Research Paper on "Managing Overseas Call Centers"

Research Paper 7 pages (2208 words) Sources: 7

[EXCERPT] . . . .

Offshore Call Center

In the past couple of decades there has been a significant trend towards outsourcing call centers to overseas locations, India being a common one. At one point an estimated 30% of call center positions at high-tech firms had been outsourced overseas, although there is some evidence that the trend is reversing (Zeitlin, 2012). For any company considering using an overseas call center, there are a number of issues that need to be taken into consideration. Only when weighing the issues on balance can it be determined if using an overseas call center benefits the firm, and if so, how this strategy can best be executed. This paper will discuss some of the issues with managing on overseas call center, including the pros and cons of this strategy for it firms.

Rise of Outsourcing -- Pros

Outsourcing call center work as a strategy rose to prominence for a simple reason -- it helped firms to save money. When firms save money, they earn more profits, or they have more cash flow to plow into other areas. Some companies like telecoms have high infrastructure investment costs, so the savings from going offshore freed up cash flow to pursue more important investment. The same can be said for any company that feels the service dimension is a less critical investment -- offshoring the call center frees up cash flow for more valuable investments. India rose to prominence because of its low wages and large, English-speaking population, but other countries can also fill this need. Even within the U.S., low-wage states have long been preferred for call center work, relative to high-wage states.

There have been few identified pros to offshoring the call center, other than cost. However, one is that in many cases the call center management is also outsourced, to a consulting firm or a firm that specializes in such call centers. This means that even the management of an offshore call center receives lower wages, and this frees up even more capital for alternate investments. The company, particularly if it is focused on it or other high technology, frees up management resources from the mundane task of running a call center. However, while subcontracted call centers account for around 1/3 of all call centers, they often perform different work than in-house call centers. A subcontracted call center will typically conduct outbound and sales calls (Holman, Batt, Holtgrewe, 2007). With more transient workers who are paid less, subcontractor call centers are viewed by American business as a notably inferior option to in-house call centers.

Thus, the primary motivation for taking call centers overseas is to save money. This does not imply that there are no other benefits, but anecdotal evidence suggests that there are tradeoffs inherent in offshoring call centers. Service at foreign call centers can be inferior, and extensive training is required of the staff both with respect to U.S. service standards and even with respect to accents so that the call center workers can be understandable and better understand the cultural norms of the country they are servicing. This training is typically done for every country -- a call center in India might have several teams, to service the U.S., Canada, the UK and Australia, each specializing in the accents and service standards of each region. In addition to service issues, there are technological issues that might also come into play, if the phone and computer networks in the outsourced country are ineffective.

Outsourcing -- Cons

There are several drawbacks to outsourcing call center work. The first is the service element, which can suffer for a variety of reasons, many of which are described above. Additionally, however, the distance between the call center and the company's customer base and head office can present challenges. Managing remote work groups is never easy, and relies heavily on information technology for control mechanisms. It is much easier to manage and control a team that works in the U.S. than one that works halfway around the world. Issues, such as lapses in service or training standards, can be identified and addressed slowly when these functions are performed remotely. These problems are exacerbated when the call center is run by a third-party company, one of the reasons why so few inbound call centers are run by subcontractors.

There are also the risks that are associated with international business in general. Some of these risks including political risk, economic risk and foreign exchange rate risk. Political risk is the risk that political instability reduces the effectiveness of the offshore unit. When expropriations are a risk, foreign firms are unlikely to invest at all. Clearly, however, call centers are located in India in part because it offers political stability, compared with similar countries elsewhere in the subcontinent. Economic risk also comes into play. Remember that the major reason for offshoring call centers is to save money, but those savings are eroded when inflation increases the costs of the overseas call center. China is losing its cost advantage as a manufacturing center as the cost of labor and land increases there, and the same can happen in India with call center work. It is possible that a time will come when it is cheaper to operate a call center is a low-wage U.S. state than a foreign country due to such economic risk. Foreign exchange rate risk is another risk that firms face, when the value of the wages paid to the foreign workers increases quickly as exchange rates change.

Also, there is political risk on the home front. Drezner (2004) notes that outsourcing is a major political issue in the United States. The government here has at times table legislation to discourage American firms from offshoring call center work or to provide incentives to bring that work back to the United States (Jamieson, 2011). Firms must bear in mind that if the reason for offshoring call center work is to save money, such political actions and incentives could erode the economic differences between operating a foreign call center and operating a U.S. one.

Another important disadvantage of the foreign call center is reduced productivity. In essence, the equation for productivity is worker * output. While foreign workers are cheaper, their output is usually lower. There are instances where American workers have productivity that is so much higher -- particularly with highly complex calls that often involve it solutions -- that it is still cheaper to use an American call center (Muir, 2012). In addition, a domestic call center can sometimes be a source of competitive advantage, since most Americans prefer domestic call centers to foreign ones, as they have better communications and cultural knowledge. In addition, Zeitlin (2012) notes, technology has reduced the need for call centers to perform simple tasks, which are now done online. While there is an absolute cost advantage in the foreign country for routine call center tasks, the U.S. maintains an absolute advantage in service and a comparative advantage overall when all the different factors are taken into account. This reality has brought call centers back to the U.S., since they often only field the more technical calls.

Thus, it has contributed to the return of call center work to the United States. Many of the cons of offshoring call center work have remained unresolved even though this trend has been occurring since the 1980s. As a result, American companies have solved the need to offshore call center work, and this allows them to bring call center jobs back to the United States. Offshoring call center work today would be more like a California tech company setting up a call center is Tennessee or Mississippi, rather than India or the Philippines.

Returning Call Centers to the U.S.

With the change in technology, more call center jobs have been returned to the U.S. There are numerous anecdotes supporting the idea, but the statistics show that while at one point 30% of call center jobs at U.S. It firms were overseas, now that figure is just 12% (Zeitlin, 2012). Interestingly, one of the main issues is clarity of communication. Zeitlin (2012) notes that when customer care agents speak clearly, they are perceived to have solved the problem 88% of the time, versus 45% of the time for those agents that do not speak clearly. The issue is not that domestic representatives are inherently better at solving problems -- though they might be -- it is that customers are more satisfied, regardless of whether or not their problem is actually solved. Communication is also more than just the ability to speak English with the appropriate accent. Communication also implies having shared cultural norms, methods of speaking, and being able to relate to the other person. Managers of international work teams understand that there can sometimes be significant barriers to communication even when there is no language barrier, and these barriers are more difficult to resolve when only voice communication is used. Much of communication is either visual or contextual, so it is… READ MORE

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