The decision by the UK’s biggest insurance firm to cut 2,350 job at home and outsource the work to India has refuelled debate on the whole issue of offshore call centres.
Aviva, better known as Norwich Union, said this week that it will outsource work to Delhi and Bangalore next year, with the threat of up to 500 compulsory redundancies in this country. Richard Harvey, group chief executive, said: “We are operating in an increasingly competitive environment. Our customers want value for money products and high levels of service so it is vital that we continually explore opportunities to improve our efficiency while maintaining service levels.
“Our staff in India are an important part of this process and our experiences to date have been positive. Making decisions that will affect our staff is always tough, but by taking action to remain competitive we will secure a long-term future for our business and therefore the majority of our people. Through our UK-wide redeployment process, staff will have the best possible opportunity to find other roles within our group that match their skills."
Aviva already employs 1,200 workers in Delhi and Bangalore and said its experience in India had been “positive”. The company expects that 80 per cent of the jobs created in India to support the UK business will be accommodated by a combination of expansion, current vacancies, staff turnover and voluntary measures. The remaining 500 posts could be accommodated elsewhere in the company through redeployment, although the firm said it could not rule out compulsory redundancies.
The 350 jobs to be created at call centres in India will deal mainly with car and household insurance inquiries and claims. "Overall these plans will give the company extra flexibility and capacity for its UK business, while providing further scope to enhance efficiency and continue to deliver a high level of service to customers", Aviva said in a statement. It added that the announcement would affect about 2,000 back office, administration, processing and information technology roles and around 350 call centre posts.
In what is becoming a familiar pattern, strike action at Lloyds TSB over the closure of a Newcastle Upon Tyne call centre looks ever more certain to become reality in the New Year. Again Lloyds TSB plans to transfer the work to India. Similar action seems likely at Norwich Union if union Amicus promise to fight the move “by any means necessary” comes true. Amicus has long taken a stand on the outsourcing issue, predicting that 200,000 jobs could leave the UK in the next five years.
“This deplorable announcement by Aviva is based purely on greed. It ignores Aviva’s corporate social responsibility towards its UK employees and customers because company turnover is overwhelmingly UK-based,” said Amicus National officer Dave Fleming “With this announcement of job cuts coming hard on the heels of proposals to increase staff pensions contributions by 5 per cent, Aviva have given these 2,350 employees a wonderful Christmas present of an uncertain future. They are throwing thousands of families on to the scrapheap for a 40 per cent saving that will not be passed on to their customers.”
Fleming called on the government to intervene, arguing that it cannot “wash its hands” of the impact of offshore outsourcing on the UK or on its own electoral prospects. "We asked the Government to sit down and discuss the situation with us in September but we have not heard a dickey bird," he said. "By the time the general election comes around the Government's employment policy will be in tatters."
But his words fell on stoney ground. Prime Minister Tony Blair commented: “We live in an economy today which is global, in which there is going to be a lot of churning of jobs, in which the old concept of 9 - 5 jobs, that people kept the same job for many, many years, is changing and has already changed and that the best thing that government can do is not offer a false prospectus to people that we can prevent these changes, but on the contrary help people through education, through skills, through an active employment service to find new jobs if they lose their existing ones.
“It may not be what people always want to hear, but that is the truth. It is the reason why we as an economy have managed to keep employment rising and unemployment falling. Even when virtually the whole of the industrialised world has not been in that position ... we have maintained a very active employment service skills policy. You know the New Deal for the unemployed has been fantastically helpful for example, but we have not tried to pretend to people that we can stop what is happening in the global economy. And of course I feel desperately sorry for anyone whose job is at risk as a result of this change, but that is the way the world is today.
“If you go to India and you go down to places like Bangalore and you see the information technology and biotechnology graduates working there, we are in a different world today, the 21st century is going to be dominated by some of these countries whos labour costs may be lower than ours at the moment, but these countries are catching up fast and we have got to move ahead.
