Tech Mahindra expands seat capacity on strong profitability

Indian BPO giant Tech Mahindra is expanding its Philippine operations either in Clark or Subic on strong profit and firming up its presence in the country as its biggest site outside of India.

Sujit Baksi, CEO of Tech Mahindra’s Business Services Group, told Business Bulletin in an interview his company is adding 400 seats in a new site either in Clark or Subic within this second quarter. This will expand its existing 2,300-seat capacity operations in its three centers, 2 in Manila (2,000+ seats) and 1 in Cebu (300+ seats), with total employment of 3,200 people since the company started operations here in 2008.

[caption id="attachment_129668" align="alignright" width="180"] SUJIT BAKSI[/caption]

“We are very happy with our profitability here and the quality of work and services delivered from here since day one,” said Baksi.

Tech Mahindra runs an all-voice operation in the Philippines. It provides support channels for voice, email, chat, data entry and social media. Other services include customer service, technical support, structured cross and upsell, employee helpdesk, and social media support. Its Philippine operation is managed by Filipino executives with five Indian expatriates in strategic roles.

It currently provides service to its clients in North America, Europe, Middle East, Australia and some local clients in the Philippines.

According to Baksi, the expansion will cater to increased volume of work from its existing clients and new products from new and existing clients.

Baksi cited the Philippines as the preferred voice BPO destination by most clients because the quality of work here is a lot better than India. He, however, said that the Philippines cannot yet handle technical support operations, which clients prefer to do in India.

There could be some technical support that can be done here but these are confined to simple rules to be followed as scripted. Some BPO firms are providing services for simple finance and accounting services, posting ledgers, and data entry while legal and healthcare services are also starting to come.

WANING VOICE SERVICES

While the Philippines will continue to retain its top position as the world’s hub for voice services in the BPO space, Baksi cautioned saying voice will gradually slow down.

“Voice is expensive for clients so more and more are working to eliminate voice,” Baksi said adding there are investments to come up with technology that would the way for automation and replace voice.

The attraction of voice will not grow in the future but rather go down as companies look at other forms of communication other than voice, he said.

Baksi could not say though as to when voice will start to weaken, but likened the creeping automation in the voice sector to the car manufacturing in the US.  According to Baksi, car manufacturing is going back to the US market because it is cheaper to manufacture in the US. One day, he said, car manufacturing in the US will be manned by one person and a dog: the man will operate the robots and the dog to guard the plant against thieves.

TRANSPORT COST

In terms of cost, both Philippines and India have similar cost level. But what makes India unique in its cost components is the transportation subsidy that it provides to its BPO workers, who have to be picked up from their homes and brought back at company’s expense.

According to Baksi, at least 40 percent of Tech Mahindra’s 15 BPO centers in India are female, who have to be picked up from house to house or brought back after work. Transport subsidy accounts for 20 percent of the company’s total cost.

“Public transport is not so detailed in India and taking a taxi at night is not safe and expensive. Employees cannot afford it,” Baksi said noting that in India almost everything stands still at night. Just like in the Philippines, India BPO firms operate at night because they are serving different time zone.

Unlike in the Philippines, BPO companies do not need to bring their workers from house to house or bring them home after work because public transport is available 24 hours. Normally, some BPO companies provide transport service but only at pick up and drop off points from where they can take a taxi to get home.

“We fully subsidize the transport cost of workers, so it is very expensive for BPO companies in India. This is an expense that we do not incur here,” he said.

Both Philippines and India have the same telecommunications cost although the real estate cost here is at least 10 percent cheaper than the cost in the big cities in India.

In terms of labor, the Philippine labor is 10 percent higher than India but Baksi said the labor arbitrage will soon become negligible saying clients will prefer India for technical support services because they are after of quality work not cost.

Overall, however, costs between India and the Philippines are almost the same. So far, both countries are enjoying their separate expertise: India for complex technical support while the Philippines continues to be the darling for voice.