Friday, September 23, 2005

A bit of controversy

Rational Technology for September 25, 2005

Analogies, like rubber bands, are tools of approximation. Just as you wrap a rubber band around the cross section of an object, you can also use an analogy to describe a situation. In so doing, you might need to stretch them a little. Stretch too far and they break.

I bring this up because last week's editorial in this paper made use of several analogies to raise a caveat regarding the first mover advantage that the city council is considering. And well that it should. Decisions like these should not come lightly. The city council's foremost responsibility is to the people of Dumaguete.

Perhaps in an effort to shock, the editorial compares the local government to a doctor or to a policeman. Would the local government, the editorial asks, not be remiss in its duty if it declined to issue a business permit? Just as a doctor would be so remiss in refusing to treat a patient, and likewise a policeman who lets a criminal go scot-free.

How apt, really, because in the same issue we read of a pending shortage of doctors in Negros Oriental. Perhaps the analogy would have been better directed at this situation, in which case, it would be no analogy at all.

Rather than examine the matter by way of imperfect analogy, let us instead take it head on. Is it the duty of the local government to simply issue business permits on demand? Or isn't the welfare of the citizens its ultimate goal? We can appreciate the need for a level playing field in business, true, but what if there was no playing field to begin with?

In the case of the first mover advantage proposal, there are really three separate questions that bear answering.

First: would the entry of a large call center in Dumaguete be a good thing or not? A large contact center would employ 300 agents from the city and bring in P40 million of investments into the city, not to mention a whole host of auxiliary businesses in food, transport, travel, and entertainment. Or would we prefer to go on as we are now, content
with job fairs that draw our pool of talent to Manila, Cebu, Davao, Iloilo, and Cagayan de Oro?

Second: could we get a major contact center into Dumaguete without the first mover advantage program? Most likely not. As I mentioned in my article "Outsourcing 101: People" published last year, the number of qualified potential agents in Dumaguete is too small to support more than one large call center. True, we might have the fiber connections, and we might have the quality of life, but a contact center moves by dint of its talent pool first and foremost.

If you have two or more of such contact centers in close proximity, employee retention becomes a problem for both.

Besides, none of the other contact centers has really raised a hue and cry over our proposed ordinance. The ordinance itself may have prompted other contact centers to evaluate Dumaguete, as one did this week.

Third: is Teletech the right contact center as our first mover? Or would it, as last week's editorial says "be closing the door for bigger and better call centers who may want to invest in Dumaguete?"

The answer to the third question is still up in the air, of course. But let's take a brief situationer:

1) Epixtar, our previous suitor, is currently in the midst of a major lawsuit in the United States. One of its board members is wanted for fraud in several states.

2) PeopleSupport's president Bong Borja has repeatedly said on record that small cities like Dumaguete -- especially Dumaguete -- have nothing to offer contact centers.

3) Primary interest of other call centers in Dumaguete thus far has simply been for recruitment.

4) Teletech is willing to begin operations as early as October this year. The ICT Group is looking at perhaps the first half of next year.

And as to bigger and better, I invite you to look at the market capitalizations and P/E ratios of the major multinational contact centers in the accompanying table whose data I pulled from Bloomberg.com (not from Teletech). In terms of market cap, Teletech is at number two. What about Convergys? So far they have not shown any interest in setting up shop in Dumaguete.

The editorial, in my opinion, took the sensational and alarmist track. That's unfortunate, because it paints the proposal in a bad light; and doubly so, because a proper advice of caution would have been better served by tempered approach.

In the final analysis, yes, the city would have to enter into this agreement with due caution. We shouldn't have to agree to the terms of the multinational company -- whether Teletech or some other -- so completely without regard for the common good of the citizens of Dumaguete. Entering into this agreement, we will have to study the conditions, amend what we feel would be disadvantageous to us, and negotiate towards terms that are mutually acceptable and beneficial to the city and to the company. But that does not mean that the spirit or intent of the agreement is wrong in itself.

Finally, some disclosure: Teletech Business Development Manager Veneeth Iyengar, a leading proponent of his company's entry into Dumaguete, is a close friend. Teletech has also indicated that they might wish to hire me for an executive position, though we have not moved that idea forward (and even then, I would have to give the matter some serious consideration simply because I am too attached to Dumaguete's bike routes). Friendship is a factor in my opinions here; but -- as I would like to think -- the promise of employment is not.