Call Center Outsourcing's Effect on the U.S. Economy
Pros and Cons
Call center outsourcing is the business practice of contracting out call center services. Call centers handle all kinds of customer services 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 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. For those reasons, Phoenix Arizona became a hub for many corporate call centers.
How It Affects the U.S. Economy
As the U.S. standard of living improved, many companies located call centers overseas. Countries like India, Ireland, Canada, and the Philippines were the most popular. Not only were workers paid much less, but they already spoke English. For example, a U.S. call center employee costs a company $20 per hour on average versus $12 per hour in India. That cost includes including labor, technology, and phone routing. Between 2001 and 2003, firms outsourced over 250,000 call center jobs to India and the Philippines alone.
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. 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.
U.S. call center workers only make 15 percent more than their counterparts in India. This makes Nebraska call center workers more competitive, despite the higher cost. They have a greater command of English and familiarity with American culture. This provided greater customer satisfaction because it meant fewer complaints than those received when calls involved foreign call center workers.
There are at least four major reasons why a company would want to outsource its call center. They all have to do with offloading risk to the call center specialist, instead of keeping it in-house. Here are more specifics:
- Flexibility: 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.
- Responsiveness: 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.
- Customer Service: 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.
- Communication: One of the biggest complaints of outsourced call centers is understanding foreign accents. Foreign call center employees’ accents kept U.S. customers from understanding them.
- Culture Shock: Employees in foreign call centers weren't familiar with common U.S. phrases and slang. They weren't clear on geographic references. This reduced customers' trust in their expertise.
- Product Knowledge: Foreign call center employees were far removed from the corporate base. As a result, they weren't as familiar with the company's products and services. This also reduced the confidence and resolution of customer problems.