Onshoring and Offshoring Aren’t the Only Options
It wasn’t too long ago that offshoring seemed to be the only option for cutting the cost of expensive customer service operations. Companies rushed to capitalize on cheaper labor in places like Egypt, India, and Eastern Europe, outsourcing a key business process that they viewed as a huge cost center and one that fell far outside of their core competencies.
The cost savings were impressive, but they came at a huge price: Customers whose calls were routed to overseas call centers became frustrated with foreign agents’ poor language skills, hard-to-understand accents, and lack of shared cultural understanding. Customer satisfaction, call quality, first-call resolution, and many other metrics plummeted dramatically as a result of the move.
Credit card issuer Discover cleverly brought this to light about three years ago with an ad campaign featuring an Eastern European male masquerading as a female call center operator named Peggy. It was a brilliant campaign that successfully highlighted Discover’s superior U.S.-based customer support.
Nonetheless, companies found the allure of potential cost savings and follow-the-sun capabilities abroad appealing enough that they were willing to overlook obvious customer service, communication, cultural, and information security problems.
Times are far different today, and political and economic upheaval has rewritten the script on many of the traditional foreign outsourcing locations. We at CRM magazine were curious to see just where outsourcing was going and were surprised to find that, in many instances, it isn’t going anywhere. For a lot of U.S. companies, contact centers are now staying right here in the USA. And the onshoring trend is expected to continue, as this month’s cover story, “Where in the World Is Outsourcing Going?”, points out.
Rather than looking to Asia or Africa, companies are now looking to the American Southeast and Southwest due to generally lower wages and operating costs and higher economic incentives than other parts of the country. The American Midwest is also gaining traction, the article points out.
Even with the booming American economy and job market, offshoring remains an option that is still worthy of consideration. But the decision isn’t quite as black and white as it used to be. Onshoring and offshoring aren’t the only two choices. There are other options.
Nearshoring—the practice of transferring contact center operations to neighboring countries over ones that are far more distant—is rampant. Contact centers are opening up all over the Caribbean and Central America to field calls, emails, text messages, and chats from U.S. consumers. Countries like Jamaica, Costa Rica, Honduras, Belize, and the Dominican Republic are welcoming U.S. contact center investments.
Another option is a new trend called homeshoring, in which companies staff their contact centers with work-at-home agents. It’s a relatively new business model with many obvious benefits. First, removing geographic limitations greatly expands the pool of qualified agents available. Also, companies can remove, or at least curtail, the significant overhead costs associated with traditional brick-and-mortar contact center buildings. Finally, since many work-at-home agents are given the freedom to work on their own schedules and receive incentives for their work, the company benefits from highly motivated, happy workers who can facilitate better customer service.
At the same time, the cost differential between U.S. and foreign facilities is diminishing. Wages are going up around the world, taking away one of the primary incentives for offshoring.
Consider wisely, but if you haven’t already started bringing contact center operations back home, now might be the best time to start exploring the possibility. For companies that are still on the fence, starting small is probably a good idea. You don’t have to completely eliminate all foreign jobs or back out of all foreign contracts. You can divert a percentage of your call volume back to the United States and compare the results. If you find that your customers are happier, it might make sense to expand your U.S.-based operations further, even if the expense is a bit higher.
Explore all your options and, in the end, know that it’s not just about onshoring or offshoring, insourcing or outsourcing.
“The idea today is right-sourcing, using a combination of onshoring, nearshoring, and offshoring to deliver customer service,” says Hillol Bala, a professor at Indiana University’s Kelley School of Business, in the feature.
Bala says further that “quality is a major concern.” I would argue that quality should be the only concern, regardless of where in the world it originates.
Leonard Klie is the editor of CRM magazine. He can be reached at lklie@infotoday.com.