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January 2000


Considerations For Call Center Development: A Case History


Three years ago, wireless communications provider Nextel Communications was a $300 million business. Today, its annual revenue is nearly $2 billion. In the telecommunications business, this kind of growth leads to increased pressure on corporate infrastructures, particularly customer care centers.

According to Katrina Menzigan, an analyst at International Data Corporation, call centers are becoming the center of all customer activity, so infrastructures must handle an increased workload.

"Billing services and sales functions are increasingly being transitioned into the domain of the call center," said Menzigan. "This is because it is difficult for companies to establish salespeople in new areas at a pace quick enough to support their expansion efforts."

Nextel anticipated this trend and took steps to ensure that its customer care centers supported the company's growth strategy.

"We realized that in order to keep our reputation for providing the best-possible service to customers, we need to make continual investments in call center infrastructures as our business grows," said Albert Shotwell, vice president of real estate at Nextel.

The McLean, Virginia-based firm had a digital subscriber base of 2.96 million at the end of 1998. Its call center facilities were no longer adequate to serve the increasing number of customers and volume of calls. Expansion of call center operations would be necessary to sustain Nextel's growth and promote shareholder value.

In fact, Menzigan reported that the telecommunications industry is one of the top consumers of call center services.

"As the wireless communications industry becomes more competitive, firms are turning to customer service centers with 24-hour customer service to differentiate themselves from the competition," said Menzigan.

A Strategic Approach
First and foremost, call center development that maximizes value and opportunities requires enough time for research and due diligence.

Many firms are eager to have their new call centers up and running quickly due to the importance of such a critical, around-the-clock function that interfaces directly with the customer. However, many companies later sorely regret jumping at the first option available when they discover operation costs are extremely high, labor is difficult to find, or they are unable to eventually expand the facility.

The three factors discussed below map out the key areas of the methodology to consider for call center location decisions.

Labor Pool
Labor drives the decision as to where to locate a call center, and Nextel’s labor research shows why. The company compiled data on labor availability in different regions, labor competition (some call centers actively target competitors’ employees), educational level and wage rates. Geographical factors, such as cost of living, quality of schools and transportation, are also included since they impact the suitability and quality of the labor pool. These data were formatted into a matrix and ranked according to each location.

“We wanted to ensure that we made an informed decision and that we weren’t jumping into the selection process blind,” said Shotwell. Understanding the potential for both success and failure of a call center, Nextel partnered with a commercial real estate strategy and consulting firm.

Nextel’s labor studies enabled it to narrow 40 possibilities down to only 10, and eventually to two: Winchester, Virginia and the Hampton/Norfolk, Virginia area.

Together with the consulting firm, Nextel tested the labor market in each city by running advertisements for call center jobs in the local newspapers. In Hampton, Virginia, one response mechanism generated 500 replies via e-mail, indicating an abundant labor pool with a propensity toward technology.

Even though call center development has exploded in the last five years because companies across the board want to provide customer service in this fashion, there are only a handful of call center clusters. Currently, the greatest concentrations are in the Southeast and Midwest, where the climate is not too harsh and there is less chance that weather can knock out power. Nextel considered both areas, but focused on the Southeast because of the positive results of the labor research.

Own Or Lease?
Once the short list of cities is determined, the next decision is whether to lease or own call center space. In the case of Nextel, its management team and the consulting firm determined that leasing was the best option since Nextel did not want its capital tied up in real estate.

“We want our money available to make investments that will allow us to continue to grow,” said Shotwell. “The leasing option provides much more inherent flexibility.”

However, some firms don’t know if they want to lease call center space or purchase land for development. If this is the case, it is suggested that they first look for available space in their target cities to ensure they are not limiting their options.

Regardless of a firm’s preference for leasing or owning, a conversion opportunity can be a sensible choice. Former retail buildings or semi-industrial facilities, such as discount stores or supermarkets, can possess features, including infrastructure, building design and parking, that make them attractive for a call center conversion.
Sufficient room for parking is critical because call center employees often work late-night shifts that public transportation cannot accommodate. The parking area should be on the ground level and outside because this is less costly to build and maintain than indoor parking structures.

Many conversion opportunities already have this parking configuration, and they are located in appropriate neighborhoods. They are not surrounded by high-rise buildings, which tend to be built in areas with high real estate values that needlessly drive up costs. With a one-level structure, they tend to have more surrounding space which allows for future expansion opportunities.

