What is the future for Offshore Contact Centres?

  • Published on: 3 November 2014
  • By: Denzil Brisland


Every week I see a new article discussing where the next big outsourcing hub will be based, usually written by local newspapers, magazines or websites in that region. With all the noise, it got me thinking: is the Indian contact centre industry dying, where will the contact centres of the future be located and what is pushing the industry there?

History of offshore contact centres

Let’s look first at the history of offshore contact centres. Even though a number of the large banks have moved back to ‘in-house’ operations in the UK, we are all aware that offshore contact centres still exist. We are still receiving daily calls from Mark, Paul or Mary based in Bangalore, Delhi or Mumbai. The Indian contact centre market is alive and, to some extent, still thriving.

The offshore contact centre really took off in the mid-1990s with companies whose business relied on customer verbal interaction taking the option of moving to India and utilising inexpensive and plentiful, well-educated resources.

Was this really thought through as a lasting strategy? I have to say that, at the time, yes it was. With salaries high in the UK, the drive to keep costs down became a factor at the top of the agenda. Added to this, the ever increasing requirement for the customer to be able to interact with the business outside of the traditional 9–5 UK business day, India on the face of it, seemed the perfect choice, especially given the UK’s ever changing multi-cultural population. However, as Simon Scarrott mentioned in his last post, classic market forces have come into play and it is now less attractive to offshore to India.

So what has gone wrong?

In my mind there are four main issues, which are classic red flags to any business model:

·         Salaries have increased, especially at a senior level

·         Quality resources have reduced

·         Customers complaints have increased

·         Perception of the integrity of the service has diminished.

I would like to explore each of the above issues to show how they all link and have contributed to the fall of the Indian contact centre.

Salaries have increased

As the market grew, the cost to employ rose, due to excessive competition. Contact centres were opening in India’s towns and cities almost daily and the commercially savvy employee could move between these centres and earn a few rupees per hour more. This obviously had a negative impact on staff churn, which in turn reduced the quality of service provided.

Quality resources have reduced

This is a classic case of supply and demand where the demand outstripped the supply. As the requirement to offshore to India grew at an alarming pace, the quality resource that was once plentiful dried up. This meant that suppliers had to employ less qualified individuals, creating a poor service that simply increased customer complaints.

Customer complaints have increased

·         Language Barrier

Almost from day one, customers complained of a language barrier between themselves and the Indian workforce. It was at best difficult and at worst, impossible to conduct transactions and customers complained in their tens of thousands. This forced a major rethink especially in the UK banking industry.

·         Trust and Confidence

If the customer was able to get past the language issue, often their required transaction never took place. This was either due to poor training and service or (maybe cynically) down to the worker not doing what they should be doing. At this stage I need to point out that this is not solely a problem within Indian contact centres. I have managed a number of contact centres in the UK where workers spent time talking to themselves rather than the customer to actually avoid working! By way of an example, I spoke to the contact centre of my mobile telephone provider based in India to upgrade my phone and renew my contract. The upgrade to contract piece was completed as expected, but here I am six weeks later, still waiting for my new handset!

So when you put the language barrier together with the lack of trust, you have a recipe for disaster, especially when you add in the last ingredient – a lack of integrity.

Perception that the integrity of the service has diminished

As very good contact centres emerged in India, and there are many of them, unfortunately so did the scammers. There isn’t a week that goes by without an Indian voice at the other end of the phone purportedly working for Microsoft or Windows telling me that they have checked my systems and that “my laptop is out of ink”! And for a one-off fee of about £200, they could keep me on the phone for an hour and repair it for me.

This negatively impacts the perception of the integrity of the service. Sadly people, mainly the old and vulnerable, get caught out and word gets round that you should never deal with an Indian contact centre.

Where to next? Is the answer already there?

So if India is out, where to next for the offshore contact centre? Well the answer already exists. According to a number of publications on the web, Manila in the Philippines is now the world’s second biggest outsourcing destination next to Bangalore, and Eastern European contact centres have been established for a while now.

Contact centres began in the Philippines to handle e-mail responses, but have grown in recent times to manage all of the traditional contact centre activities. The Philippines is majorly influenced by the US which dates back to when it was a US colony and latterly when the US Navy had a large base there. It is generally considered that Filipinos are more westernised compared to the rest of Asia. This could be due to the number of people who move abroad to work and then return to the Philippines. People who know about the US and speak American are going to make good call centre personnel. Filipinos generally like to work for UK contact centres and work European hours as opposed to American hours, as the time difference isn’t so harsh on them and allows a better work/life balance.

Reading the font of all knowledge, Wikipedia, with interest, it is reported that the main reasons for the Philippines being considered as a choice location are its less expensive labour costs and its plentiful, highly skilled workforce. Sound familiar?

According to the Call Centre Directory of the Philippine Economic Zone Authority (PEZA), the Philippines now has more than 1,000 call centres in over 20 key locations. Manila hosts 150 of those 1,000 centres.

So is the Philippines worth investing in?

Whilst costs are typically viewed as 20% higher in the Philippines over India, this doesn’t tell the whole story. It is true that call centre agents are more expensive but as you go up the pay scales and get into senior positions, the salaries are less expensive than their Indian counterparts who are becoming more and more expensive as time goes by. The classic cost over quality equation still currently stacks up and the costs are narrowing all the time. Therefore UK businesses will no doubt continue to explore this opportunity. Going back to the ‘So what has gone wrong’ section of this blog, the four issues I indicated are not yet factors here, so the Philippines might just be the answer.

Where else?

A number of UK companies have already established centres in Eastern Europe. This is an obvious choice as the UK population is supplemented by huge numbers of European immigrants who need customer support. Malaysia is another location with a high density of contact centres.

But what about further afield? A few years ago, I attended a contact centre exhibition and whilst strolling through the many exhibitors, I came across a stand sponsored by the New Zealand government who were just starting to build a contact centre industry. I had a lengthy discussion with the exhibitors who were selling New Zealand contact centres on the basis that the language used is the same (in their opinion) time zone in that they were open for business when the UK closes, therefore a “follow the sun” approach could be used and also that they have the ability to recruit high calibre staff. Again this sounds familiar, if only missing the word inexpensive.

New Zealand compares itself to Australia in many things and proudly boasts that it is 30% cheaper than Australia in contact centre costs (Source: www.wellingtonnz.com). However it is yet to compete with India in this area. That said, if cost is not the prime driver, then New Zealand might be worth exploring.

One other growth area worthy of a mention is South Africa. The South African contact centre industry is growing at about 30% per year (Source: HfS Research) and positions itself somewhere between the nearshore operations of Eastern Europe and offshore locations such as India.

The South African contact centre industry can boast time zone compatibility with Europe, high numbers of fluent English speakers with an accent that is easily understood, strong government support and state-based incentives that will support initial set up and beyond. A strong cultural affinity between South Africa and Europe is also a major positive in South Africa’s favour.

South African contact centres can provide multi-language support as well as English - other key European languages including German, French, Spanish and Italian are well represented within the centres.

Noted above are but a few of the countries jockeying for a piece of the contact centre pie and the list is of course more extensive than this. It would be great to get your views on where you think the next generation of contact centres will be located.

About the author

Denzil Brisland has many years of experience in building and managing contacts centres and help desks, having consulted or supported a number of high profile companies in their contact centre operation.