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Issues with Offshore Call Centres

Info: 5466 words (22 pages) Dissertation
Published: 11th Dec 2019

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Tags: Outsourcing

Advancements in communications, software development and other technologies have enabled practically every type of business to expand its services to off-shore locations with the probable choices of countries where both the infrastructure and specific needs of the clients can easily be met. Examples of such services include but are not limited to call-centers, as also the subject of our present dissertation, back office operations, insurance claim processing, revenue accounting as well as web/digital development. Indeed one of the successful areas have the disciplines which involve information technology (IT) related services, making it a crucial element and part of a value chain for present day businesses. These IT enabled services and business processes are generally sourcedfrom a location where the end-user are not located, hence the remoteprovision of such set of services. The concept behind this phenomenonis to deliver services from off-shore locations using the state of theart technologies in communication, also called data networks which mayinclude wireline or wireless. Thus, clients or customers are providedthe same set of services or business processes from workers or subsidiaries based in offshore locations. An example to this respect is that of serving the clients of a multinational in the United Kingdom,where as the individuals involved in serving these clients are located in far off region such as India. In such an environment, there is noneed for the British clients to know about the whereabouts of the individuals serving their particular needs, nor is it necessary for theworkers to divulge such information to the British clients. The gap between the clients and the workers in such a situation is fulfilledthrough the modern forms of communication software. These software enable a British caller for example to place a call to India, withoutrealizing that the call has actually been made to India and in responsean Indian worker will respond to the said query of the British callerrespectively. The objective behind the entire exercise of outsourcingand running an offshore facility by a business operating in the UnitedKingdom or the United States of America is truly economical. As theparent company has to spend only a fraction of the amount otherwiseneeded to run and operate the same set of services in their homecountry (UK or the United States of America).

As the global businesses move ever closer to globalization and spreading their business wings in practically every corner of theglobe, outsourcing or setting up off-shore facilities has indeedemerged as one of the fastest and perhaps most successful modes ofaspects of a business value chain. Some of the primary reasons for the immense popularity of the outsourcing include increasing levels ofproductive through measures that are both cheap as well as efficient.Above, all where companies maintain their level of excellence in theservices and businesses processes offered to their clients, the phenomenon of outsourcing has added tremendously to their pool of revenues.

One of the first aspects business seek in setting up an offshorefacility is the requisite level of skilled manpower, which is todayavailable in huge quantities in a number of third world countries. Thisskilled manpower’s primary and basic requirements include individuals who can speak excellent English, are highly quality conscious, as wellas computer literate. These criteria are found in ample quantify incountries such as India, which has attained the status of being thenumber one choice for companies the world over. Another importantcriteria which business organizations in the Western countries seek arethe factor of cost, as also the largest and most important element inthe entire outsourcing decision. A brief comparison of the wages ofqualified personnel in the United Kingdom or for that matter in theUnited States of America with qualified personnel in India shows thatthere is a huge difference ranging from 70-80 percent. This hugedifference automatically calculates into a net saving of 50-60 percentfor the company based in United Kingdom or the United States ofAmerica. Then there is the aspect of customer service and delivery,which accounts for a major element in any business. This particularaspect has been more than emphasized by majority of the businessorganization with their headquarters and principle offices in thewestern countries. The maintenance of exceptional standards and qualityin both the deliveries of services and business processes ensures thatclients and customers alike remain content. It is these set of reasonsthat more than serve as potentials and viable options for setting upoff-shore facilities for products and services for companies, inparticular those with principle bases in the western countries. A briefsurvey of the Fortune 500 companies revealed that more than 200companies from this elite list had already set up their off-shorefacilities in a country where the availability of the above set offacilities had more than provided for their continued and progressivesuccess over the years. (Youndon, 2004)

As reiterated in the above lines, the outsourcing phenomenon andsetting up of offshore facilities in a more economical and professionalenvironment is increasingly revolutionizing the entire mode of runningand operating businesses. This is not only in the United Kingdom, theUnited States of America, but in a number of countries of the Europe aswell. The majority of the focus is however limited to the countrieswhere English is the first language spoken, and where the entireclient/customer base is English speaking. It is precisely thiscriterion of the English language that both the United Kingdom andUnited States of America have found third world countries where Englishhas reached the standard and status equal to or nearly equal to thestandards found in the said western countries. The fact that Indiabecame a number one choice in approximately a decade’s time isprecisely the reason as Indian government and the public both havefocused on making their populations excel in the English language, aswell as the various basic forms of computer literacy.

