Call centres, shared service centres and technical support centres may not be bellweather industries, but they reflect business trends and the ways corporations are dealing with the global financial crisis.
Chrysler, a ‘big three’ US auto manufacturer on the verge of bankruptcy, revealed plans to move its customer assistance call centre from India back to the US to Rochester Hills, Michigan and Salt Lake City, Utah. The reason: to improve customer service. Chrysler had found that many US customers had trouble understanding the Indian accents and complained about their quality of support.
In November, Sallie Mae, the leading US college loan company, announced plans to expand to a new credit operations centre in Newark, Delaware, a move that will add about 750 employees by the end of 2010 and an additional 350 employees in 2011.
According to 2007 data available from the National Association of Call Centres (NACC) in Hattiesburg, Mississippi, the US employed 4 million people in call centres, making it the largest call-centre market in the world. fDi Markets, the Financial Times Ltd’s greenfield investment tracking service, identifies the US as the primary source for business processes outsourcing (BPO) FDI projects between January 2008 and January 2009, accounting for 58% (184 projects) of global FDI projects. Of these, 34% of projects were by US companies setting up in other American states.
Between 2003 and 2007, India was regarded as the top destination for FDI in BPO activities. But by 2008, the Philippines became the top destination. A host of reasons made India less appealing, according to CB Richard Ellis (CBRE) sources. These include the country’s accelerating wage rates, increasing attrition levels, complaints about customer service and accents, exchange rate fluctuations, and more recently, fears surrounding the Mumbai terrorist attacks and the scandal involving Satyam BPO,
India’s leading integrated end-toend outsourcing service provider.
Elsewhere, countries such as Mauritius and South Africa offer potential. The increased liberalisation of South Africa’s telecommunications sector in November opened doors for Teraco to become the country’s first provider of vendor-neutral data centres. Previously, outsourced data centre facilities in South Africa were offered only by internet service providers or large IT outsourcing companies. Vodacom has been operating three state-of-the-art call centres from its Cape Town-based network management centre. About 300 permanent and 120 flexible workers take inbound calls from the centre, primarily from contract and pre-paid customers.
“It is our only 24-hour call centre and services the entire country,” says Anel Coetzee, techno centre business operations manger. Vodacom located in Cape Town because workers are accent neutral and the city offers a good talent pool.
“Plus, they speak four languages: Swahili, Zulu, Afrikaan and English,” she says. “The exchange rate against the US dollar and British pound also makes it cheaper.”
BizWORKS (Pty), formed by Durbanbased Black Empowerment ICT companies, Data World and ImvoTech, in alliance with the internationally based ICH Pty, received 40,000 calls a month as of October 2008.
BizWORK’s goal is to make Durban a first-class venue for the outsourcing and co-sourcing of contact centre and BPO solutions. To attract such operations, BizWorks’ Durban-based facility provides a state-of-the-art contact centre infrastructure and a highstandard environment for organisations wanting to either pilot, outsource or co-source their contact centre operations.
“The time is right for the business,” says BizWORKS executive Sebastian Mahadeo. “We now have fantastic government incentives for 100-plus seat facilities. With South
Africa hosting the 2010 FIFA World Cup, telecommunications is also being upgraded and competition is driving telecommunications costs down by 30%.”
If past figures are any indication of the future, however, expansion prospects may remain bleak. CBRE reports in its year-end 2008 Call Centre Market Report that the difference in the number of new callcentre openings from 2006 to 2007 was stark, falling by nearly 40%. The decline was less substantial in 2008, with 20% fewer openings than in 2007.
“In terms of closings, data suggests that 2008 had the same number as in 2007,” says Mark Seeley, CBRE senior managing director of the Labor Analytics Group,
Global Corporate Services, in Phoenix, Arizona. “However, we saw a 37% spike in the number of closings in Q4 of 2008 over Q3 2008 and a 61% increase over Q4 2007.” Not surprisingly, the financial services industry experienced an increase in closure announcements in Q4 2008.
Although the numbers do not reveal whether centres were exported or consolidated, CBRE indicates that half of all US call centres are located in tier-one markets. These tend to be the most competitive because they have the highest wage and saturation rates, as well as the lowest unemployment.
Consequently, relocation to tierthree markets is growing among insourced call centres.
Nevertheless, Mr Seeley contends that recent economic indicators suggest the industry’s downward trend will continue and probably accelerate.
The reasons are many. Financial services, which encompassed 10% of call-centre activities between January 2008 and January 2009, has been the hardest hit in the economic downturn. The industry is undergoing tremendous consolidation, which includes its back-office and callcentre activities, says Mr Seeley.
Area of contraction
Call centres focused on fulfilment, distribution and reservations have also been contracting. “But it is not because these jobs are going offshore,” says NACC executive director David Butler. “Jobs are being replaced by the internet and companies are seeking zero labour costs.”
Telemarketing and collections have diminished due to Do Not Call lists in the US. Labour there has shrunk by 50%, the NACC maintains.
Nevertheless, increased unemployment rates, particularly in the US, are causing companies to consider
tier-three US markets. “That’s why we are seeing across-the-board increases and announcements in recent months in places such as Tyler, Texas, and Hickory, North
Carolina,” says Mr Seeley. “Clients are also interested in the mid-west –places such as Saginaw, Michigan – because of available labour resulting from lay-offs in the auto industry.”
Another emerging trend that hit the radar screen in 2008 was home agent programmes -- operational platforms that allow call-centre agents to perform their jobs from home.
According to CBRE, companies are embracing this model to reduce their real estate footprint and facility costs and broaden their call-centre talent pool.
“Many companies see the model as a trend toward virtual offshoring,” says Mr Seeley. “The technology is there, and the model gives companies the ability to employ domestically.”