“The ‘digitized infrastructure’ connecting office buildings and factories has become as important as bricks, mortar and hard walls,” says a “Smart Cities White Paper” from the International Development Research Council (IDRC), the world’s preeminent corporate real estate association.

Is it ever. Consider May 20, the day a lot of U.S. business stopped dead. A PanAmSat satellite shut down, knocking out 50 million U.S. pagers. In many corporate facilities, chaos reigned.

Many call centers couldn’t pull up on-screen information, miffing customers and squandering revenues. In-the-field salesmen were reduced to constantly calling for directions. Manufacturing troubleshooters were guided by old-fashioned loudspeakers. And the work process simply stopped for some teams wirelessly handing off projects to other teams based in faraway time zones.

“This was a wake-up call,” says Atlanta-based telecom consultant Jeffrey Kagan.

It was that and more, a jarring reminder of how tightly telecom binds business facilities together. Much of the new economy is built on “infostructure” -- digital technologies and networks using satellites, cabling, PCs, phones, the Internet, videoconferencing and software that does everything from factory-floor training to manufacturing-cell coordination.

Cut the telecom connection, and many businesses are out of business.

The Call Center Barometer

Call centers are a barometer of telecom’s real estate impact. Few facility types are so numerous and so technology-dependent.

The USA alone has 60,000-plus call centers, says London-based Datamonitor. And 80 percent of center costs, analysts say, go into telecom services and labor, the two factors dominating many location strategies.

Call centers’ position on telecom’s leading edge has moved them from back office to corporate center stage.
“It’s become a business imperative that CEOs know their telecom system’s effectiveness and cost. They must continually focus on their internal and external communications,” says Ricardo Brutocao, president of AAC Corp., a Monrovia, Calif.-based call software company.

“When so many people have access to so many communications forms, utilization and productivity become intertwined.”

Changing Location Factors

The technology-powered new economy has also eclipsed many traditional call center location criteria -- low taxes, high incentives, “neutral” accents and ready labor that’s educated, computer-savvy and articulate.

Centers can now be located virtually anywhere, given developed economies’ broad availability of infostructure like Integrated Services Digital Network (ISDN) lines, which are essential for high-volume Internet business or data warehousing. Market proximity is rarely an issue. Houston’s call center cluster, for example, includes Connecticut-based CardMember Publishing, Florida-based Software Support and Washington, D.C.-based MCI.

Nonetheless, some areas don’t make call center location short lists because of local carriers’ high ISDN pricing or their poor service in providing ISDN, analysts say. The ISDN alternative, leased lines linking call centers, is a pricey, time-eating deal killer.

Economies of scale continue to create many large call centers. In the last three years, the 10 biggest new U.S. call centers averaged 1,827 jobs (see chart). Large call centers are also popular in serving markets with significant linguistic and cultural differences.

Small, dispersed call centers, however, are increasingly common due to ISDN, which provides real-time call center network linkage. When customers dial a center, ISDN technology instantaneously scans the network, routing calls with seamless speed to available agents at any center.

ISDN has allowed some companies to change location strategies, siting a series of 40- to 80-employee centers, some in a single metro, providing backup capability if a center’s system crashes.

In addition, that location model addresses a major turnover factor: With more managerial roles, distributed centers create a career ladder.

New Labor Strategies


Above all, labor market changes are altering call center location strategies.

Tightening labor markets have aggravated many centers’ historically high turnover. “If you have a facility where the labor market has dried up, you have no choice but to move on,” says Bill Yontz, vice president of real estate at Falls Church, Va.-based Capital One Services.

Second- and third-tier cities are increasingly popular center sites. Oklahoma City landed more than 3,000 call center jobs in three years, including America Online, Idelman Telemarketing, Lucent Technologies, Matrixx Marketing and Southwest Airlines.

Analysts cite many other labor-rich second- and third cities, including Birmingham, Ala.; Boise and Pocatello, Ida.; Des Moines, Iowa; El Paso, Texas; Kansas City; Lexington and Louisville, Ky.; Norfolk and Virginia Beach, Va.; Phoenix, Ariz.; Richardson, Texas; Shreveport, La.; Sioux Falls, S.D.; St. Louis and Tulsa, Okla.

Such cities also offer lower occupancy and telecom costs. For example, annual operational costs for a Fresno, Calif.-based 300-seater would be $16.8 million, compared to San Francisco’s $21.6 million, according to a study by Princeton, N.J.-based Boyd Co. Location Consultants.

The labor crunch has also vastly improved the appeal of downtown sites with nearby labor and quality public transit. For example, Sprint’s Lenexa, Mo., call center is electronically linked with a smaller downtown Kansas City center Sprint set up to tap available labor.

Readily available, lower-cost real estate adds to downtown sites’ appeal. U.S. downtown vacancy rates, for example, hover in the 12-13 percent range, compared to suburbia’s 10 percent, says CB Commercial.

Substantial skilled labor pockets have also made Canada a ripe call center market, particularly with national telecom deregulation. Canadian centers’ operational costs are 5.4 percent below U.S. centers, according to a KPMG Peat Marwick study.

Small Cities’ Big Rise

Smaller cities with available labor are landing many 100-to 300-seaters. High-tech centers in particular have found fruitful sites in smaller areas that have colleges and universities with solid engineering and computer science programs. For example, Nacogdoches, Texas, has but 33,000 “full-time” residents, but it’s also home to Stephen F. Austin University’s 12,000 students.

Some call center expansion teams also like smaller areas’ non-union mood, plus their ability to provide the large land tracts sometimes required to co-locate call centers and distribution centers for greater efficiencies.

Smaller locales are more likely to offer attractive center location incentives, industry analysts say, as labor-squeezed larger cities scale back.

Attacking with Technology


Sophisticated technological tools are also upping call center efficiencies. Many centers are employing call accounting software that increases productivity, cuts telecom costs and predicts peak labor demands.

Perhaps the biggest technological tool, though, is the Internet, now a bona fide mass medium. American Airlines’ customer service Web site has cut flight information calls by 20 percent. Dell Computer’s Web site is drawing 20,000 hits a week from customers tracking orders. If those customers phoned, Dell’s expenses would jump $60,000 to $100,000 a week, company officials say.

By the year 2001, two-thirds of U.S. call centers will be Internet-integrated, says Paul Stockford, principal analyst for Cahners Economics In-Stat Business Research Group.

Some industry experts, however, caution against Web over-reliance. “When a customer calls, it’s a great opportunity to have a dialogue, far better than calling them at dinnertime,” says Bob Young, vice president of marketing for Richardson, Texas-based AnswerSoft, which provides call center automation systems.

Call centers’ next major technological hurdle, says Young, is “creating a single stream of customer communications” -- integrating calls, faxes, email and “snail mail.”

Web links are also raising the bar for service agent skills, further complicating the task of finding the right work force.

“Routine tasks like order-taking [will] disappear, replaced by more complicated tasks,” predicts “The Emerging Digital Economy,” a recent U.S. Commerce Dept. report. Already, many outbound center “script-reading” jobs paying $6 to $8 an hour are being supplanted by more difficult customer service/help desk positions paying $30,000-$40,000 a year.

Year 2000 Jitters


Call centers may also provide the next rude reminder of infostructure’s vital real estate role. With their umbilical telecom link, many centers are apprehensively eyeing year 2000.

Says Christopher Thompson, principal analyst for Dataquest’s Call Centers North America program, “The single most important trend affecting the call center market is year 2000 compliance.”
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