Call Center Offshoring Continues, But Hang

he North American customer contact center industry, historically in a constant state of flux, has seen turbulence rise to new levels over the past year. Sea changes have been aplenty whether it be the early returns of the Do Not Call registry’s effect on telemarketing jobs or increased offshoring of inbound customer service jobs with a subsequent politically charged backlash in some states.

        And, while some high-profile U.S. firms – namely Dell Computer and Lehman Brothers – generated publicity by opting to move some customer service operations back home from India due to apparent culture clashing on the telephone, Internet service provider Earthlink, opting to offshore its call center jobs, seems to be indicative of the larger trend. The phenomenon of Indian call center workers toiling through the night to serve U.S. customers is now even the subject of a movie being filmed in New Delhi, “American Daylight.”

U.S. site decisions in this sector continue in the secondary market mode that began at the start of the millennium. Canada remains popular, but currency fluctuations are mitigating its appeal somewhat, industry observers say.

        Daniel Hong, a call center industry analyst for Datamonitor, says low labor costs and affordable real estate have long been the draw for call center expansion in the South and Midwest. He says while the greatest proportion of agent positions will remain in these regions, the West will be the fastest growing region.

        “Plenty of available and affordable real estate, outside of major urban areas such as San Francisco, and a slightly higher unemployment rate will contribute to the growth of agent positions in the West,” Hong says. “Denver, Las Vegas and Salt Lake City have all re-established themselves as viable call center cities.”

        In Canada, Datamonitor’s research indicates the Western provinces of British Columbia, Alberta, Saskat-chewan and Manitoba will see the most growth, also due to available and affordable real estate and labor. The Atlantic Provinces will be another growth area, providing plentiful labor as traditional sources of employment such as manufacturing and fishing wane, Datamonitor says.

        Brad Cleveland, president of the Incoming Calls Management Institute in Annapolis, Md., says while Canada remains a draw for many firms, the strengthening of the Canadian dollar has taken off some of the luster. Cleveland says the U.S., while seeing some jobs flow to Asia, is doing quite well, with an estimated 75,000 call centers employing about five million agents. Firms spend about US$180 billion a year running these operations, he says.

West Corp., one of the largest customer service outsourcing firms, opened a call center in British Columbia in 2003, but sees future growth going offshore.

        “Certainly, some jobs are going to India, the Philippines and Costa Rica, and that will continue to grow,” Cleveland says. “But there’s been mixed success. Companies have to do their homework.”

        Skip Hanson, chief administrative officer for Omaha-based West Corp., a major customer contact services provider, notes that while contact center jobs will continue to flow from the U.S. to low-wage countries such as India and the Philippines, some opportunities for investment remain in North America.

        “Obviously, there are some near-shore options,” Hanson explains. “There are probably a few more opportunities up in Canada. In the U.S., it’s mainly going to be groups that are looking at a group of operations or vacated call centers. There are a lot of opportunities in the U.S. if you are still determined that’s the right market. Everything is driven by what your business is. Some groups don’t want to go offshore and have chosen near-shore operations, but some of those areas have become saturated.”

        Recent expansions in Canada include outsourcing firm LiveBridge, which is converting its Prince George, British Columbia, facility to a full-service operation center creating 300 jobs.

        Expansions are happening in non-urban areas around the U.S. where labor is available.

        “Companies are finding success in smaller cities and less populated areas like Idaho, Montana and South Dakota,” Cleveland says. “These areas offer lower cost structures and good quality of life.”

        Idaho has seen significant recent expansion. Wireless service provider T-Mobile, a subsidiary of Germany’s Deutsche Telekom, plans a 600-employee customer service center in Meridian, a Boise suburb. The comp any will occupy a new 77,000-sq.-ft. (7,153-sq.-m.) building this summer. Sue Nokes, T-Mobile’s senior vice president, customer service, says the company chose Meridian for its “healthy employment base and strong local support.”

        On the opposite end of the state, Qwest Communications International plans to add 325 jobs at its service centers in Idaho Falls and Pocatello. Both centers handle inbound calls from Qwest’s 14-state local service region.

Technology Marketing Corp. (TMC), a Norwalk, Conn.-based marketing and publishing firm specializing in call centers, estimates the U.S. has lost 250,000 call-center jobs to India and the Philippines since 2001.

        Nadji Tehrani, TMC founder and CEO, say while India has the momentum, it is not without problems that could shift more business back to the U.S.

        “Some companies are running into an enormous amount of trouble,” Tehrani says. “India is in competition with the Philippines, which has created tremendous price cutting. The number one enemy of the call center industry is lack of proper quality control, and some companies are letting anyone do anything. Logic dictates that you get what you pay for.”

        Tehrani says the Do Not Call list, while costing thousands of U.S. jobs initially, will turn out to be not so bad to the industry. He says it has thinned out many poorly financed small and medium-sized companies. But, he says, business is coming back to U.S.-based outsourcing firms in a variety of ways, including some from companies formerly using offshore firms in Asia.

        Tehrani believes that inevitably, the Do Not Call law will result in violations by India-based call center companies. That will bring more business back to the U.S., he says.

        “If somebody in India commits a violation that results in fines, then the company from the U.S. is responsible,” Tehrani says. “It’s one thing to send T-shirts and sneakers to be made over there. That will work because cultural differences don’t matter. However, telemarketing is a big difference. Cultural problems won’t be solved overnight.”

        While some may dismiss it as election year posturing, legislatures in several states have either passed or are considering bills aimed at curbing offshore outsourcing involving state contracts. U.S. Sen. John Kerry, a Democratic presidential

candidate, introduced a bill that would require companies to inform people who call offshore centers about where the workers are located.

        Cleveland believes these moves are futile.

        “It’s not going to work and it won’t take hold,” he says. “It’s an election year and there’s a lot of concern about jobs, but these aren’t fair laws. It will create a lot of problems when you create a one-way street.”