision to move abroad cannot be taken lightly.

There is strong resistance to the moves amongst the unions who are fighting to keep jobs in the UK.

The Communications Workers Union said BT and other companies that outsources call centre work should be reminded of the benefits of remaining in the UK.

Business reluctance

A new report from Huntswood Outsourcing Solutions says many in the financial sector feel the benefits to be gained from outsourcing are "overhyped".

They interviewed 100 directors of financial services companies with responsibility for outsourcing, with the respondents predicting that offshore outsourcing will more than double in the next five years.

But when asked it they would offshore functions such as call centres, processing new business applications or customer service administration, 80% said they would not.

Huntswood said its research showed many managers approved of offshoring in theory, but not for their own operations.

UK knowledge

Furthermore, a Mitial Research paper shows that 60% of the UK public is against outsourcing.

The greatest concern about offshore outsourcing is that overseas outsourcers do not have as good an understanding of the UK consumer as domestic providers.

But Mr Kobayashi-Hillary says these problems can be overcome with better training.

"There are still several decades of growth in offshoring to India, before rising wages mean jobs there are then offshored to countries like China," he claims.

The BBC's Russel Hayes
"Dreadful news to hear for those employees over Christmas"

Mike Robinson, Amicus
"Amicus is totally opposed to the company's proposal"

Norwich Union jobs move to India
02 Dec 03 |  Business
Should British firms move jobs to Asia?
02 Dec 03 |  Have Your Say
Call centre workforce debate
26 Nov 03 |  Wales
Indian call centre move 'idiotic'
13 Nov 03 |  Business
Union's anger at BT's India plan
09 Sep 03 |  West Midlands

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