Entering the European market for contact centre services

What is the most interesting channel for you?

The most common and most promising market entry channel for contact centre service providers from developing countries is to find and work together with a European service provider. Other channels are working with a consultant/matchmaker, a sales/marketing representative, a local sales office or direct sales (possibly through online platforms).

Selecting a channel depends on your type of company, the nature of your product or service, your target market and the available resources for market entry. You must understand that, regardless of the channel you choose, marketing and promotion is a vital part of your market entry strategy. And you are responsible for your own marketing and promotion strategy.

European service provider

Most contact centre service providers from developing countries find a European service provider either directly or by working together with a matchmaker and/or a sales representative. According to industry experts, subcontracting for European service providers is the most realistic market entry channel. You can try to find a suitable partner on your own or work with an intermediary. Because many European companies prefer to deal with a local contact person, an intermediary is a good option.

A European service provider that is similar to your company would be your most suitable subcontractor. Ideally, this contact centre service provider should offer similar contact centre solutions to yours and be active in similar industries. This can also be a chain of contact centre service providers that has offices in different countries.

Consultant/matchmaker

Consultants/matchmakers (just like sales and marketing representatives) usually work based on a retainer + success fee basis. This has a number of consequences related to marketing and contracting issues. A matchmaker is a person or a company with existing, relevant and ideally a large number of contacts in a specific market segment or industry.

A good consultant/matchmaker is therefore a “door opener” and not an agent to make cold calls or send cold emails. Matchmakers make appointments with prospects for you. However, the presentation and sales process remains in your own hands. This means that a consultant or matchmaker is a good option for you if you feel comfortable taking care of the presentation and sales process yourself.

It is also very important to consider the exit strategy in the contract. It is in your best interest to clearly define a (shorter) period after which the contract can be terminated without any further consequences. This period is usually not longer than three or four months (after which the contract will be evaluated and can be terminated – for non-delivery for instance – or prolonged for another period). For this period, there should be clearly-defined delivery expectations and targets (number of relevant meetings, projects brought in, etc.). To negotiate a trial period can also be in your interest.

Sales/marketing representative

A sales representative also does the sales and is sometimes also involved in the high-level management of the projects. Marketing and sales representatives (just like consultants and matchmakers) often work based on a retainer + success fee basis. The retainer must be paid even if there is no delivery by the matchmaker or sales representative. The success fee depends on what the matchmaker/sales representative has delivered. This combination should provide motivation for the intermediary to deliver.

A properly drafted contract, by a lawyer, is a must! In the contracting process, determining the exact level of the retainer as well as the success fee is very important. In case of sales representatives, determining the success fee is usually easier, because it is often a certain percentage of the projects they bring in.

Involve a good lawyer who knows the applicable law of the country where the sales/marketing representative resides and has previous experience with this type of contracting. Pay special attention to exit clauses (how and when the contract can be ended), success criteria, deliverables and payments.

Local sales office

Ideally, you should establish a local sales office in your European target market. A local presence makes it easier to build up long-term relationships with customers through personal contact. It also increases your credibility and builds trust. However, this is very difficult in practice, as it requires a lot of experience and large investments. Most companies in developing countries are simply too small and do not have the financial strength for this.

Direct sales (possibly through online market places)

You can also try to sell your contact centre services directly (even to European end users). Many European companies are looking for cost reduction and delivery capacity, which developing countries can often provide. This is one of your unique selling points.

For most suppliers from developing countries, it is very challenging to sell contact centre services directly. Sometimes, suppliers from developing countries team up with other service providers to make an offer for direct sales to European customers. This usually means that these other service providers sell your calls/contacts at a higher price than your initial cost price. Having one or more customers in Europe will help you find a suitable European customer, as references are a must when you want to enter this market through direct sales.

The main characteristics of direct sales to end users are as follows:

• There must be a direct relationship between the service provider and the end customer.
• You must have a lot of international experience.

Direct sales to end users can be interesting if you:

• have experience in the European market;
• are a large company;
• want to target large European end users;
• focus on a small, underserviced niche market.

3. What competition do you face on the European contact centre services outsourcing market?

Which countries are you competing with?

For contact centre service providers, we have selected six countries that can be considered your strongest competition. It is important to note that, in general, European companies prefer to outsource services to providers within the same country (homesourcing). When they do outsource to companies abroad, they generally prefer nearshore locations, because of proximity, language, cultural similarities and the minimal time difference. For more information on nearshoring versus offshoring, please read our Market Analysis study.

Global Services Location Index

The competitiveness of an outsourcing destination can be measured by various factors: financial attractiveness, people skills and availability, business environment and digital resonance. Together, they form the Global Services Location Index (GSLI). In this chapter, we connected the country scores in the GSLI with the most competitive countries for (I)IoT service providers.

Table 1: Global Services Location Index

Financial attractiveness (35%)	People skills and availability (25%)	Business environment (25%)	Digital resonance (15%)
Compensation costs	ITO/BPO experience and skills	Country environment	Digital skills
Infrastructure costs	Labour force availability	Country infrastructure	Legal and cybersecurity
Tax and regulatory costs	Educational skills	Cultural adaptability	Corporate activity
	Language skills	Security of IP	Outputs

Source: Kearney analysis

Country competition

On an international level, entire destinations compete to become an established outsourcing destination for contact centre services. European companies choose a specific destination based on a mix of factors, such as price, talent pool, language skills, economic and political stability and cultural and geographical proximity. For example, if salaries in a country are rising or the political situation is escalating, European buyers may switch to a cheaper or more stable destination. This is out of the control of individual service providers.

