Who’s calling?

“Job cuts as bosses move operations to India.” This headline is a familiar – and somewhat predictable – tabloid approach to the changing role of contact centres. But is it an accurate picture? The traditional call centre environment is changing but that is because simple tasks are increasingly automated or outsourced, and agents are frequently employed as vital front-end knowledge workers, empowered to make more business decisions during customer interaction.

During the past five years, the idea that everything has gone to India has developed pace. The advantages of the sub-continent are well known: there is a big, low-cost, well-educated labour pool, which can be attractive for businesses seeking cost-efficiency. Various state governments in the country are offering incentives for companies to locate their call centre operations in cities such as Mumbai, Bangalore and Delhi. And organisations such as the National Association of Software and Services Companies are actively lobbying the government on behalf of the industry.

In a survey carried out by specialist law firm Technology Law Alliance, in conjunction with Call Centre Focus magazine, respondents were asked what cost savings they hoped to experience by outsourcing their contact centres to India. Jagvinder Kang, director of offshore outsourcing at Technology Law Alliance, says: “67% of organisations said they expected up to 20% savings and 33% said 30%-40%. This represents a change from a couple of years ago, when you used to see up to 50% cost savings being expected.”

Suitable routes

Although cost optimisation may be a crucial part of companies’ contact centre strategies, other factors, such as business performance improvement, are also being considered now. “What organisations need to look at is whether their contact centre is optimised,” says Terry Wright, research director at consultants Gartner. “Depending on the organisation and application, some processes may be managed better if outsourced. For others, self-service automation may provide the most suitable route.”

So, while India is a strong proposition for many businesses, it is not the only answer. In fact, the supposed mass exodus to the sub-continent has been overstated.

“The majority (approximately 90%) of companies still don’t outsource any part of their contact centre operations,” says Mr Wright. “Of the 5%-10% that do outsource, perhaps half outsource the business process – the majority using outsourcing for additional response cover in peak periods…In respect of offshore outsourcing, something closer to 1% of companies currently outsource overseas.”

Staying at home

For some companies, the challenges associated with going offshore may simply be too great. High profile reports of outsource U-turns by companies such as Dell and Shop Direct have dampened some enthusiasm for sending call centre work overseas.

Furthermore, western European contact centres remain buoyant. An independent report commissioned by the UK’s Department of Trade and Industry (DTI) earlier this year, revealed that the UK’s call centre industry is expected to gain about 200,000 jobs in the next three years. The report also revealed that the sector is healthy and is set to employ more than one million people by 2007 – four times more than India in the same year.

As the call centre industry matures, organisations are increasingly concerned about their stakeholders’ attitudes to any offshoring decision. Last year, research company ContactBabel conducted a survey of 1000 people entitled ‘Finding the balance – the effect of offshore customer contact on profitability and brand’. According to Steve Morrell, principal analyst at ContactBabel: “Approximately half the people questioned didn’t approve of offshoring – and this was largely because they had not had a good experience of it.”

In the past, some people have argued that the approach has been to go offshore and deal with the public relations consequence afterwards. Today, things are changing, as Mr Morrell highlights: “You could say that nobody likes telephoning call centres and nobody likes using touch-tone systems, so does it really matter? Well, yes – 7.3% of those questioned said they had changed their banking or insurance supplier because of offshoring. When you consider that the main motivation for many organisations to go offshore has been cost-related, 7.3% can represent a significant fall in revenue.”

Viabe alternatives

Taking stakeholders’ concerns into account, several countries provide viable alternatives to India. While the sub-continent’s history makes it a strong contender for dealing with British culture and language, it is often less good at dealing with multi-geographical customers with variable language requirements.

Christina Wood, event director at Offshore Customer Management International Conference, says: “The first conference that we held was in India as this was the obvious starting point for offshore events. However, it became clear that although India has a major market share, it doesn’t provide all the answers.

“Taking the conference to a new location provides an opportunity to investigate a slightly different proposition. India has been seen as a good location for large-volume capabilities, but markets in South Africa, Botswana and eastern Europe are also opening up.”

Location choice

Ms Wood’s views are shared by others in the industry. The Philippines and Canada rank as good destinations for US English language calls. There has also been an increasing movement of US Hispanic outsourcing to Latin America, particularly the Caribbean, Costa Rica, Argentina, Chile, Venezuela and Panama.

