Billing rates for BPO companies stabilize

NEW DELHI: The average billing rates in the BPO sector has stabilized in the $12-$15 per hour according to most top-notch players in the industry. While some high-end projects may still be priced as high as $20-$40 per hour, but those are the exceptions rather than the norm. At the same time, there are smaller players who are offering services in the range of $nine per hour.

With the mushrooming of players in the industry, billing rates had come under pressure. At the same time, clients in the US also realized the margins on which Indian companies were playing and pressed harder for better rates.

Wipro-Spectramind, ICICI OneSource, TracMail, Infowavz all have an average billing rate of $12-$15 per hour. Said Raman Roy, Chairman and MD, Wipro-Spectramind Services, "Some projects which require highly skilled R&D efforts are priced in the range of $40 per hour. But by and large most projects fall in the $12-$15 per hour price bracket." While this is the average rate for most top companies, smaller companies are offering lower rates with the consolidation over the past 18 months separating "the men from the boys".

Comparatively, call centers in the US bill in the range of $30-$40 per hour for similar work, while a call center in Ireland would bill in the range of $24 per hour for companies being serviced in the UK or Scotland.

There are various parameters by which pricing is decided. Said Umesh Vyas, Consultant with QAI, and the lead assessor for call centers, "Pricing could be decided on the basis of a) per seat, b) per hour of logged in time, and c) per call or per email."

K Ganesh, President, ICICI OneSource, said, "Pricing is dependent on three factors. The allocation of bandwidth required for the project; the kind of process or the level of complexity of the project and whether the project is voice or non voice."

The industry currently offers about 50 percent-60 percent services on voice, with 15 percent-20 percent services on mail and over 25 percent of the work would be back office processing. Chat-based support services, which were very popular over two years ago, are virtually non-existent these days. Similarly, the share of email based support has also come down drastically.

Arjun Vaznaik, COO, TracMail India, said that pricing is majorly dependent on whether the traffic is inbound or outbound. "For inbound traffic the industry average stands at $nine-$14 per hour while for outbound the rate stands at $ eight-$12 per hour." Rates are also dependent on the vertical in which the service is being offered. Most of the traffic in third party call centers here are still predominantly outbound calls.

Zia Sheikh, CEO, Infowavz International said that the industry average billing rate is $13.5 per hour. But added that the top companies in the industry tend to earn a lot--an addition of over 30 percent-40 percent based on the performance of its employees.

Captive call center, which account for over 50 percent of the country's total capacity, is a different story altogether where the billing rates are still very high. Typically, a captive call center has billing in the range of $40 per hour per seat simply because it works under a legacy environment and is based on the "cost plus" model.

Under the current billing rates, third party call center companies make gross profits in the range of 30 percent-40 percent. While only a few like Wipro-Spectramind are making net profits in the range of 28 percent, net profits of most companies are still in the single digit range.

As compared to the US counterparts, Indian BPOs have an advantage in terms of manpower cost. While manpower cost in the US account for 45 percent-60 percent of the cost of a set up, in India, manpower costs would be in the range of 25 percent-35 percent.

It is not only the lower cost of manpower in India but also the quality of manpower available here which makes a difference. In India, the manpower available is well educated and qualified, while call center employees in the US are either students working part-time or professionals in between jobs or old employees.

Despite the 30 percent attrition rates in India being very high, it is nothing compared to the attrition rate prevailing in the US industry. Infrastructure cost is sizable in India at 40 percent-50 percent of the company's cost as compared to the US industry where infrastructure costs stands at just 20 percent.