The importance of retaining existing / old customers in a business activity cannot be denied or overlooked. Researchers say getting new customers can be five to ten times more expensive than retaining existing / old ones. According to database experts, while every dollar spent on advertising yields $5 in revenues, the same spent on customer services yields $60 in revenues.

Not to be misunderstood, all one is saying is that in a fiercely competitive environment prevailing today, it is as important to retain old customers as is winning new ones. This is where customer relationship management or CRM steps in.

CRM, as a process, is all about attracting, servicing and expanding customer base through better customer relationship management. It can help companies achieve vital customer satisfaction. Typically CRM would involve leveraging various IT products and services to drive the above stated functions. The global CRM market is said to be growing at a CAGR of 22 per cent. Outsourced CRM services market, currently placed at $35.3 billion, accounts for 72 per cent for the total global CRM services market. Leading research agency IDC expects outsourcing to retain this dominant position despite the economic slowdown, accounting for almost 65 per cent of the market by 2003.

The good news is that India is visualised to benefit substantially from this trend. The outsourced CRM services market in India, currently placed at $88 million and employing 6,000 people excluding people in captive/in-house contact centres, is expected to grow at 52 per cent CAGR as per IDC and touch $306 million employing over 20,800 people by the year 2003. This is expected to rise further to $3.7 billion by 2008 employing around 2,12,000 personnel by 2008 according to Mckinsey-Nasscom study. It must be remembered that outsourcing CRM services is an important component of IT enabled services, which by itself forms an important source of revenues in the projected figures of Mckinsey-Nasscom study.

Noted venture capital advisors, Edelweiss Capital, cites three reasons for this situation of "Advantage India":

1. large, well qualified, human resource pool.
2. Cost advantages, mainly due to favourable wage differentials and
3. Liberalised policies and regulations.

Advantage India?

India has a natural advantage with its estimated 1 million-plus computer professionals and high knowledge of English, which is the is the standard medium of instruction in most Indian universities. Both these are essential ingredients for outsourcing.

Further, reduced costs of telecommunications and the Internet have made it possible to outsource customer service across the globe including those based in low cost economies like India.

Manpower costs are significantly lower in India. For example leading Indian contact centre companies charge their clients at the rate of $1.50 to $2.75 per e-mail, while the comparative cost in the US is $3.50 to $4.50 per e-mail. Assuming that US salaries increase at 3 per cent to 10 per cent CAGR and Indian salaries at 10 per cent to 25 per cent CAGR, wage differentials between India and the US will continue to be over 60 per cent for several years.

Low start-up costs as compared to investment required in other industries in India. For example GE is believed to have invested only Rs 250 million or $5.4 million to set up a 1,000-people centre at Gurgaon. Moreover incremental capital needs are low and future cash flows are sufficient to take care of expansions.

Policy and regulatory enablers

The Indian government has initiated a number of steps to encourage IT and IT-enabled services, which can be of immense benefit to outsourcing companies. For example as per recommendations made by the national taskforce on IT and software development, the government is facilitating supportive infrastructure for proliferation of IT-enabled services throughout the country.

• duty-free imports of capital goods have been permitted, under the export promotion of capital goods scheme, for IT-enabled services in comparison to the current peak duty of 35 per cent.
• 100 per cent tax exemption on exports of IT-enabled services is allowed. The services qualifying for the exemption include among others medical transcription, back-office operations, data processing etc.
• foreign direct investment or FDI of 100 per cent is permitted on IT-enabled services, thus facilitating easy access to capital.
• government has promoted several software technology parks or STPs, which provide ready-to-plug IT and telecom infrastructure. These STPs are in the vicinity of Bangalore, Goa, Calcutta, Ahmedabad, Thiruvananthapuram, Chandigarh, Chennai, Hyderabad, Delhi and Bhuvaneshwar. STPs also allow single-window clearance for all regulatory compliance issues.
• privatisation of basic telephony, cellular telephony, paging, internet services and international internet gateways has resulted in reduced tariffs. Domestic leased circuit tariff has been brought down by 80 per cent in the last one year. There is likelihood of reduction in the tariffs of international gateways too.
• buoyed by fiscal incentives and regulatory relaxations provided by the Indian government, some state governments like Andhra Pradesh have also taken initiative of encouraging entrepreneurs. Thus for example the Andhra Pradesh government has decided to subsidise Rs 20,000 per employee in real estate costs for every 1,000 people employed by the company. Thus for every 1,000 people employed, the company will get a Rs 20 million discount on the land it buys.

Some outsource success stories in India

There are several success stories in the filed of CRM in the country. Some of these are:

• American Express Bank, which processes internal financial transactions for all of Asia within India, employing 600 people.
• GE Capital, which manages global payroll, call centres, mortgage and insurance claims employing 4,000 people, which is expected to go up to 8,000 by the end of 2003. Its call centres handle inbound and outbound calls for credit card collections and responds to customer queries.
• British Airways, which employs 750 people to handle an array of back office applications.
• Brigade Solutions, which runs two contact centres out of India employing about 500 people, who cater to clients like Compaq & Palm.
• Spectranet, a Delhi based company, which is engaged in CRM and business process outsourcing space, employs 500 people catering to some 200 global clients.
• Compaq Computers India, a Delhi based company, which has a tele-support centre to provide online technical assistance to users of Compaq Presario range of home computers. Called "Compaq on call", this is the first such call centre in India catering to the home PC segment.
• The Indian subsidiary of Dell Computer Corp is setting up a call centre in Bangalore to service other English speaking countries.

Bechtel’s remote processing centre in Gurgaon provides real-time 24-hour support to other Bechtel employees working on ground infrastructure projects around the globe.