Nextel’s newest customer care center in Hampton, Virginia is a 100,000- square-foot, one-story facility with plenty of surrounding open space. This provides abundant employee parking and is making it possible for the company to add an additional 43,000 square feet to the facility for the first quarter of 2000. The first 57,000 square feet was occupied in early August 1999.

A good infrastructure is also critical. Fiber optic cable and the building’s power and security systems are all things that need to be put in place if they are not already there. Nextel and its consulting firm noted that the Hampton, Virgina site was within a few miles of several corporate headquarters buildings, which indicated a lot of fiber optics were already in place. In general, Staubach estimates that the cost can be up to 50 percent lower when converting a former semi-industrial or retail facility as opposed to developing a new building from the ground up.

Municipal Incentives
An often overlooked yet critical element of call center development is securing municipal incentives from the city and state governments. Since call centers bring job growth and employment opportunities to an area, telecommunications firms can receive tax incentives, grants, low-cost financing, workforce allowances and road improvement subsidies. In addition, the government will often give cash abatements and real estate tax breaks to firms that create new jobs in a region.

For Nextel, the $2.3 million saved through negotiations for state and municipal incentives also led to the decision to select Hampton, Virginia for the call center site. “Skillfull negotiators and experience in dealing with local and state governments add tremendous value,” Shotwell said. “It made the difference between a fair offer and one that was simply too good to pass up.”

Central to all three of the factors discussed above — labor, real estate and incentives — is that they all center around finding the most reliable and cost-effective solution.

The Results
Today Nextel has customer care operations in Rutherford, New Jersey, Denver, Atlanta and most recently in Hampton, Virginia. Nextel’s national real estate portfolio presently exceeds four million square feet.

The methodology employed by Nextel’s consulting firm paid off. In addition to the savings generated through negotiations with the local and state governments, the chosen building was the least expensive deal and Nextel saved $600,000 on pure construction costs related to the expansion of the building. Since a region with a large, proven labor pool was selected, less competition for labor exists, which results in lower wages. These savings prove that proper due diligence and skillful negotiations can save a company a lot in the long run. This process is one that Nextel will continue to use when selecting new call center sites or expanding its existing ones.

Rob Copito is a senior vice president with The Staubach Company’s Northeast Regional Office. The Staubach Company is a commercial real estate strategy and consulting firm. Copito specializes in strategic real estate planning and transactional work for the telecommunications industry.

Editor's Note: Building The Perfect Call Center — A Yearlong Journey

Building a call center is an arduous process that involves integrating diverse elements. We have designed this section to help you, over the course of this year, to become an expert in the judicious selection of the many products that make up a call center.

This month we will look at choosing a location for your call center; in February, we will examine call center design and furniture; in March, selecting outbound call center technology; in April, various inbound routing technologies; in May, how to use CTI technologies to increase productivity; in June, the benefits of open systems as exhibited in PC-PBXs and PC-ACDs; in July, workforce management solutions for increasing productivity; in August, logging and monitoring and technologies; in September, headset selection; in October, next-generation call center systems; and in November, how to integrate the Internet into your call center and utilize your database for one-to-one marketing.

It is our hope that by the time we reach November, you will be able to follow the guide we have presented and that you will be able to confidently go about building your own perfect call center.

Location Checklist


This checklist provides a guide to topics to investigate when evaluating a new site
for your call center.

Labor Market Factors
(**= those obtained from an “employer” survey)

1) Demographics

  • Population (including
  • Income (including
    percent households
    under $35,000)

2) Employment

  • By major industry (e.g., manufacturing)
  • By occupation
    • Nine broad categories (e.g., clerical/administrative)
    • 506 specific categories (e.g., secretary)
  • Unemployment
  • Underemployment (percentage of workers in traditionally low-paying occupations)
  • New workforce entrants
  • High school graduates
  • Community college graduates
  • College graduates
  • Adults in-migration
    (ages 18 to 64)
  • Ancillary labor pools
    • Military
    • College students
    • Retirees (55 to 74)
  • Major employers
    • Office
    • Manufacturing
    • Distribution
    • Public sector
  • New/expandingemployers (last three years)
  • Downsized employers (last two years)
  • ** Employer labor supply ratings
    • Entry level
      • Clerical
      • roduction
    • Experienced
      • Clerical
      • Semi-skilled production
      • Skilled production
      • Technician
    • Professional
      • General skills (e.g., accountant)
      • Technical skills (e.g., engineer)
    • Part-time worker availability
    • Seasonal work availability
    • Difficult positions to fill
      • Entry level
      • Experienced
      • Professional