Youdon, E., writing in his book “Introduction to Outsourcing” printedby Prentice Hall quotes studies carried out by an American surveygroup, “Cutter Consortium” notes that outsourcing has become amainstream phenomenon in the period between 2000 and 2004. The samesurvey also revealed that, unlike the dot.com bubble of the 1980s, thisphenomenon shown no signs of recession. On the contrary the high-techboom initiated by the outsourcing phenomena will more than likely takeon the shape of a permanent trend, one which will keep on increasingwith the passage of time.¬† (Youndon, 2004)

The survey by ‘Cutter Consortium’ also showed that the rising trends ofoutsourcing has led to extremely high levels of unemployment in thecomputer industry of the United States of America, and in additionthere has been a gradual shift of tens of thousands of IT related jobsto countries such as India, the Philippines, Russia, and China. Thus,one may note that though setting up of offshore businesses has led to atremendous boom for companies and organizations in the UK and theUnited States of America from every practical perspective. The sametrend has resulted in the rising levels of unemployment, particularlyin the US, as also mentioned in the preceding paragraphs.

A brief into the not so recent history, say the decade of the 1990swould reveal that even the largest of multinational companies couldnever have imagined, and for some it was a radical thought to moveentire departments from hub of US cities to for example the city ofBanglore in India or to Moscow in Russia. However, the age-old conceptof savings and down-right economics led the path to seekinglower-paying employees, yet this was truly difficult as the advances intelecommunication technology and requisite levels of computer literacywas still a far-off dream for countries such as India and Russia.

However, only a decade later, in 2002, there have been such tremendousdevelopments and rising levels of computer literacy, as well as commandover English language in the said countries. This has been combinedwith the simultaneous advances in technology, which duly raised thedemand for offshore facilities. The same offshore facilities has nowreached some 28 percent of the entire IT budget for Europe and theUnited States, a mark reached within two years from 2000 to 2002. Asalso confirmed by the findings of “Forester Research” in their 2002survey, the allocation of major IT budgets for offshore facilities willlikely increase by a significant percentage in the coming years. Asimilar survey carried out by ‘Gartner Group’ showed that by year 2004,some 8 out of every 10 CIOs in American organizations had receivedorders to set-up a part, if not entire technology service department tooffshore facilities. The same studies also confirmed that 4 out 5companies would already have taken the step by the end of year 2004.

To name only some of the famous American names who have already set upshop in the different cities of India, Russia, Eastern Europe and Chinainclude computer giants such as IBM, Microsoft, Oracle, Unisys6, andDell. Also included in the list of companies who have established callcenters in above said countries are a number of banks, firms based onthe New York’s Wall Street, insurance companies, as well asmultinationals such as General Electric who serve their clients with atruly information-intensive network and IT departments. Credit-cardcompanies, consumer appliances companies as well as a number of otherindustries have also established offshore call centers. (Robinson andKalkota, 2004)

The offshore facilities of business organization, irrespective of theirorigin in the United Kingdom or the United States of America haveattained the status of the principal phenomena, as also reiterated inthe above paragraphs. Majority of these who have set up shop asoffshore facilities are those involved in software development,maintenance, project management, and it is these particular segments ofIT industries that are earmarked to witness tremendous growth in thecoming decades. Unlike the dot-com bobble of the 1980s decade, thereare no signs that these phenomena of outsourcing, including callcenters will likely see a period of recession in the near future.However, there are questions put up by economic pundits, such as thelikelihood of leveling off, say at 10 – 15 percent or at a higher levelof 50 percent with the focus on overall employment within the sameindustries. The answers to such queries are the same, which is thecontinued growth and competition will remain and serve as the principletrigger for this spate of continued growth.

