Offshore
Call Center Outsourcing:
International site
Selection strategies
By Shailen Gupta, Renodis
In today's troubled economy, companies are searching for new and innovative
ways to help them weather the storm. Outsourcing has traditionally been one of
the options used by companies looking to trim costs and reconfigure business
models. Outsourcing gives companies the ability to focus on areas of competitive
differentiation by moving non-core parts of a business to an outsourcing
provider. By outsourcing, costs are changed from fixed to variable and business
services are performed by providers that have mastered processes and technology
in a manner that presents significant efficiency advantages. Over the past few
years, however, the nature of the game has changed. Companies, both small and
large, are looking outside of national borders ('offshore') in search of further
outsourcing benefits.
Offshore outsourcing provides all of the same core benefits as traditional
outsourcing to a U.S. provider but at price point that is significantly less
than anything seen in the past. Wages of customer service reps in offshore
countries can be as much as 80 percent lower than those of their U.S.
counterparts and employees often have better educational qualifications. The
jobs that can be moved offshore range from lower-end inbound and outbound
customer contact services to higher-end technical support and value-added
business processing.
Because of the tremendous amount of buzz and activity around offshore
outsourcing in the call center industry, almost all industry participants today
have, at least in some capacity, considered moving their call center to a
country like India, the Philippines or Ireland. Many call center executives have
explored the offshore outsourcing option with cautious optimism, often seeking
answers to some very basic questions before undertaking such an initiative. Can
I really save 50 percent and maintain my current service levels? Can I
effectively mitigate the risks of doing business with a lesser-developed
country? Can I overcome accent and cultural differences? Will the network
infrastructure provide me with the kind of reliability my customers demand? The
answer to all of these questions can vary widely based on the offshore country
you eventually decide to do business with.
One of the most basic, yet critically important decisions a call center
executive will make during the offshore outsourcing process is country
selection. The country decision is important because ' at a macro level ' many
of a call center vendor's operating practices (management style, business
culture, adherence to process and quality standards, etc.) are strongly
influenced by the country they are headquartered in. Each country presents its
own set of unique challenges and risks as well as benefits. Executives should
look at a multitude of country-level characteristics to determine country
suitability for an outsourcing initiative. The wrong choice can lead to
disaster.
The country choices are many and the supporting data, more often than not, is
inconclusive. In an attempt to promote their respective countries to new
businesses, government officials and vendors will often use exaggerated claims
or inflated figures to help make the case as to why their country is the
destination of choice. As more U.S. companies seek to outsource call centers
globally, more countries are emerging to benefit from that demand, each with its
own particular strengths and weaknesses. Countries as familiar as Canada to
others in remote parts of the world like Sri Lanka and Malaysia are emerging as
real options for call center executives.
A country analysis should begin with the development of important criteria that
will be used to compare the multitude of country options available. The criteria
should be developed based on general requirements as well as requirements
specific to the call center. The following list of criteria should provide a
good starting point to the analysis:
Maturity of market. Look closely at companies that have successfully moved call
centers offshore and the countries they have selected. Many Fortune 500
companies have spent many months selecting a country, supported by rigorous
evaluation methodologies and country-specific research. Review case studies of
these companies to understand why they selected a specific country and if they
were successful.
Support by government. National and local governments provide financial
incentives to companies looking to set-up call centers in their respective
countries. These incentives can be in the form of tax credits, government-funded
infrastructure or eased regulatory requirements. Developing countries are
notorious for slow bureaucracy and red tape, which often can present significant
problems for U.S. companies.
Infrastructure. Relative to the U.S., offshore countries often lack basic
infrastructure requirements such as power, roads, public transportation and
communication networks. Many countries without these basic infrastructure
elements have tried to create government-sponsored technology parks with mixed
success. Often these technology parks satisfy basic requirements for a call
center with dedicated and redundant power and communication systems. The
reliability and cost-effectiveness of a country's communications infrastructure
is an important component of running a world-class call center and should be
evaluated carefully within each country.
Wage rates. Many countries such as India and the Philippines offer wage rates
that are as much as 90 percent less than U.S. wages. Ultimately, one of the main
drivers for outsourcing a call center to a foreign country is cost savings.
Since staffing costs represent 60 percent of operating costs for a call center,
fully loaded wage rates within each country should be understood.
