A Model Business

By Joe Fleischer

Why outsourcing is vital for the growth of the world’s newest call centers.

The start of 2009 represents an opportunity for call center managers throughout the world to reap the benefits of their economic interdependence by working together to identify and address the challenges they share.

An excellent source of information about these challenges comes from the Global Call Center Project, an international academic research group whose most recent report surveyed nearly 2,500 in-house call centers and outsourcers in 17 countries. Released in May 2007, the report is available on-line at www.globalcallcenter.org.

If you’ve worked in or observed call centers during the last few decades, you may not necessarily be surprised by all the attributes the report says call centers share in common. Only 21% of the call center managers who responded to the survey come from centers that solely engage in outbound telemarketing; most centers answer incoming calls from customers. Most call centers assist their own customers directly; only a third of the survey respondents come from outsourcers. A large majority of respondents, 86%, are from centers that assist customers from the same countries or regions where they are located.

In my view, the most revealing of the report’s findings are those about the differences among call centers. India’s call centers, for example, are the most competitive, hiring only 7% of applicants, which is far lower than the 20% median selection rate among all centers the report surveyed. The report also points out that in India, where students require a minimum of three years to earn a college degree, 70% of call centers employ college graduates. Nearly all the agents whom Indian call centers typically employ are permanent, full-time workers.

Based on these observations, it would seem that in India, the position of a call center agent should be a sought-after job. Within the report, a challenge to this interpretation comes from call center managers’ subjective responses to survey questions about how much judgment agents are allowed to exercise in how they communication with customers and organize their time. On a five-point scale, where a higher number corresponds to more decision-making authority for agents, managers give agents’ jobs an average rating of 2.6. According to the report, India has the highest percentage of agents whose roles that fall below the average rating, and “stands out as unique, with almost three quarters of the jobs offering very little opportunity for employees to make independent decisions about their work.”

Further undermining the apparent appeal of Indian call centers is that compared to centers in other countries mentioned in the report, centers in India monitor agents’ calls, and the efficiency with which agents work, with the greatest frequency — typically more than once a week. On average per year, Indian call centers have the highest percentage of agents who voluntarily leave their jobs (20%) and the highest overall turnover rate among agents (39%). Close to 60% of agents in Indian centers remain in their jobs for less than a year.

Before we jump to a conclusion about how Indian call centers treat agents, and before we question why there is so much competition in India for jobs as agents, we should note several other facts. Of the Indian call centers surveyed, 73% assist international customers, by far the largest such percentage among countries in the report. Moreover, 80% of Indian call centers surveyed are outsourcers, which the report says in general tend to share characteristics that we so far have ascribed specifically to Indian call centers — frequent monitoring of agents, a high degree of standardization of work and a high rate of turnover among agents.

How can call centers that serve international customers emerge as sustainable businesses? To answer this question, we have to consider why, for instance, many Indian call centers are outsourcers. Call centers in India still represent a new phenomenon, and most of their customers are likely to come from outside the country. By operating as outsourcers, Indian call centers achieve economies of scale that make it possible for them to serve lots of customers among multiple locations at the same time.

Although adopting the outsourcer model enables call centers in India to thrive, it also introduces issues, especially those involving turnover, that have long afflicted call centers elsewhere. I believe that a key lesson we gather from the report is that the growth of call centers globally largely depends on the extent to which the outsourcer paradigm evolves from a business model to a model business for developing agents and serving customers. This subject will be the focus of my next column.

Joe Fleischer has written about the call center industry for more than 12 years. With Brendan Read, he co-authored the book The Complete Guide to Customer Support.

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