Businesses investing more in onshore call centers and tech, report says

Call center providers shift focus from cost savings to customer satisfaction with a rise in onshore services and enhanced technology adoption.

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Businesses are moving their contact center outsourcing (CCO) to a surprising place: Onshore. In 2015, the number of CCO contracts with significant onshore delivery rose to 53%, compared to 49% in 2013 and 35% in 2010, according to a recent report from management consulting and research firm Everest Group.

Call center providers reported a shift in focus from cost savings to customer satisfaction and advanced technology adoption, the report stated, demonstrating how they are adapting to the needs of modern enterprises.

The rise of call center onshoring is not surprising, especially for customer service or technical support issues, said Carol Scovotti, professor of marketing at the University of Wisconsin-Whitewater.

"When customers need to speak directly with someone at an organization, there are already issues they can't resolve themselves. Something as simple as a bad connection or a rep with a heavy accent can intensify already stressful situations," Scovotti said. "While cost efficiency is always an important consideration, it's customer satisfaction that keeps the cash register ringing."

SEE: Is tech turning contract work into the future of employment?

Global contact center spending stands at $300-325 billion, and third-party outsourcing accounts for about 25%, the Everest Group report found. The CCO market grew 4% in 2014, reaching $75-$78 billion.

The report examined a database of more than 2,500 CCO contracts, and did not include shared services or global in-house centers. It included coverage across more than 25 CCO service providers, including Dell, HPE, Infosys, and Xerox.

"The findings are by no means a detractor from the offshore model," said Katrina Menzigian, vice president at Everest Group. "As the options in the marketplace evolve, the onshore model has regained some value and appeal."

Increased use of technology in the space is driving the move back on shore, Menzigian said. For one, more companies are using non-voice channels, so the need for an inexpensive voice alternative has dropped. Instead, these companies might use a US-based chat or social media agent who can support multiple conversations at the same time.

As many businesses start to adopt these non-voice channels, they are less comfortable for now with sending them offshore. "We think that, as some time goes on and more organizations become comfortable with how these channels are run, we will see more of this work going off-shore as well," Menzigian said.

And as more work becomes automated, business workforces are shifting, with a need for more high-skilled workers that may be more readily available onshore, she added. Industries including healthcare and retail are increasingly adopting CCO contracts, and many of these buyers tend to keep things closer to home at first, Menzigian added.

Onshoring benefits

Many companies outsourced call center work to cut costs due to lower labor costs in third-world countries and the ability to create 24-hour response lines due to time differences, said Falguni Sen, a professor of management systems and director of the Global Healthcare Innovation Management Center at Fordham University.

Now, buyers are increasing their focus on improving service quality, and prefer agents close to customers, the Everest Group report noted. And, buyers' expectations from service providers have expanded beyond cost containment and implementation to focus on proactiveness, providing better insights, and innovation.

The growth of non-voice services reduces onshoring costs while providing a proximity advantage, Sen said.

"Moreover, the value-added service requirements in contact centers these days require higher-trained personnel who are no longer as 'cheap' compared even to onshore options," Sen said. "Training in countries such as the US in relatively labor cost-competitive areas has resulted in having local proximal employees at not that much higher a cost."

There may even be a cost advantage in onshoring for some industries where the use of non-voice is higher than voice, Sen said. There are also customer experience benefits to onshoring.

"People want similarity of experience, which encourages their trust," said Michael Czinkota, an associate professor of international business and trade at Georgetown University. For example, if you talk with someone in a contact center who went to the same college as you did, or grew up in the same town, it contributes to a nesting effect, in which people feel more comfortable and open.

Even if you chose to contract with a call center overseas whose employees speak English fluently, differences in the dialect can make customers wary, Czinkota said.

Research shows that people are willing to pay more for a service that offers simplicity, Czinkota added. "Simplicity is worth money, because it translates into better interactions with customers."

Investing in tech

The CCO industry is investing heavily in technology, followed by scale, the report found. Enabler technologies, such as analytics, automation, and multi-channel tools, were the largest area of investment.

Multi-channel contract adoption is increasing, with greater inclusion of chat and social media to address the evolving customer need for an integrated digital experience. Service providers can differentiate themselves with these tech features, Menzigian said. For example, a retail store might use multi-channel interactions that include a mobile chat and the ability to push an order to the person's phone so both parties can view it at once.

"We're going to see the expectations of consumers continue to heighten," she said. "Consumers will have an expectation that the enterprises they do business with will have already created the link between analytics and automation, so when they call you can have effective, intelligent interactions."

More enhanced technology and security capabilities have also led to growth in the adoption of a work-at-home agents model, which costs less to operate than onshore, full-time equivalents. Traditional CCO providers have invested in work-at-home agents to supplement their brick-and-mortar models, with about 30,000 work-at-home agents employed by these traditional providers, the report found.

"With increased technology functionality and a change in buyer needs, we're seeing a changing landscape for work at home," Menzigian said. "It opens up a whole new set of populations you can recruit for contact call center work."

Advice for the enterprise

Make the value and cost determination of onshore versus offshore work very carefully, and based on your specific industry, Sen said. "Do not forget the strategic and competitive positioning of your products, and the level of complexity of questions asked," he added.

One possibility is to use less expensive offshoring for simpler tasks, and move to onshoring for more complex problem resolutions, Sen said. A business leader should evaluate the new technology options on the horizon that would enable automating processes without losing customization, he added.

"Note that the customers, too, are changing, and becoming more savvy and comfortable with interactive but automated systems and functional robots," Sen added.

Businesses cannot look at the customer interaction piece as an opportunity to cut costs, Menzigian said. "More and more business is going to be done remotely, and more and more will involve connected customers," she added. "You have to look at it from a consumer perspective: How do I link my business goals with the ways my consumers interact?"

Menzigian also recommends businesses look to partner with service providers that offer a variety of service options, in the event the business wants to change to on- or offshore services in the future.

"The technology is no longer a limiting factor," Menzigian said. "What becomes important is identifying and building the right business case so your total cost of ownership and functionality model is aligned to your business goals."

The 3 big takeaways for TechRepublic readers

  1. Businesses are increasingly moving their contact center outsourcing back onshore: In 2015, 53% of CCO contracts had significant onshore delivery, compared to just 35% in 2010, according to a recent report from Everest Group.
  2. A shift to automated services and non-voice channels has facilitated the move back on shore. Businesses are increasingly demanding their providers offer better customer experiences and meet their expectations for quality service.
  3. Enterprises' expectations from service providers have also expanded beyond cost containment and implementation to focus on proactiveness, providing better insights, and innovation.

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