“Our research reveals that at least 27 countries are now handling offshore work from countries speaking the appropriate languages,” says Penny Bousfield, director of outsourcing at CM Insight. “For example, Tunisia and Mauritius are successful offshore destinations for French language calls. A number of eastern European countries are able to handle calls in English and German.

“Added to this, the eastern European countries will be well-placed to handle offshore calls for Russia, when the Russian economy is [eventually] at the right stage.”

Outsourcing to China has been slow to date. Technology Law Alliance’s survey revealed that few companies favoured China as a potential destination. “When you consider issues such as cost – as well as large amounts of press coverage about China – it seems surprising that few people showed an interest in this market. The reason for this seems to be the issue of language and accent,” says Mr Kang.

These problems are echoed by Ms Bousfield. “Little is happening in the way of English language call handling. This is partly because of the lack of language skills and also significant cultural differences that are likely to pose challenges for European call handling.”

One to watch

After India, South Africa appears to be the big place to watch. Its call centre market emerged in the 1980s to serve domestic corporates so, unlike India, which has been largely backed by venture capital funding, the market has grown organically to its current level of 45,000 agent seats and 80,000 employees. “This provides it with the advantage of a big stable pool of skills to pull from a domestic market that is not growing faster than the economy,” says Luke Mills, executive director at Calling The Cape.

Today, the country's offshore customers are typically British, European and North American. High-profile organisations include Budget Insurance, which uses the country for inbound sales-based calls, Dialogue Communication, a call centre bureau that conducts inbound and outbound calls on behalf of companies (including Admiral Insurance and British Gas), and airline Lufthansa, which houses its largest global sales office in the country.

“We considered a number of offshore locations before choosing Cape Town for our first offshore contact centre,” says Steve Loose, director of Fusion Outsourcing Services (a subsidiary of Budget Insurance). “We were attracted by the quality of the workforce, the infrastructure and the professionalism of the service providers we met. Our investment is on schedule and on budget and our staff are rising to the challenge of providing excellent service to our UK customers.”

Although the bulk of South Africa’s call centre work is handled on behalf of British clients, Europe is becoming increasingly important. “The Netherlands provides a fairly big market for South African call centres as there are only 200,000 seats in the Netherlands and there isn’t such a large global pool of Dutch speakers,” says Mr Mills.

Work undertaken in South Africa varies from customer renewals, customer care, back-office work, administration, retail services and even recruitment. “A common thread to all these areas of activity is the requirement for longer conversations and interactions, often involving seven or more stages, such as complex products and process, for example, insurance renewal,” says Mr Mills.

The risk factor

Of the companies that now outsource overseas, many are opting for a two or three location strategy in an attempt to diversify risk. Another approach is the smart shore option. Taking this approach, organisations are setting up onshore facilities to establish an understanding, joint culture and test processes. Having established this successfully, companies are in a stronger position to move these processes offshore.

For example, a UK wireless telco provider, which differentiates itself on the basis of customer service and customer experience, found it difficult to go offshore, and to get the offshore agents to understand its business and empathise with its customers. As a result, it is establishing a smart shore operation with an account management function onshore along with a model office that could test processes and benchmark. When smart shore solutions such as these are adopted, key people from the operational management team may eventually work in the offshore destination. Likewise, offshore agents may be brought to the UK to learn about the company culture. Such people eventually return to their offshore base, where they act as ‘culture champions’.

Where next?

Although the offshore outsourcing model represents a small percentage of contact centre activity, the market is maturing. However, the market faces increased competition from the self-service industry, where automated speech recognition and web-based self-service are now growing. This provides a win-win situation, with live agents becoming vital knowledge workers with a skills base more specific to the organisation. Having knowledge workers at the front end speeds up the decision-making process for an organisation and its customers; which must be good for business retention and creation, and for customers in terms of higher quality service.

“The call centre industry is at a crossroads: it has pulled away from focusing on efficiency and is now starting to grow up,” says Mr Morrell. “However, success is still measured by executives within call centres by cost.”

Mr Wright agrees. “People often look at offshore outsourcing as a low cost option – but the reality is that it shouldn’t be viewed in such a way. You’ve also got to make sure that you maintain or improve customer service, and this means understanding information flows as well as understanding how best to target groups,” he says.