Businesses shun “risky” offshore call centres for higher-cost local services

MELBOURNE, AUSTRALIA: Companies that provide offshore contact centre services face a tough battle to win new business over coming years, as demand in major markets is low, according to new Ovum research.

Ovum’s report is based on a survey of senior executives at leading North American, European and Australian businesses, which revealed that just two per cent said they would look to offshore their customer service centres in the next 12 to 24 months, while only 10 per cent said they would do so within 25 to 36 months. Meanwhile, a massive 80 per cent said they had no plans to offshore their contact centres.

Regions such as India and South America have been established as offshore contact centre locations in recent times, due to their low delivery costs supported by cheap labour and premises. However, Ovum’s research has confirmed that lower delivery costs are not offsetting the concerns enterprises that have not already taken the plunge have about these locations.

Peter Ryan, Ovum lead analyst and author of the report, commented: “These numbers will make worrying reading for companies that provide offshore contact centre services and are hoping to win new business based on their ability to reduce costs for clients. Several new barriers to offshoring contact centre work have come to the fore and made it a risker prospect for enterprises. Enterprises feel that the reduced prices simply don’t compensate for the potential to lose customers in these tough economic times.”

According to Ryan, there are four key issues that now concern enterprises when it comes to offshoring their customer service centres. These are quality of the interaction with end users, stability of the offshore destination, pressure from consumers to keep work in the domestic country, and fears over safety of data.

Ryan commented: “The issue over the quality of the interaction with customer service agents and end users is a key one. Customers can quickly become frustrated if they feel their enquiry is not being dealt with quickly and effectively and take their business elsewhere. In this tough economic climate, enterprises are less willing to send their contact centres to low-lost offshore locations because they feel there is greater risk that quality will become an issue.”

In terms of the stability of some of the new, developing offshore locations, recent troubles have brought concerns about continuity of service for enterprises. “Many enterprises would rather pay a ‘premium’ to ensure continuity of service for their customers than have to deal with the political unrest and drugs wars” commented Ryan.

But Ryan questions whether domestic markets will continue to be more attractive for CRM outsourcing well into the future. He added: “At the moment there are good deals to be found in places like Australia, the UK and US due to the economic crisis pushing down labour and premises costs and reducing agent churn. This has helped some businesses to move their contact centres back onshore, but the question is, how long will that scenario be sustained? Could it be that when the job market and economy recover those decisions will be rethought?”

This is especially the case in Australia, which for all intents and purposes did not have a recession, and where contact center pricing is among the highest anywhere globally. The big question is whether Australian firms can afford to remain onshore?