India continues to lead the Global Services Location Index. This leading position is mainly due to the country’s unique combination of low-cost services and excellent English language skills. This attractive profile makes India a particularly strong contender on the contact centre services outsourcing market. To stay ahead, the country needs to prepare for the shift from lower-skilled jobs that may be replaced by robots to more creative and highly-skilled work. This applies to other low-cost countries as well.

India has long been the global leader as a contact centre outsourcing destination. However, in light of recent reports of poor customer feedback and the emergence of other cheaper and closer destinations, the Indian contact centre industry is not performing very well at the moment.

Bulgaria. The Index rankings of traditionally strong performers in Central and Eastern Europe are declining. Bulgaria now holds the 17^th position (coming from 15^th in 2017), due to decreases in compensation costs and ITO/BPO experience and skills.

To fill the language gap, many Bulgarian companies hire residents (quite often students) from other European countries. This also applies to the other companies on this shortlist, except for India.

Poland used to be the highest-ranking Central and Eastern European country. Now, it has slipped to 24^th place, after ranking 12^th in 2017. It remains an important outsourcing location for contact centre services, as the industry is maturing and can offer good-quality services.

Romania has dropped 10 places, to the 28^th position. In future, jobs demanding a higher degree of creativity and skills offer opportunities for these nearshore countries. Just like other Central and Eastern European countries, Romania continues to be able to offer good language skills combined with relatively low wages.

Hungary lost five places on the Global Services Location Index. The country went from the 26^th position in 2017 to the 31^st. It remains a popular outsourcing destination, but the quick rising of the Baltic countries (Estonia, Latvia and Lithuania) may prove to be a threat for Hungarian contact centre service providers.

South Africa dropped six places on the Global Services Location index, from the 43^rd position in 2017 to the 49^th position today. However, South Africa remains a popular contact centre outsourcing destination for services that require both English and Dutch-speaking employees. Also, the quality of the contact centre services employees in South Africa remains high.

South African contact centres in financial services, healthcare, travel and utilities segments perform particularly well.

Which companies are you competing with?

There are many contact centre service providers in the world. It is impossible to mention all relevant companies from all the most competitive source countries, because the market is so diverse.

Global Phoning Group is an Eastern European (Moldova and Ukraine) company that specialises in offshore outsourcing. Besides contact centre services, they also offer BPO and KPO solutions. They operate in 25 countries, offer more than 10 languages and are mainly located in Southeast Europe and the Balkan region.

Another contact centre nearshoring provider (based in Czechia) is Cortex. They pay extra attention to offering an inclusive workplace. This means they offer equal opportunities for all employees, regardless of their nationality, gender, family status and physical disposition.

SA Commercial is an award-winning (Business Process Outsourcing) company from South Africa. They offer a training program for young people that are interested in working as contact centre agents. They have a clear website that is easy to navigate and tells potential customers what they can offer. Their certifications are listed on the website, as are their social media channels. However, their website will need some updating in the near future.

Which products are you competing with?

In contact centre outsourcing services, the product is the service. This means that the real question here is: what makes one service provider different from another? The answer is: available capacity, references, language skills, flexibility, reliability, communication, quality management, security infrastructure, vertical and/or horizontal market focus and niche market orientation, among other things. The location (country) of the service provider is also an important factor.

Automation

The threat of substitutes on the European contact centre outsourcing market is moderate. Automation is the main substitute for contact centre outsourcing services. An increasing number of contact centre activities are being automated to save costs. In the contact centre sector, for example, computers increasingly handle calls, chatbots are available and self-service applications are increasingly integrated in the websites of European companies.

The search for automation is expected to grow, meaning the threat of automation will increase. Opportunities exist if you can combine your services with some level of automation.

Other substitutes for service providers are:

• in-house departments (for example, in-house Information Technology departments);
• captive centres;
• backsourcing (moving outsourced services back home, often driven by automation).

4. What are the prices for contact centre services outsourcing?

When trying to make a sale in Europe, it is very important to offer the right price. The outsourcing market is a buyer’s market, driven by demand. Buyers set the conditions, as they can choose from a wide range of service providers worldwide offering similar services. Furthermore, more countries are promoting outsourcing. This gives buyers even more options in outsourcing destinations and providers.

At the same time, as long as the costs and risks of switching providers are high, this somewhat reduces the power of buyers who are already engaged with service providers.

In contact centre services, the most commonly used pricing models are full-time equivalent-based (FTE) (generally eight hours per day, five days per week), transaction-based and outcome-based pricing. Since contact centre services are a very diverse business, you must look at the exact services you want to develop a price for if you want to determine the average prices.

You must also choose a price model for your product or service. There are three popular working models: Fixed-Price Contract (where you agree on specifications, budget and deadlines in advance), Time and Material Approach and Dedicated Team (where you discuss and agree on the specifications during the development process). For more information on pricing models in outsourcing, please read this document.

This study has been carried out on behalf of CBI by Globally Cool.

Please review our market information disclaimer.