Perth debt collection company Repcol has become an unlikely trend setter by 'off-shoring' half its workforce to India. Mark Beyer reports.
Bangalore in southern India has become a second home for many of the Western world’s top corporations, including IBM, Dell, Microsoft, GE, and Intel.
Keeping company with this eminent group is Subiaco-based debt collector Repcol, which is aiming to prove that medium-sized companies can also benefit from ‘offshoring’.
Repcol has up to 200 people working at its collection centre in Bangalore, which was established in 2003 and has grown rapidly ever since.
Managing director John Wreford is upbeat about the commercial benefits for Repcol.
“The [business] model has proved remarkably resilient,” he told WA Business News.
Mr Wreford also believes the trend to offshoring is inevitable, despite the controversy it often attracts.
“We believe that India will be to global services what China has been to global manufacturing,” Mr Wreford said, adding that other Australian companies needed to ask how they could harness this change.
“We need to learn how to ride the tiger,” he said.
The commercial logic of offshoring is compelling.
Labour costs are Repcol’s biggest expense and in India the company can employ university graduates at one-eighth to one-10th the cost of local (Australian) staff.
If properly managed, the move to India should allow Repcol to be both more competitive in bidding for new work and more profitable.
The company’s own profit guidance suggests it is on the way to better times, after a patchy profit record following its stock market listing in 2002.
Investors will be watching its next profit report closely, after the company gained an unwanted reputation for over promising and under delivering.
Repcol expects revenue in the current financial year to be at least $34 million, double last year’s level.
And it expects to report a net profit of between $4.9 million and $7.1 million, also double last year’s level.
Patersons Securities, which under-wrote a $14.5 million capital raising last March, is even more bullish, tipping a net profit of $7.7 million.
The establishment of the Indian call centre has played a big part in enabling Repcol to achieve its rapid growth.
The Indian move reflects the influence of Mr Wreford, who joined Repcol in 2002 and succeeded company founder Peter Di Prinzio as managing director last October.
Mr Wreford has a diverse background, including consulting to the State Government when it first started outsourcing its debt collection to private sector companies such as Repcol.
He has completed a masters degree on the outsourcing and offshoring of business activities, his former employer Working Systems recruited IT staff in India and one of Repcol’s biggest clients, GE, has offshored work to India.
Mr Wreford said the move to India was triggered by the increasing difficulty of recruiting suitable staff in large numbers in Australia.
“We began casting around for options, and all of those things came together – the theory, the opportunity and the past experience,” he said.
Repcol committed to India only after testing three key risks – the technical infrastructure, the labour supply, and the regulatory environment, Mr Wreford said.
It selected Bangalore after evaluating several cities in southern India, and Mr Wreford said the set-up had progressed very smoothly.
“People were stunned that we did it in such a short period of time.”
The “happy confluence” of events that came together with the Indian move is illustrated by Repcol’s manager in Bangalore.
Rajendra Krishnan is an ethnic Indian who worked with Mr Wreford in Singapore and completed business studies at Curtin University.
Modern technology also played a big role in the Indian move.
The company implemented a wide area network (WAN) between Perth and Bangalore and uses Voice over Internet Protocol (VoIP) for its international phone calls, which it says are cheaper than local calls.
“That’s critical; without the enabling technologies none of this would have happened,” Mr Wreford said.
Repcol is the lead case study in a Curtin Business School research project into the potential benefits of offshoring.
“The offshore outsourcing of business processes is a new, largely unexplored and under-theorised area that is placing great pressure on Australian organisations,” Curtin Business School professor Graham Pervan said. “What we’re trying to investigate is which things can be most effectively offshored and which things are best to retain in your home office.”
Professor Pervan said it was difficult to obtain reliable statistics on the amount of offshoring that has occurred. He said it was clearly a big activity and extended from areas such as IT and information systems to accounting services and health services, such as analysis of x-rays.
Repcol has expanded rapidly since opening in India, helped by its association with GE, which has a fast-growing consumer finance business in Australia, and Mr Wreford said the company could now consider bidding for international contracts.
It has just obtained international accreditation from an unnamed global credit card provider, which is already an Australian client.
Mr Wreford said that the Bangalore call centre, which operated 16 hours a day, could run a third shift during European business hours.
