Fred Chua – Call Centers: Then and Now

Derek: Hi and welcome to another episode of the Outsource Accelerator podcast my name is Derek Gallimore and this is episode number 146. Today we are joined by Fred Chua of Magellan Solutions this is a Filipino owned call center that’s been going since 2004 which is the early days of Philippine call centers but specifically, he’s been focusing on the SME market so it’s really quite an early player in that space. Fred has a lot of experience in the sector so it’s a really good conversation that we had, I certainly enjoyed it so if you want to get in touch with Fred or want to know any more about this episode then go to our show notes which is at outsourceaccelerator.com/146 enjoy.

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Derek: Hi and welcome back everybody, today I’m joined by Fred Chua of Magellan Solutions, Hi Fred how are you?

Fred: I’m fine, thank you, how about you?

Derek: Fantastic, glad to have you onboard and Fred will obviously introduce himself a lot better than I can but he is the founder, CEO, and Director of Magellan Solutions which is a Philippine-owned call center  but also a general BPO service offering as well so thanks for joining us Fred and I suppose initially can you just introduce yourself and how you came to be here today?

Fred: Sure, you know i’ve been in the call center industry for a long time so start off as a call center agent myself back in 2001 to be specific worked in company called e-Telecare that was bought eventually by Stream Global which is bought again so now there’s a lot of  mergers and acquisitions so you know I’ve been in the industry for a long time you know we setup the call center back in 2003-2004 and we were operating in 2005 because I think we wanted to focus back then there was only a handful of call centers and mostly those are the huge call centers and we want to focus on predominantly focusing on the small to medium size enterprises. So our call centers are really focused on managing SMEs, really times, so you know we’re currently a 600 seat call center operation, you know the majority of our business are on 80% of our clients are US based companies, the other 20% is actually Europe and Australia. So we do have to get you know multilingual agents as well. We’re kind of like a generalist more so than a specialist so we have like inbound, outbound, back office processes within the split of like 50/40/10 split and I guess that’s it you know that’s kind of like where we started off, we started out with 14 people long time ago so typical startup type of operation in a house that even had a swimming pool so yeah the pool back then and of course naturally we wanted to always keep a very good atmosphere in our organization, family oriented, very culturally rich and at the same time we wanted to make sure you know we give it a good atmosphere for everyone to really stay and grow

Derek: Fantastic so and you started in the call center industry in 2001 and you know that was very much the beginning of the industry in the Philippines what was it like then and what was sort of changes have you seen in the industry as you’ve developed.

Fred: Well I remember back then back in 2000- 2001 most of the people that were working in the call center industry were the tier 1 top universities you know people that have very very good communication skills you know the Ateneo or La salle the top tier schools and of course right now it has evolved since then, it has evolved to include a wider spectrum and more people to the really apply and work in the company of course, in the industry I mean because now, of course, the industry is employing around 1.2-1.3 million so essentially there were a lot of improvements in the educational system to cater to the bpo sector so they have focused primarily on improving people’s communication skills to be a lot more you know fluent and a lot more spontaneous so that has evolved significantly before their criteria for being in the call center industry were very very high, it was very difficult. I actually failed one of my company one of the companies that I applied for I actually failed because of typing skills.

Derek: But is that a sort of paradoxes because the obviously as the sector gets bigger they need to open the net but also back then wasn’t the call center industry which really was limited to kind of call centers and basic functions, wasn’t it sort of look down on by the professionals of what certainly the professional graduates of these top tier schools?

Fred: yup it was it was also the case as well of course naturally back then when the industry started you know you can’t really get a probably a high paying job you know earning like you know 10k pesos or something like that in the Philippines and it was very difficult to get a high paying job back then you know although it was kind of like looked down on in a sense then again they were offering relative to the industry to the general recruitment industry they are offering something significantly higher than what’s offered in the market so I think it started off that way, of course now people did have a negative perception of call centers saying that you know it’s a dead end job, there’s really no progress after that but you know what to be honest amongst all the industries in the Philippines it has the biggest potential, biggest growth potential because it’s the only industry that has 15-20% year on year growth potential so if we start off you know a couple of thousand and now we’re pretty much what 4 or 5 million over all it has a huge impact on the industry so people that are working there have a much broader you know corporate ladder experience that they can sort of jump up on.

Derek: And of course back in 2001 there wasn’t really that corporate ladder because the industry was so new but now kind of 20-25 years later there’s the whole range of executive functions and talents and experiences and this is what i’ve tried remind people of in the west like potential clients that if you come and outsource in the Philippines you’re really buying in to 25 years executive experience and you might get a you know young kind of kid doing your customer service but there’s a backup there of the 25 years of professional experience that the Philippines has versus a lot of this newer outsourcing destination where there is just not the level of sophistication.