3) Labor Quality
  • Workforce educational attainment (e.g., percentage 12 to 15 years of education)
  • Average SAT scores
  • 4 Employer experiences/ratings
    • Turnover
    • Absenteeism
    • Punctuality
    • Basic skills attainment (e.g., math, reading)
      • Existing workforce
      • Applicant flow
      • Projected (next two years)
    • PC literacy
    • Knowledge of basic software
    • Ability to operate in self-directed teams
    • Productivity
      • Actual
      • Compared to similar company operations elsewhere
    • Work ethic
    • Overall quality rating
      • Two years ago
      • Today
      • Projected two years

4) Labor Costs

  • Average annual salary by major industry
  • ** Salary ranges (including start ratio) by selected occupation
    • Clerical
    • Production worker
    • Technician
    • Professional
  • **Average annual salary increases
  • **Utilization of incentive compensation
  • **Fringe benefit practices
  • **Wage escalation pressure
  • **Satisfaction with
    • Workers’ compensation
    • Unemployment insurance
  • Workers’ compensation
    • Rates for 10 to 15 representative occupations
    • Maximum weekly benefit
    • Key legislation provisions (e.g., doctor of choice)
  • Unemployment insurance costs
    • New employer
    • Existing employer
5) Training Resources
  • Annual graduate in post-secondary technical schools
    by selected
    programs (e.g., machine trades)
  • High school vocational/technical programs
  • Adult education programs
  • Four-year college graduates by
    selected program
  • **Employer Ratings
    • Post-secondary vocational/
    • High school
    • Adult education
    • Four-year college/ university
    • State job training

6) Labor/Management Relations

  • Percent workforce
  • Unionized
  • Union election
  • **Employer

7) Quality Of Life/
Transferee Appeal

  • Cost of living
  • Housing
  • Education
  • Commutation
  • Crime
  • ** Spousal
    employment opportunities
  • Climate
  • Arts/culture
  • Recreation
  • Medical services
  • ** Employer
    • Above
    • Overall quality of life
    • Ability to relocate professional talent to
      area from elsewhere

8)** Overall Labor
Market Rating

9) 4 Rating On Value
Of Human Resource Investment

10) 4 Verbatim
(e.g., what’s good,
what’s wrong,
emerging concerns)

11) 4 Cross-Tab Survey Results

  • State
  • Local area
  • Companies in static employment mode
  • Companies in employment expansion mode
  • Industry
  • Wage level
Location Checklist

Site Selection Checklist: Non-labor Market Factors Non-labor market factors are also enumerated. Keep in mind that although statewide information is helpful for some factors, information (both statistical and empirical) must be thoroughly investigated at the local level where substantial variation occurs.

The following checklist contains the non-labor market factors most frequently examined during the location (and site) selection search.

1) Business Costs

  • Recurring (e.g., payroll)
  • One time (e.g., relocation)

2) Real Estate

  • Number and location of available buildings
  • Lease costs
  • Net absorption
  • Number and location of greenfield sites

3) Telecommunications

  • Long-distance carriers
    • Carriers with local point-of-presence (POP)
    • Sophistication of POPs
  • Local
    • Digital central offices
    • Fiber central offices
    • Fiber ring diversity system
    • Policy re: telephone installations, lineconnections, etc.

4) Electric Power

  • Cost
  • Capacity
  • Reliability
  • Energy deregulation status

5) Tax Policy

  • Local telephone
  • Intrastate telephone
  • Interstate telephone
  • Incoming 800 calls
  • Outgoing WATS
  • Office furniture/fixtures/equipment
  • Software
  • Intangible property (e.g., accounts receivable)

6) Labor Law

  • Telephone monitoring for productivity, customer satisfaction
    • No-party consent
    • Single-party consent
    • Dual-party consent
  • Employment at will
  • Applicant drug testing
  • Mandatory parental/family leave stricter than federal
  • ADA legislation stricter than federal
  • State minimum wage higher than federal
  • Workers’ compensation laws (e.g., mental stress a compensable injury)
  • Ease of filing/winning discrimination/harassment complaints and wrongful discharge suits

7) Transportation

  • Air service
    • To/from HQ
    • To/from other major hubs
    • Maximum distance from local airport
  • Small package delivery
  • Postal service
  • UPS zones

8) Incentives (“As-of-Right” or Customized)

  • Grants
  • Tax credits
  • Tax refunds
  • Tax abatement
  • Low-interest financing
  • Tax increment financing
  • Reduced land cost
  • Electric power rate reduction
  • Fee waivers
  • Reduced airfare during the transition period

9) Other

  • Natural disaster potential
  • Community leadership attitude toward the project
  • Community appearance

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