Page 1

Current Scenario

A major threat facing the Indian BPO industry is the attrition rate. Attrition is defined as a reduction in the number of employees through retirement, resignation or death. Attrition rate is the rate of shrinkage in size or number of the employees.

According to a Nasscom-Hewitt Survey carried out in 2004, the cost of attrition is 1.5 times the annual salary¹. If a person leaves after the training, it costs the company about Rs. 60,000. For a 300-seater call centre facing the normal 30% attrition, this translates into Rs. 60 lakhs per annum². Many experts believe that all these challenges can turn out to be a real dampener in the growth of this industry as the costs associated with the attrition are so high that they can override the benefits of lower wage costs.

While wages in call centers in India are less than one-eighth of those in Northern Europe, it has been reported that Hewlett-Packard have found the cost per 'ticket' (the cost of processing a query) has doubled "due to the inability of the staff to resolve customer queries efficiently because of language barriers and inexperience". It is said that this increased cost has made HP's move from Ireland to India "completely pointless", and that it can never recover the (substantial) costs of the move. It is further reported that GE Capital has moved a call centre back to Australia "after staff attrition rates of 70% wiped away any potential cost savings³".

An overview of the costs involved in attrition: -