Fred: Yup it’s very mature I think right now based on my experiences because I have pretty active in the industry itself with CCAP and IBPAP and all the other DICT as well is that other countries are actually starting to benchmark with us Vietnam had been in the Philippines a couple of times I’ve seen groups from China as well sort of like trying to replicate the BPO sector here, Malaysia is also here you know some of the industry expositions you know conventions I actually see them here benchmarking because I think we have been able to make it to a standard we’re like kind of like the gold standard in a sense as far is an outsourcing is a concern.

Derek: And we at Outsource Accelerator we’re actually trying to promote the Philippines as like the Swiss banking of outsourcing because you know as you say it is a gold standard India is, without a doubt, bigger and they have been doing it for an equal length of time.

Fred: Actually longer, they started probably in terms of the outsourcing industry they started a decade ahead of us so if we started like late 90’s early 2000 they started like late 80’s, early 90’s so they started decade ahead of us.

Derek: That must have been the most basic telephone functions because there was no real internet functionality back then was there?

Fred: Yep the typical switchboard PBX type of system wherein there is no VOIP and stuff like that but then again that’s where they started I think there’s a lot of data encoding company as well in India that’s why medical transcription has been very very commoditized because of the Indian sector.

Derek: It really has exploded and not only in terms of sophistication but now it’s exploded in terms of range of functionalities before it was just like kind of inbound, outbound call centers but how have you see the demand now in terms of different roles, different functionalities and this is also championed or helped by the fact that the internet is so much more functional now. What are you seeing in the BPO industry of today as opposed to yesteryear?

Fred: I think Derek I see it as a pretty much what how you see it as well that naturally as the industry becomes a lot more mature that’s the natural progression is to you know what do you call this up skill or not up skill but to like upgrade it’s competency level from the basic telephone services from inbound and outbound now we do a lot of back offices, non voice high level of you know work as well from recruitment to accounting to legal process and stuff like that so you know I would think that’s really that natural of progression in that aspect. I think it’s both aspects first the maturity of the industry itself and second is the comfort level of the clients to say you know what even if they’re in the Philippines I can trust them they can do the work for me, there’s no difference in hiring a person locally in my office as opposed to if somebody were to if they had data security issues and stuff like that even an employee that you hire directly can actually cheat you as well in that sense so it’s just a matter of making sure they have protocols, processes to ensure data security confidentiality and stuff like whether it be in the Philippines or you know hiring a person on your own backyard.

Derek: There is a strange sense very commonly of them and us or us and them which separates the Philippines and people have this concerns about security but you know if you have a corporation in a thousand people, you’ve got leaks and security issues regardless of who they are, where they’re sitting you know it is really one and the same you, just got to have your processes in place and I think also I mean what are your thoughts on these but I think when people have little bit of kick back when you mention outsourcing and if you mention the Philippines but especially India and everyone almost has this sort of visceral reaction and they say well I have been stuck on a phonecall to my bank and it’s a call center and they don’t know what they’re doing and I feel that this is almost a hangover from 20 years ago when everything was so new and processes weren’t good and now I think you know things have come so far but there is just this unfortunate kind of hangover from that early stage when you know maybe things weren’t delivered as well do you see that you know things are moving on or you know is it still a bit of this prejudice and you know people can’t do it the same.

Fred: I think honestly speaking people are a lot more aware now compared to before you know if you will look at like 10 years ago you know if you asked an american say where is the Philippines, they would say ‘isn’t it in a jungle somewhere’ you know wherever they might even mistake it for somewhere else right so I think right now there’s a lot more awareness that you know what you know when I call let’s say American Airlines or whatever I’m bound to speak to somebody elsewhere and again you’re right you’re absolutely right it’s all about the process, the systems of course right now with a lot of cloud based platforms, crm tools, ticketing system and stuff like that it’s just a matter of ensuring that the organization that we support have the right process and systems, that everything is tracked, we have KPIs, you know the good and the hard thing its kind of like a double edged sword is that in the bpo sector you were trained to be, to handle things in fast paced manner, you know typical Philippine companies are generally i’m not talking about all but generally speaking they’re tend to be more laid back more traditional in running things and of course american based companies, you know first world countries basically the way they run their companies are a lot more efficient a lot more effective so as a Philippine organization you have to adopt to that to be successful, so you monitor a lot of KPIs, metrics you do time and motion studies to understand where people are what the work is being done and of course all the tracking mechanism so I think it has improved for sure.

Derek: Yeah I mean i’ve spoken to people that have been in the BPO industry in the early days and they said it really was flying by the seat of the pants back then because there wasn’t this systems and structures and now again I remind people that if they buy into the Philippines then they’re actually the Philippines has expertise in business processes which means that especially in SME market if an SME comes here they’re probably gonna get a huge boots in terms of their processes, in terms of the sophistication of processes, in terms of the process mapping, the kpi’s because they’re partnering with people that have been doing it here for 10,20,25 years and I think people can kind of overlook the level of sophistication the Philippines has with this functions you know

Fred: Yeah of course I agree

Derek: And especially I also speak to a lot of SMEs and they start outsourcing and I think very commonly in the west, SMEs are you they’re a little bit kind of organized chaos and they’re not all that structured where’s when they come here they realize that actually especially dealing with parties you need more structures you need more better processes and actually then it pushes a great level of maturity across the entire company.