Taking an insight view of the number of industries which haveestablished call centers in far off and remote regions/countries, itwould be evident that majority of them fall in the category ofknowledge based industries. The phrase of ‘knowledge based industriesis coined precisely to make a distinction with other industries as callcenters are providing just this. They are providing services withstrong points in just two areas of expertise; first is their computerliteracy and second is their command of English language. Thus, one maynote that these two aspects are the core, and perhaps the pivotalreasons for the tremendous success of the call centers, aside from thecost factors for the parent companies based in the United Kingdom orthe United States of America.

A brief on the US companies in search of setting up call centers asoffshore facilities shows that they are deemed as innovators in thisparticular phenomenon of outsourcing. In doing so, these companies takeinto account three principle aspects, which also serve as potentialconflicts with the consumers.

One of the first aspects which assists these businesses is theeconomics and high speeds offered in the telecommunication and Internetfacilities for call centers, as compared to similar facilities say adecade ago. Examples to this effect include mortgage-approvaldepartment of a business which wishes to set up a call center facility,as the business would be least concerned whether it is a technologicalpioneer or not. Similarly such businesses need not worry about the highcosts incurred in advanced telecommunications which may otherwise wipeout any savings achieved from strategy of employing low wage employees.(Youndon, 2004)

Second aspect which serves as a conflict between the businesses settingup call centers through outsourcing and their consumers the widespreadknowledge about the phenomena of call centers and outsourcing. Even ifone were to compare the increasing awareness and knowledge about callcenters with that of, for example a decade ago, it would be evidentthat little was known. For example call centers now include in theiragenda conferences held amongst the various call centers throughvideo-phone, or even video conferencing; the increase use and knowledgeof consultants for call centers who assist in such processes asselection of vendors, negotiation of contracts, and management ofadministrative and financial details. In this context, the overwhelmingwave of information at the disposal of these new breed of consultantsin the call center business may not necessarily guarantee the successof the respective call centers. However, they do enjoy an edge in areasof advice and guidance as compared to their counterparts in the ITarena (for example data entry operators/pioneers), say a decade ago.

The third aspect which serves as the conflict between the businessesand their consumers over the call centers and outsourcing is theincreasing pressure to investigate into the affairs of the outsourcebusiness, or the call center in our case study. A decade ago, the casewas somewhat opposite, as there was little or no pressure toinvestigate the activities of the outsource businesses. One may notethat the decade of the 1990s was indeed a boom time for a number ofcompanies, and the general atmosphere was one of generous wages and asteady growth of employment. This trend was augmented by competition atthe global level, which also witnessed a steady growth of outsourcingbusiness the world over. Yet, the single most factors that perhapsserved to halt this growth was outgrowth and rising global demands forgoods and services, which outstripped supply. It would take a decade,when this rising demand of goods and services was be somewhat matchsupply, a phenomenon which we presently witness in entire outsourcingincluding call centers in the third world countries.

Thus, present conditions on the call center arena the world over showthat supply is more than the demand for goods and services. It isprecisely this reasoning, that majority of the companies wishing to setup a call center now have a greater choice to select workers andregions where workers are least expensive. This is more commonlyobserved in the knowledge-based industries, which also includes thecall centers of India, Russia, Philippines, and China. As also a stateof conflict between the companies and their consumers, the first(businesses) are now more pressurized to cut back on costs due tofierce global competition, hence the search for ever more cheaperknowledge based labor force with less demanding working conditions andlow-paying employees respectively.

The above section has briefly discussed the phenomenon and trends thathave become a mainstream for call centers, as also some of the businessperspectives from the point of those companies wishing to set up callcenters for economic reasons, competition, and growth of theirrespective organizations.

