June 2002

By James Beatty, NCS International

Over the last two months, I've discussed two different strategies for site selection: the Small Town Strategy and the Urban Inner City Strategy. The final strategy in call center site selection is the Global Strategy. This strategy recognizes that call centers can and are located throughout the world. This article addresses several key issues with an admitted emphasis on labor and the issues involved in evaluating labor.

Generally, companies interested in selecting a new call center site are seeking to either provide better service to their clients and/or to lower costs in their call center operations. Better service might be defined as locating closer to customers, having more staff available at various hours to accommodate customers worldwide or providing a multilingual environment to reflect the diversity of customers worldwide.

The same principles apply whether reviewing locations in the U.S. or other countries.

Certainly ongoing operating costs are always a concern and the one cost everyone wants to mitigate is labor while not sacrificing quality. Labor quality and costs will always be the key issues in call center site selection whether in the U.S. or worldwide and many foreign countries are making a strong case for consideration based on labor costs alone. The Asia-Pacific region has many countries that are often reviewed and discussed. Perhaps the most current example is India, which purports to have agent labor costs as low as 25 percent of a U.S. call center agent. This one fact has led to quite an interest and investment by U.S. companies to establish call center operations in that country. These companies include Dell, Compaq, First Ring, Convergys, GE and The ICT Group.

India is aggressively pursuing U.S. and U.K. call center investment and, according to reports by Datamonitor and New Rapport.com, the call center employment picture is as depicted in Table 1.

Some of the reasons put forth for this astounding growth are:

• India produces 2 million college graduates annually,
• Unemployment among college graduates is as high as 20 percent,
• Customer service positions are viewed as professions, not merely jobs,
• India has an English-speaking population second only in size to the U.S.,
• 65 percent of the world's top-rated software companies are based in India,
• Proximity to serve the greater Asian market,
• Annual turnover rate of 18 percent versus U.S. rate of 42 percent.

More information on India can be found at the Web sites www.ciionline.org and www.nasscom.org.

Other Asia-Pacific countries that could be classified as mature markets include Australia, New Zealand and Singapore. The Philippines is also establishing itself as an up-and-coming location. More information on these locations can be found at www.callcentres.net.

In reviewing European locations, one should consider the following facts. In 1999 there were 12,750 call centers and this will grow to 28,000 by 2006 according to the marketing consulting firm of Frost and Sullivan. Also, according to Datamonitor, the number of outsourced call center agents in Europe has risen from 58,000 in 1998 to a projected 127,000 by 2003.

However, according to the U.K. Department of Trade and Industry, almost 400,000 people are employed in the call center industry, more than the coal, steel and vehicle industries combined. The industry is growing at a rate of 30 percent per year and is expected to provide employment for 665,000 people by 2008.

European mature markets, areas in which call centers have become popular and might be creating tight labor conditions, include Scotland, Ireland and the Netherlands. Emerging markets include Spain, Sweden, Belgium, Germany and Denmark, due in part to the pools of foreign language workers and lower labor costs.

Companies that have located in Barcelona, Spain include Citibank, Avis and Bayer. The Netherlands can boast the customer care operations of DaimlerChrysler, Novell, Sony, DHL and Sykes Enterprises.

On the North American front, Canada has emerged as a leader in the call center industry, due in part to the sustained efforts of the federal and provincial governments over the past few years. Over the past decade, many provinces established call center/economic development teams that were the joint efforts of the provincial governments and the telecommunications company servicing the area. These teams were very active in recruiting call centers to their respective province and, in fact, many teams remain active today.

Canada's attractiveness was also due to the exchange rate with the Canadian dollar at about one-third of the U.S. dollar. Canada also provided large pools of English-speaking and multilingual workers, especially in metropolitan areas such as Toronto, Halifax, Montreal and Vancouver.

Due to the growth of the call center industry, the trend in Canada has been to locate in communities of 50,000 and below population range.

Canada's unemployment rate has been about 8 percent with some areas as high as 20 percent due to changes in the type of work performed in some locations, especially in the mining sector.

The call center industry in Canada has 330,000 agents and is growing at a rate of 24 percent annually. According to PricewaterhouseCoopers Consulting, Canada's contact center sector had 4,000 centers in 1995 and has 13,500 in 2002 and will continue to grow at a rate of 20 percent annually for the next three years.

The breakout by province is detailed in Table 2.

There are numerous companies with operations in Canada. They include Electronic Data Systems, Convergys, Spiegel, Ron Weber and Associates, Neiman Marcus and Stream International.

The Caribbean has also become an emerging location due to lower costs of labor and multilingual talent. Among some of the recent entries in the call center recruitment market are Jamaica and Barbados.

Jamaica has publicly stated its desire to recruit 40,000 jobs within three years starting in 2001 and with 2,200 jobs thus far, the government is actively seeking more U.S. and U.K. investment in this industry. Jampro is the organization tasked with achieving these goals. More information can be found at www.investjamaica.com.

Barbados, through the efforts of Cable and Wireless, the telecommunications provider, and Bidco, the agency promoting the area, is actively recruiting U.K. and U.S. More information can be found at www.bidc.com.

Incentives
Each country has developed an array of incentives to attract inward investment for call center operations. These incentives range from the elimination of the surcharge on international calls to forgiveness of various corporate and personal taxes on revenues associated with the business operation in their country. In fact, based on some of the information I have reviewed, some of the financial incentives, especially for IT-related call center jobs, are more lucrative than can generally be found in the U.S.

Keep in mind that the countries mentioned here and even the ones I have not mentioned are generally aggressive and will work closely with you in all phases of the project.

Telecommunications
This can be a very precarious topic. One should spend extra time researching the telecommunications laws and rates of the countries under consideration. The U.S. market has conditioned call centers to think in terms of costs around 5 cents per minute or less based on volume. This will not necessarily be the case in other countries. Be sure to identify all costs associated with the project, as potential savings on labor costs could be eroded in the telecom arena. Some countries are in varying stages of telecommunications deregulation and competition, thus creating unique opportunities for your call center project. This area is indeed a topic unto itself and I plan to cover this in a future article.

Political Stability
Clearly, companies need to evaluate the stability of the government of the country under consideration and determine the degree of risk associated with having an operation on foreign soil. Understand the history, the political landscape, the parties and the election process in order to assess the risk, if any, in a specific country.

The site selection process has many similarities but the differences are potentially very costly such that one must truly research and conduct due diligence in selecting a foreign country as a location partner. If you have questions or comments, please contact me at www.callcentersites.net or [email protected].

James Beatty is president of NCS International, Inc., which specializes in corporate site selection, community analysis and marketing.

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