Fred: I think that I agree with you that’s the reason why we wanted to focus in the sme market as well because like for example you know our company were you know iso 2700 1 certified, we’re pci dss certified because that’s one of the things that’s critical for companies in terms of data security and privacy and confidentiality that’s one side of it but at the same time you know if you’re an iso certification you’re forcing yourself to also be processes driven so in terms of all aspects from continuous improvement methodologies and stuff like that and you’re absolutely right about the organized chaos because normally when an SME company wants to outsource an operation they typically say I want to outsource my customer service but they might not, i’m not saying that all of them are, but they might not have specific kpi’s or metrics or specific standards that they based it on so when they’re working with a bpo company offshore that has a lot of extensive experience focusing in these industries then there’s a lot off what do you call this best practices already that can be applied and that helps these organizations pretty much succeed and you know outsourcing customer service properly.

Derek: It’s incredible isn’t it and then when you have structures when you have the standard offer and procedures and things and that is a launch pad for scalability then isn’t it where is previously SMEs are running things kind of on a day by day basis and those things are hard to scale so there’s incredible kind of value potential for everyone.

Fred: the potential is huge because if you just look at the number of companies even in the US if you focus in the US probably I would say 90% of all, I don’t what the specific percentage is but it’s probably around 90% or above that’s all smes the likes of the city banks the merlynch, there are like a hand full of companies relative to the total the scale of other sme businesses, so a huge huge market potential and but to a certain standard also complexity to that because you have to understand that if you were to let’s say for a bpo company a bpo company that’s just focused on the big players it’s easier to manage a client that has a hundred seat operation in one go as suppose to 10 clients that have 10 seats each.

Derek: Absolutely because as well the client with 10 seats you’re actually building the process where is if you have a…. but I think that is where the bpo industry here is missing a bit of a trick or certainly the main outsourcing bodies here like IBPAP because they’re kinda not really opening their arms to the smes because they only really want the big players or you know because there are those efficiencies and as you say there’s so much opportunity in sme market for both the Philippines but also the sme’s who haven’t fully explored the full potential of outsourcing.

Fred: I think you know the problem right now is that there is also a lack of kind of like guidance and support for the sme market like just to give an idea like I was supposed to attend a convention in Australia by May I’m not gonna mention anything specific but generally speaking the funny thing is that you know these things are supported by both the government and you know associations here in the Philippines majority the participants are all big players but actually the ones that can really utilize these business development activities in these conventions and conferences are actually the smes because the big players they usually have a minimum requirement. Let’s say I want a 50 seat operation or something like that which you know these are the things that don’t come by easily once in a while you probably get a big project but generally speaking you deal with also SME companies in these expos and conventions so there has to be more support and awareness of how to support these organizations for the SMEs.

Derek: But I think it’s coming and that’s certainly where we are focusing our intention we’ve done a white paper actually on a potential at the market and across the west which is about 9 or 10 key countries, there are about 35 million smes that employ about a hundred million people and I would suggest that maybe only half of percent of that outsource or really have a full awareness of outsourcing so I think there’s still such a huge potential there and certainly a potential that the Philippines should turn it sights on which I’m excited about.

Fred: I completely agree I think you know even despite all of these issues with VAT and taxes and you know yes it’s a bit of a hindrance in a sense but generally speaking I think the industry is very healthy, you know people have a conception that you know what it’s on downward trend already. I think it may have not of course naturally as the industry grows it’s difficult to maintain that 15-20% year on year growth so essentially there’s a natural progression of a lower year on year growth percentage but if you look at it the scale is still massive it may not be 15% if ever it’s like declining a bit but it’s because it’s maturing it’s very mature, it’s also difficult to maintain that.

Derek: Absolutely and I think in terms of the sme market, one day it won’t be referred to as outsourcing anymore it’ll just be called employment because people will you know look for job candidates based on their merits not on where they sitting so I think eventually it would just become blended to general employment which again super exciting concept for the Philippines but anyway thank you so much Fred for your time and you are of course from Magellan Solutions if anyone wants to get in touch with you how can they do that?

Fred: Sure from the US I guess they could dial a toll-free # 1800-371-6224 and then you know we’ll be able to handle your calls from there or you can visit our website Magellan-solutions.com

Derek: Thanks so much Fred

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Derek: That was Fred Chua of Magellan Solution if you want to get in touch with Fred or know any more about this episode go to our show notes at outsourceaccelerator.com/146 and as always if you want to ask us anything then just drop us an email to [email protected] see you next time.