However, the segment of consumers too is ever important and perhapscrucial element of a call center business. As it is the presence ofconsumers for whom the call centers emerge in the first instance.Since, majority of the consumers belong to countries where Englishlanguage is the first language, the emergence of call centers withEnglish language speaking employees is indeed a pre-requisite. The highwages prevalent as well as demanded by employees in the Englishspeaking countries including Canada, the United Kingdom, and the UnitedStates of America has forced large number of companies to outsourcetheir businesses, in part if not in whole to regions and countrieswhere is ample availability of less paying employees, yet havingcommand of the English language and are computer literate. For this theprobable choice falls on countries such India, the Philippine, theRussia and China. However, the standard and expertise of language orcomputer literacy are not the only factors, which make an outsourcingorganization successful.

In this respect, the consumers as the principle beneficiaries of callcenters have a rightful demand to obtain services and products that areof optimal quality; a set of factors that has been somewhat left out bythe companies operating call centers in remote regions of the world. Aprime example to this effect can be observed from a complaint from agroup of consumers against call center operators and their employees,which duly resulted in a ruling from a court of public opinion with thefollowing wordings;

“You have no right to bother us and leave us dangling. And if we dobusiness with you, your word isn’t good enough. You have to prove it.”

Though the above ruling is only a hint at the prevalent unease on thepart of consumers, yet this more than provides for call centeroperators and businesses to polish up their role in the provision ofgoods and services from offshore facilities, and through the use ofemployees with a little different accent, and perhaps little knowledgeon the actual complaint or command when calling up potential clients.

The consumers at the end of call centers have also found strongfootings from both the laws and regulations, which have more, thanrestricted the activities of operators of, call centers. This can beobserved in the new set of US Federal regulations which place a limiton ‘call abandonment rates, caller ID blocking, as well as demandinbound upsetting agents to ask consumers for their account IDs, andabove all to record those calls. A similar act favouring Th consumersis the “Do-Not-Call or (DNC) registry which may become effective in thevery near future. The DNC is said to have a very strong support fromboth the US Congress as well as the US public. Though the registry hasyet to become fully effective and become a law, there are already morethan 50 million US phone subscribers who have filed for the DNCregistry. All these regulations and acts that are deemed to assistconsumers from the operators and businesses of call centers are perhapshuge hurdles from the perspective of the businesses. As theseregulations and laws, also termed as outbound rules will not onlyrestrict call center operations, but also serve to cost huge job lossesboth within the countries where call centers are operating, as well asthe offshore facilities which have been set to gain economic and othercrucial business advantages.

A survey carried out by the American Teleservice Association (A.T.A.)revealed that the outbound rules could mean job losses to the tune ofsome 2 million individuals in the United States alone. As one of thefirst steps taken against the levy of such laws by the US government,legislators and public prosecutors, the A.T.A. has filed suits againstthe DNC regulations.

Another aspect to be noted vis-a-vis the consumers at the end of callcenters is that the implementation of regulations and laws benefitingthe US consumers will have a direct affect on the US employees of callcenters, in turn forcing businesses to give importance and focus onoutsourcing and offshore facilities for call center businesses. Thus,even if and when there is a likely shift in the call centers, the joblosses for US employees will probably be effective even without suchlegislation’s. To satisfy the consumers, the call centers will thushave to comply with such regulations, even if these results in huge joblosses as also mentioned in the preceding paragraph.

Yet another set of incentives and benefits for the consumers which alsoserve, as direct conflicts with the businesses are the marketingmethods employed by respective businesses. For example, businesses whenfaced with such strict measures and legislation’s as stated above mayturn to options such as direct mail, direct response, and inserts inpublications to prompt inbound calls, emails, and chat sessions. Inresponse to such changes in regulations and calls from publicofficials, the call centers at home will have to undergo and bringabout changes. These may include modifications in ‘predictive dialers’including their complete replacements, replacement of modern callrecording equipment’s and bring about changes in the mode of sellingfor both inbound and outbound agents, in turn positively affectivityand raising the standard of phone calls to consumers. The call centerson the other hand In contrast, the call centers operating in remote andfar-off locations with advantages in lower costs for both employees andinfrastructure will be least affected from such measures at homegrounds.

