Call Center Outsourcing's Effect on the U.S. Economy
Pros and Cons
Call center outsourcing is when a company contracts out call center services. Call centers handle all kinds of customer service problems, from your credit cards to appliance warranties. Companies outsource either in-house, through a separate division, or to an outside specialist.
Companies began outsourcing in the 1990s to save money. They found it was more cost-effective to locate their call centers in areas with a lower cost of living. That way, they can pay their workers less. It helps if the area has few natural disasters to interrupt service. They also need a strong telecommunications network.
Domestically, Phoenix Arizona became a hub for many corporate call centers.
Overseas, countries like India, Ireland, Canada, and the Philippines were the most popular. Not only were workers paid less, but they already spoke English.
For example, a U.S. call center employee costs a company between $22 and$35 per hour in the United States or Canada. That same employee costs between $8 and $14 per hour in the Philippines, and between $5 and $9 an hour in India.
The recession lowered costs in the United States. Companies allowed call center employees to work at home, lowering costs. At the same time, inflation pushed up wages in India and other emerging market countries.
As a result, call center outsourcing started to reverse. There is a much smaller wage discrepancy between call center workers in the United States and emerging market workers. That didn't happen for outsourcing for technology, manufacturing, and human resources.
Domestic workers have a greater command of English and familiarity with American culture. This provides greater customer satisfaction because it means fewer complaints than those received when calls involved foreign call center workers. For many companies, that's worth the added labor cost.
There are at least four major reasons why a company outsources its call center. They all have to do with offloading risk to the call center specialist, instead of keeping it in-house.
Call center outsourcing allows a company to be flexible to changing needs. If a business moves into a new market, it's difficult to estimate how many call center employees to add. The same is true when the firm launches new products. The company must pay the fixed cost of the call center, even if the expansion doesn't earn enough revenue. When it outsources the call center, the company only pays for the time employees spend on the phone.
Expansion to International Markets
When a company expands to foreign markets, it must have local call centers. The staff must understand the culture and speak the language. An outsourced call center can handle that problem on an as-needed basis.
Companies often have spikes in their business, such as those during the holiday season. It's difficult to train, hire, and then lay off workers for those few months when demand is higher. A company that outsources its call center contracts out those risks.
The telecommunications infrastructure becomes worn, unreliable, or outdated. Maintaining it is costly, and replacing it even more so. An outdated system can reduce competitiveness. An outsourced call center brings with it the latest technology. The business can then focus on innovation in its goods and services.
The biggest reason why a company would want to keep its call center in-house is control. This is especially critical for a company whose competitive advantage is customer service.
The call center is the interface with the customer. The brand promise of customer service must be top-notch. A company whose brand promise is innovative must have its call center reflect that image. For low-cost companies, the following problems aren't so critical.
One of the biggest complaints of outsourced call centers is understanding foreign accents. Foreign call center employees’ accents sometimes keep U.S. customers from understanding them.
Employees in foreign call centers aren't as familiar with common U.S. phrases and slang. They also aren't clear on geographic references. This reduces customers' trust in their expertise.
Foreign call center employees are far removed from the corporate base. As a result, they aren't as familiar with the company's products and services. This can also reduce the confidence and resolution of customer problems.
Expansion to International Markets
How Call Center Outsourcing Affects the U.S. Economy
Research from the University of Buffalo found that services outsourcing has little impact on the job market. Between 2002 and 2015, companies offshored 3.4 million jobs. That's just 0.53% of the 60 million jobs in the categories studied.
For those who lost their jobs, 3.4 million is still a large number. The study found that 75% of them found new jobs within six months. Their median wage was, unfortunately, 11% lower than their previous job.