Labor pool. Macro characteristics of a country's labor pool, including
education, size, language and work ethic, should be evaluated. Many smaller
countries score well across several of these characteristics but lack a critical
mass of population.
English. Countries like India offer an abundance of English-speaking college
graduates, whereas a country like China offers limited English skills. Companies
should determine whether English is a primary or secondary language in each
country.
Accents. Although a country might have an abundance of English-speaking
resources, heavy accents may present serious issues for U.S. call centers. There
seems to be a growing frustration today by consumers who are forced to
communicate with customer service reps with heavy foreign accents. Often, accent
characteristics of resources within a country can be altered through accent
training or 'neutralization' programs. These programs have yielded mixed
results.
Geopolitical risks. Geopolitical risks of war, terrorism or civil armed conflict
have emerged as serious concerns for companies looking to move call centers
overseas. The past year has shown that many regions are prone to violence that
can be damaging to businesses operating there. The possibility of war between
Pakistan and India or political and religious violence in the Philippines makes
geopolitical risk an important evaluation criterion.
Legal environment. Intellectual property protection, labor laws, data protection
and overall ability to enforce contracts are important legal questions to
explore in each country.
Cultural differences. Business and social cultures are often very different in
foreign countries relative to the U.S. Many U.S. companies fail to realize that
businesses in foreign countries may operate under different standards of work
ethic, risk taking, organizational structure, etc.
Geographic location. Often companies are faced with the nearshore versus
offshore decision. Countries such as Canada and Jamaica are easy to travel to
and call centers may be more easily managed as compared to call centers in Asia.
Table 1 is a brief profile of the country leaders in the burgeoning call center
outsourcing market.
As more country choices become available, country selection will play an
increasingly important role in the offshore outsourcing process. Many of the
potential failure points and risks can be avoided with proper country selection.
Although today countries like India and the Philippines remain popular
outsourcing destinations, call center executives are increasingly looking at
alternate and additional countries to mitigate country-specific risks. Companies
are often faced with a cost savings vs. risk tradeoff. Moreover, political
uncertainty, war and terrorist-related activity have many companies rethinking
their offshore outsourcing strategy. Because the industry is still in a nascent
stage, over time we will get a good indication as to which countries can
effectively develop world-class call center capabilities. For now, the jury is
still out.
Shailen Gupta is president of Renodis (www.renodis.com), a player in the
rapidly expanding offshore business process outsourcing (BPO) market. Before
co-founding Renodis, he served as the CFO of ITRadar, a business-to-business
exchange focused on the IT services industry, which was sold to a Gartner
subsidiary in August 2000. Shailen also has extensive experience in building and
operating companies in India. Renodis is based in Minneapolis, MN, with a client
service center in Chennai, India. For more information,
contact [email protected].
Country | Total Labor Force | Strengths | Weaknesses |
Canada |
16 million |
Low risk
English skills
Compatible cultures
Easy travel
Favorable exchange rate |
Higher costs |
Philippines |
32 million |
English and Spanish skills
Cost
Cultural compatibility
Strong work ethic
Service-oriented workforce
Government support
Attractive place to travel and live |
Geopolitical risk
Scalability
Experienced call center management |
India |
439 million |
Several successful case studies
Cost
Strong work ethic
Service-oriented workforce
Strong government support
Scalability |
Geopolitical risk
Experienced call center management
Accents
Distance
Infrastructure |
Ireland |
1.8 million |
English
Cultural compatibility
Distance |
Labor pool has been tapped, driving costs to near U.S. levels |
South Africa |
16.3 million |
English
Compatible accents
Cultural compatibility
Quality focus
Mature legal system |
Call center outsourcing is a very nascent market
Costs are higher than Asian countries
Political violence not as bad as it was 10 year ago but can still present problems |
Malaysia |
9.6 million |
Cost
Increasing support by government |
Cultural compatibility
Small labor pool
Religious and political violence
Largely unproven market |
China |
34 million |
Cost
Scalability
Educational system |
English skills and strong accents will prove to be a problem for many years to come
Unstable U.S.-Chinese relations |
Caribbean and Central America |
More than 15 million |
Many successful case studies
English and Spanish skills
Distance
Cultural compatibility |
Scalability
Not as cost-effective as Asia |
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