In this context there are two particular regulations which directlyaffect the call center operations and which also serve as potentialconflicts with the businesses as well. The first is the TelemarketingSales Rule (TSR) which is administered by the US Federal TradeCommission (FTC). The second is the Telephone Consumer Protection Act(TCPA) which falls under the US Federal Communications Commission(FCC).

Under the workings of both the FTC and the FCC, businesses are allowedto place calls to consumers who have given prior consent, and who haveenjoyed previous business relationships with the respective firms.There is also a time factor involved in such calls according to whichthere has to be a transaction within the last 18 months, and similarlya period of 90 days must have passed since the last inquiry was placed.On the other hand both these regulatory authorities and theirregulations become ineffective if and when a consumer refuses to accepta call, even if there was a business relationship in the recent past,and it is the obligation of the respective businesses to honor suchrefusals.

The levy of and changes in the rules by both the TCPA and TSR havecalled for changes in the outbound calls for call center operations. Anexample to this respect include call abandonment rules, according towhich marketers have to connect live agents to place calls to theconcerned consumers, and this call has to have to duration of 4 ringsor a time limit of 15 seconds, and compliance of neither may result inabandonment of said call/s.

A second rule of both the TCPA and TSR restricts the number of callsabandoned to just 3 percent, which are answered by live persons.However the TSR rules measure the same on a per day basis and a percampaign basis, while its sister authority, the TCPA measures the callover a month’s period.

In compliance of such regulations and in response to the complaints ofthe consumers, the TCPA claims that no calls are abandoned if theresponse is in the form of voice messages within 2 seconds of receiptof a consumer’s call. Similarly the calls are not abandoned if theconsumer has previously consented to receive messages, includingexisting business relationships. (Read, 2004)

Though outsourcing is being largely concentrated in areas of softwaredevelopment, maintenance, manufacturing, logistics, and adding thelatest area of knowledge based industries, one may note thatoutsourcing has perhaps been there for the last nearly 2 decades.However, the changes that have perhaps revolutionized the entire out-sourcing business, in particular the emergence of call centers includessuch disciplines as customer, transaction processing, finance andaccounting, human resources, desktop support and software development.

The core reason, and perhaps the strongest factor to force theemergence of such huge numbers of call centers in remote regions of theworld such as India and China as prime examples are cost-cuttingstrategies by making earnings look all the more attractive. Included inthe cost-cutting strategies was the wages and salaries of theemployees, truly a major chunk of operating costs, which was dulyreplaced with employees hired at a fraction of what would otherwise bepayable for example within the United States of America or UnitedKingdom. This was amply found in the offshore labor, who were bothcomputer literate as well as well suited to serve the English speakingconsumers on the North American continent, and the United Kingdom.

A brief comparison with other process-improvements innovationsincluding but not limited to Total Quality Management, Re-engineering,and Six Sigma, the offshore outsourcing too is predicted to facesomewhat similar consequences, and for arriving such a conclusion, itis only imperative that one studies the cycle of the above saidinnovations measures taken by business organizations.

Included in this management drive innovation cycle are 4 principle steps, through each business organization has to undergo.

The first is the slope of hype, and one may note that outsourcing, inparticular the emergence of call centers are passing through what maytermed as the ‘honeymoon period’, as also evident from the tremendoussuccesses achieved by majority of the organizations setting up callcenters. The duration of the hype period has witnessed a large numberof organizations somewhat copying or initiating projects based on thepresent forms of innovation. This is done to gain experience from thecurrent and ongoing process management techniques, without the need toinvest in experimenting. Another feature of such a tactic is a merepursuit of a competitor within the same industry. An example to thisrespect can be observed in the trends of e-commerce and e-business inthe later part of the 1990s decade. Thus, it was observed thatpractically every business organization was in pursuit of an e-commercestrategy, often without a detailed insight or logical reasons for doingso. A wave of e-commerce companies thus emerged offering best ofservices, and searching for a place in the market as a ‘trustedadvisor’ in their endeavours to compete win offshore contracts. Suchcompanies were duly aided by venture capitalists that fueled the hypethrough a number of attractive financial instruments.

