“The way this is getting framed is that India is the root cause for the economic recession and is somehow being blamed for America’s 20-year credit party. What is actually going on is an abundance of highly intellectual labor no longer constrained by borders.”
That was a comment made to the Washington Post in early November by PV Kannan, CEO of 24/7 Customer. We caught up with him last week to ask what the visa law backlash looks like in the US. Kannan explains how the Indian players are remaining profitable by simply adjusting their delivery models, and also about 24/7’s plans to expand in Nicaragua.
It’s been about a month since the new visa laws were implemented, and things have calmed down a little. What are you seeing as a response to those laws? Are they hurting the Indian players who are outsourcing to the US?
Kannan: We always hear a lot of noise every time the economy takes a nosedive. Back in the ’92 and ’93 recession, the public used to complain about ‘All the foreigners coming here and taking our jobs’. Now no one is coming here; the jobs are moving elsewhere. So that noise level is always to be expected, but what we track is whether it changes or influences the mindset of the top buyers. In the customer service space, this means clients pushing back on agents more, or giving lower CSAT (customer satisfaction) scores.
With that in mind, we’ve been observing a few interesting trends. While there is discontent, and admittedly it’s a little more vocal these days, the offshore CSAT levels are not coming down dramatically. While companies are more careful about matching certain call types to certain geographies, they’re not pulling back from offshore locations. While firms are very deliberate about which customer demographic is served offshore, there are no large contracts being lost.
So Indian players are continuing to stay profitable? What changes are they making to their delivery models?
Kannan: Essentially they are continuing to expand into the Nearshore. The advantage there is that even if the agents are offshore, they have more cultural understanding than in India or the Philippines, and that helps. And since the Indian players are now so globally diversified, what we’re seeing them do to add value is offer their higher paying clients a Nearshore experience, and then offer their highest paying clients an Onshore experience. But overall, I haven’t seen a single large client – with more than a thousand seats – reverse course and pull out of an offshore location.
So the offshore outsourcing story as a whole has not changed. All the hype hasn’t been hurting the Indians in terms of investments and sourcing contracts – they’re nimble enough to shift their locations and how they deliver services, and remain profitable that way.
We saw Obama just visit India and come back with a different viewpoint on Indian outsourcing. He realized that outsourcing is not one way traffic. If every Indian decides to buy an iPhone, there are suddenly a lot more jobs created in California.
How much is this benefiting Latin America? Because of the NAFTA agreement and free movement of labor, Mexico should be the main beneficiary here.
Kannan – That’s correct, but this ongoing drug war is stopping a lot of the good things going on in Mexico. In the outsourcing community, appetite for Mexico as a destination is quickly falling, and that never used to be the case earlier.
Let’s talk about 24/7’s new delivery center in Nicaragua. What are your plans for the country, and for regional expansion?
Kannan: Our entire focus right now is on growing Nicaragua in the region. We have close to a thousand employees in Guatemala, but didn’t think we could add another thousand. So a few years ago we started looking for an adjacent location, and last year zeroed in on Nicaragua. Our center there is now up to 200 agents, and there’s a capacity of 700. So for the next 12 months we’re looking to fill it up, and then keep growing. Until we reach a thousand+ in Nicaragua, we’re not focusing on expanding any more in the region.
What are your biggest challenges in Nicaragua?
Kannan: The big challenge is that it’s a brand new location for us and many US companies. It’s all about perceptions, and clients are nervous about the location, especially with Ortega in power. They were nervous about Guatemala as well as few years ago when we were one of the first to go in there. Now they trust Guatemala, and we have to get them to trust us with Nicaragua as well.
Of course the country doesn’t have the kind of scalability and English talent that India or the Philippines do, but for a Nearshore destination I think Nicaragua has a strong offering.