“The task of political leadership is to tell people what you honestly believe the challenges of the future are and we are not going to compete with these countries unless we are getting a highly educated skilled workforce moving up the ladder the whole time. And yes it may well be true that there are Indian graduates in call centres, there are probably some graduates here in call centres, but I can tell you there are a lot of Indian graduates now in new technology companies and they are beginning to make a lot of money and a lot of competition for Europe.”
So long term it's all back to New Labour's mantra of “education, education, education”; short term the offshore migration is likely to have a dramatic impact. Some 28 firms have outsourced more than 50,000 jobs serving UK customers to India over the past two years.
Financial services companies including Abbey, Barclays and HSBC have led the way, followed by firms in other sectors including British Airways, BT and Tesco. HSBC has announced that 4,000 positions would be moved to India, China and Malaysia by the end of 2006. ABN Amro has said it might outsource up to 200 jobs, while Lloyds TSB's decision will see 1,500 jobs go to India next year. Overall offshore outsourcing of call centre work is expected to grow by 25 per cent over the next five years.
But is it necessarily the best thing to do? The regular argument put forward by companies taking the outsroucing plunge is that they get a skilled workforce for a lower costs. New research this week form consultancy ContactBabel certainly confirms the first part – finding as it does that Indian call centre agents get paid less than an eighth of their UK counterparts – but it also found that Indian call centres do not provide as good a service to the customer.
ContactBabel surveyed 300 UK and Indian call centre operations to find that average starting salaries for an Indian call centre agent are £125 per month, less than 12 per cent of their UK equivalents. Indian agents answer calls more than twice as quickly as UK workers, and work 6 hours a week longer than UK agents
But on average, UK agents deal with 25 per cent more calls each hour than Indian agents and resolve 17 per cent more of these calls first-time. British call centre workers tend to stay with their company for well over 3 years, while on average, Indian call centre workers move on after only 11 months in the job.
“While everyone knows that Indian call centre workers are paid a fraction of UK salaries, it still comes as a shock to see they earn as little as 12 per cent of a UK call centre worker, especially as they are also asked to work much longer hours than UK staff.” says Steve Morrell, author of the ContactBabel report 'The UK & Indian Contact Centre Operational Reviews'.
“It seems the UK still leads in quality of service, with many more calls both handled per hour and dealt with first-time compared to India. Indian agents are very quick to pick up the phone, but on average it takes them more than a minute longer than UK staff to complete each call. And even then, more than a third of customers have to call back later to get a satisfactory resolution to their enquiry: this can be extremely frustrating.
Morrell comes to only one conclusion. “These figures show that what we all suspected: businesses moving their UK call centres to India are doing it only to cut their salary bill, not to improve their quality of customer service, regardless of what they say,” he alleges.
But that's not the upbeat message coming from the UK eEnvoy Andrew Pinder who claims that what he sees as an irreversible tide of outsourcing will ultimately benefit the UK economy. "When other countries in the world develop their skills and technology and acquire expertise in any particular field, we always benefit from that," said Pinder. "Outsourcing of jobs is a process of globalisation with which we are all engaged in. It's an irreversible process and it will benefit the British economy.
"Shipping of jobs overseas is a sensitive issue and unions have got legitimate concerns. But they also must understand that by outsourcing some processes the companies become more competitive and profitable in the long run. If the companies become more efficient in the low cost scenario then more jobs will be created and it will ultimately benefit the British economy. The existing workers must be sensitised to the advantages of outsourcing.
"When a company think about outsourcing, people immediately start thinking about job losses. We need to think and innovate, and create new jobs. But you can't stop companies from outsourcing. Britain is a very open economy.”
The harsh reality is that Pinder is undoubtedly correct. In a free market economy, companies must be allowed to pursue the most cost effective options open to them. The only alternative would require a degree of state interventionism that is impossible to imagine under New Labour. The markets will decide – not that that's going to provide much comfort in the run up to Christmas for staff at Norwich Union.