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Is it time to hang up on your offshore contact centre?

12th Jul 2011
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With Santander the latest to transfer its call centre operations from India to the UK, is the offshore model past its sell-by date?

Santander’s decision to transfer its Indian call centre operations to the UK in a bid to boost customer satisfaction would appear to indicate that the offshore model is "increasingly past its sell-by-date", according to experts.

The move comes less than a week after New Call Telecom announced that it was moving its call centre operations from Bombay to Burnley because the costs of operating in the two countries were now at "absolute parity" but it considered UK staff to be more loyal and efficient.

An estimated 1.5 million calls will now also be handled by 500 new Santander staff based in Glasgow, Leicester and Liverpool, bringing the number of UK-based call centre personnel employed by the financial services group to 2,500.

Ana Botin, Santander UK’s chief executive, said that the move was "the most important factor in terms of satisfaction with the bank".

"Our customers tell us they prefer our call centres to be in the UK and not offshore. We have listened to the feedback and have acted by re-establishing our call centres back here," she added.

Rising costs, falling quality

The Spanish firm is now the third largest bank on the high street, following its acquisition of Abbey, Alliance & Leicester and Bradford & Bingley over recent years. Abbey outsourced its call centre operations in 2003 to two Indian centres, one in Bangalore and one in Pune as a cost-cutting measure, which coincided with an increase in the number of customer complaints.

Martin Hart, chairman of the National Outsourcing Association, said that the move was "not just a matter of rising costs in India, but falling quality".

"India’s staff attrition rates are at an all-time high – people move on very quickly, for just a few rupees more elsewhere. This means there is not time for adequate cultural awareness training, so quality has dropped," he said.

But John O’Brien, an analyst at Techmarketview, believes that the move is significant because of what it signals about the dynamics in the wider market. Firstly, he said, the average wage for call centre workers in lower cost regions of the UK are now almost at parity with those in India.

Secondly, O’Brien pointed out: "Offshoring call centres has often resulted in reduced customer service quality, and latterly increased customer attrition as other providers now offer ‘UK-only call centres’. This has become a real differentiator in the UK retail, banking and mobile telecoms sector."

The third point, which is important given the current economic climate and high levels of unemployment, is that it is very good PR to be seen to be investing in the UK at the moment. To be seen to be ‘putting something back’ rather than just ‘taking something out’ is likely to be "strong selling point for a brand", O’Brien said.

Past its sell-by-date?

Offshore business process outsourcing providers operating in the UK are likewise changing their strategies to respond to the trend, however. For example, Firstsource won a contact centre deal with Barclaycard last October, which resulted in it taking on 700 bank staff in Stockton.

As a result, O’Brien said: "Some back office work will go offshore, but the customer service work remains onshore. However, for UK plc, the true offshore call centre model now looking increasingly past its sell-by-date."

But not everyone is in agreement with this assessment. Following the recent announcement from global CRM outsourcer Sitel that it would be opening a delivery centre in Belgrade, Serbia - a city that is not known as a hotspot for third-party contact-centre service delivery - some experts are predicting that the European nearshore sector may emerge as an increasingly attractive opportunity. In recent times, vendors have been desperately seeking alternatives to nearshore destinations such as the Czech Republic, Hungary and the Baltics, all of which like India have increased in price.

And Ovum lead analyst believes that should Sitel's Serbian gamble pay off, it could spark a change in the dynamic of the nearshore sector.

"From an economic standpoint, Serbia’s fundamentals appear sound, with the International Monetary Fund (IMF) forecasting over the next five years that inflation will decline and GDP growth will increase at solid (yet manageable) levels, making the on-the-ground commercial environment appear solid," he said. "Sitel also has the chance to take advantage of a push for more transparency in legal dealings, as the government moves to compliance with EU regulations, necessary for membership in that organisation."

He added: "We believe that this gamble may prove to be lucrative for Sitel considering the ongoing normalisation of commercial and political affairs in that location. As work continues to improve the overall perception of Serbia’s stability, we consider this move to be one that has the potential to discernibly shift the European nearshore dynamic in the coming years."

It may be early days for the Serbian sector, but with India looking an increasingly unattractive proposition, companies are sure to be assessing their options.

Replies (3)

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By chrishansen14
12th Jul 2011 17:02

What we see is that people are no longer willing to absorb corporate dictates toward low-quality, low-cost providers who add only marginal value to the products and services that they sell. The cost of fixing brand and customer satisfaction are much more difficult to repair than simple balance sheet mechanics.

I've known for a long time that outsourcing to offshore provides marginal (read: very marginal) advances in most cost structures over time because the quality on goods and services is low, and the administrative overhead is significant due to a low committment labor force.

With the costs of repairing brand and customer satisfaction incresingly dificult due to competitive market forces, it becomes necessary to differentiate in a way that sets one's company above its competition. Localised or regionalised labor forces become very necessary to connect with one's customers in a unique and fulfilling way.

You don't see Canadian CSR's manning the phones for Chinese banks for the simple reason that they're not a good cultural fit to their customer base (aside from the cost issues). I struggle to find a compelling reason why more companies are not recognizing that in fully saturated markets, service differentiation is critical to profitability margins. The prospect of not having to deal with people who can't understand, comprehend or empathize with someone 12,000 miles away is quite appealing.

Additionally, most countries in the world marketplace need those jobs to promote their own financial and demographic stability, so the push will be towards smaller economies of scale at the regional level first, and then perhaps even towards more nationalised boundaries thereafter.

There's a reason that the global map has outlines for countries on it. Time, distance and cultural differences dictated its necessity. The movement back towards more segmented vertical markets is not only necessary, but welcomed.


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By Henry Dean
13th Jul 2011 14:58

Any of the companies saying that they are bringing their call centres back to the UK for service reasons are talking bull. this is about money and nothing more. as soon as costs in the UK start to rise again, they will outsource it abroad again. will be interested to see if this trend continues. i use virgin for my broadband and they still outsource to india. hopefully the costs will rise further and they'll bring that back to liverpool.

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By AlishaSharma
21st Jul 2015 08:35

We all know that there are various advantages of offshore outsourcing in the direction of the business. As the whole of the business process depends on the customer relationship. We can also consider it as the major factor which is responsible for business growth.

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