Small-time call centers head offshore

By Eric Lai
East Bay Business Times
Updated: 8:00 p.m. ET July 31, 2005
Five9 hopes its strategy to win new customers for its Internet call center services proves to be a clever way to develop new business, rather than a draining distraction for the young, venture-backed startup.
The Pleasanton software firm announced July 25 that it is creating call center training centers in the Philippines and India. The centers are basically incubators for budding owners and managers of call centers, who pay the equivalent of $40 a month to get a real-life crash course on all aspects of running a call center.
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Up until now, the U.S. companies that have offshored their call centers - from technical help desks and customer service hotlines to telemarketers - have tended to be Fortune 1000 firms that set up huge call centers with thousands of operators.
But the low entry-level cost of call center technology such as that offered by Five9, coupled with the huge savings for companies that shift even small call centers overseas, is creating a new market.
"There is both money and talent in those countries that want to get into the call center business," said Five9 CEO, Brian Silverman. But the failure rate for call center startups is high: more than half go out of business within a year, according to Silverman.
That's no good for Five9. Like Salesforce.com, Five9's software is delivered completely through the Web and is aimed at smaller firms, typically with call centers of 200 operators or less.
Using Five9, even very small companies can outsource or offshore their call centers.
Take SF Signature Limousine and Sedan Service. The four-employee South San Francisco company now uses an operator based in the Philippines to handle dispatches, phone orders and even do some tele-sales, said Valerie Tse, one of Signature's owners.
"It definitely makes sense for us economically," said Tse, who figures the cost of using an offshore operator is about one-third that of hiring someone locally.
In addition to training centers, Five9 is working with universities in those countries to create a one-year training call center training program with matching scholarships. Five9 is also creating an Internet marketplace that will bring small companies in the United States together with call center providers overseas.
It's all part of a long-term strategy that Silverman says Five9 can - and must - afford. Two-thirds of Five9's 400 customer companies run call centers based in the United States or Canada. But Five9 is expecting sales to quickly ramp up in markets such as the Caribbean, the Philippines and India, where English skills are strong and salaries of call center operators are low.
Founded in 2001, Five9 has raised $17 million in two rounds of venture capital financing. With 4,000 users for its software, which lists at $300 per user per month but is discounted in poorer countries, Five9's monthly revenue is approaching $1 million. That revenue is growing 15 percent to 20 percent month-over-month, said Silverman.
Five9 expects to turn its first profit by year's end, and start trading publicly sometime next year.
© 2005 East Bay Business Times