TMCnews Featured Article

December 21, 2011

India Offers Strong Cost Advantage, Even with Proposed Call Center Outsourcing Legislation Looming

By Susan J. Campbell, TMCnet Contributing Editor

The buzz throughout the call center outsourcing industry is a proposed bill that could penalize companies for moving their call center operations offshore. If passed, companies supporting such initiatives could find themselves blocked from critical funding and penalized for non-compliance.

TMCnet reported earlier today that the U.S. Call Center Worker and Consumer Protection Act, a bill introduced by Tim Bishop, a New York Congressman and Democrat, and David McKinley, a Republican from West Virginia, aims to protect U.S. jobs and slow the tide of sending call center positions overseas.

In addition, a Financial Times’ (News - Alert) beyondbrics blog post stressed that Indian companies are confident the bill won’t hurt their position in the market. The country’s IT sector is currently growing at 15 percent per year and contributes just 2 to 3 percent to India’s overall GDP. It does, however, dominate in job creation as the sector was responsible for 200,000 jobs last year alone.

Representatives from the industry have already outwardly condemned the proposed measure, claiming it is merely a protectionist move. Uncertainty still surrounds the issue as proponents suggest it could be a game-changer, while others suggest IT companies will object to the higher cost of moving those jobs back home.

According to Amit Nivsarkar, vice president of the National Association of Software Service Companies, it’s too early to accurately predict the number of jobs in India that will be lost as a result of this bill. He told beyondbrics that if the bill passes, the cost of services will increase in relation to time and efficiency. These costs will be passed on to customers.

Companies headquartered throughout the world rely on offshore call centers to provide customers with 24-hour service. Nivsarkar stressed that if jobs are moved back to the U.S., companies will rapidly incur higher costs to pay employees to work the night shift, and to retain the necessary talent to support such operations.

If the legislation does in fact pass, those companies moving their call center operations offshore would become ineligible for guaranteed loans and federal grants. The bill would also require discloser of location when on the phone with customers, and the offer to transfer the caller back to a U.S.-based representative if requested. This rule alone, according to Nivsarkar, would render offshoring inefficient.

He believes customers would prefer to talk to someone offshore if it meant a two minute wait, as opposed to 15 minutes in the queue to reach a U.S.-based agent.

Industry analysts also suggest that domestic issues such as high inflation and slowing growth are bigger concerns for the sector at present.

In an interview with Jyoti Narasimhan, macroeconomic analyst at IHS (News - Alert) Global Insight, beyondbrics learned that despite the current global pressures, India still offers a cost-advantage that is very hard to beat, even with inflation.

India is still the cheapest, according to Narasimhan, and some call center outsourcing companies may be willing to risk the consequences to remain cost- effective in their customer service efforts.
Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Jamie Epstein

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TMCnews Featured Article

India Offers Strong Cost Advantage, Even with Proposed Call Center Outsourcing Legislation Looming

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