The second principle of process management is that of despair, orrather the slope of despair. As the business enters the slope ofdespair, it is evidence that the honeymoon era, as also described inthe preceding paragraph has come to abrupt end. The offshore projectsinitiated in rather haste, including initiation or blindly following acompetitor with the same industry will witness a failure as noconsideration was given, nor any wieghtage given to the decision ofsetting up an offshore facility, or call center. The result of taking adecision in such haste is that promises to consumers remainunfulfilled, in turn triggering a possible ‘backlash’ from within theorganization. Recent examples to this respect can be observed in thedecisions to call back and close shop decision taken by famous namessuch as Dell and Lehman Brothers. It is also observed that during thisslope of despair, a large number of organizations that are not seriousin operating offshore facilities would opt for closing down theiroffshore facilities. Further, such companies would either go for acomplete re-evaluation of their principle strategies, while those whoare truly serious in pursuing and benefiting from their offshore plans,continue to excel and strive to maximize their earnings from thetremendous set of advantages hidden in the operation of offshorebusinesses, including call centers.

The third important aspect in the process management innovation measureis that of consolidation and assimilation. This step is immediatelyproceeded after that of despair where serious contenders stay on, andthose who step in the market without serious considerations eitherere-evaluate their strategies, or completely fall back and retreat totheir home grounds. The business of e-commerce witnessed similar trendsand behaviors. Having undergone the crucial step of consolidation, abusiness more often than not enters the slope of profit era. As alsoevidenced in majority of the businesses involved in e-commerce, mostorganization have today realized that e-commerce is not a merenecessity, rather a pre-requisite for their businesses. A similar spateof events awaits the offshore business, where call centers arepredicted to reach levels of extra-ordinary profits for their parentorganizations, a likelihood prediction for the end of the presentdecade.

The study of the above 4 principle aspects of process managementinnovations shows, as also evident from recent corporate history, thatit is the home country’s economy, which by and large dictates thesuccess or failure of a corporate strategy. Thus, if economy is movingtowards recovery, not only will other businesses suffer, but theoffshore business including call centers will too face the same fate.Similarly, if the home economy is failure, and is continuouslywitnessing a fall, offshore outsourcing as well as all other businesseswill bound to see an acceleration and growth with significant profitmargins who can sustain the ups and falls of offshore businesses.However, there are more than likely chances for the IT sector, inparticular the knowledge based industries which include the callcenters will witness a similar migration as has happened with themanufacturing from the North American and European continents to moveto the Pacific Rim countries. (Gore, 2003)

The above section of the dissertation has briefly discussed some of theaspects of offshore call centers including the businesses as well asthe consumers and the conflicts between them. The above section hasprimarily focused on the US businesses as they enjoy the single largestsegment of the global offshore call centers. The is followed by UnitedKingdom enjoying a second place, and which will constitute thefollowing section of our dissertation. The following part will thustake into account a brief history of outsourcing, and move on todiscuss businesses and consumers from the European perspective, with aparticular attention on the implications on the British businesses,British consumers, and the British job markets with respect to callcenters.

Having briefly touched the US perspective of outsourcing businesses,the following section discusses the businesses, consumers and theirconflicts from a British point of view.

A survey carried by M/s Outsourcing Insight Ltd., Harvard, M., showedthat the year 2000 was a record period for Britain as it witnessed theemergence of some 35,000 call center related jobs, and establishment ofsome 88 call centers.

This tremendous growth pattern in the outsourcing business in theUnited Kingdom proved a number of points. For example, it showed that arecord number of businesses had chosen to shift and expand towardsoutsourcing. It also proved that the consumers had a wider choice. Itwas also evident that each call center was offering a more diverse setof services, a more specialized version and an ever-competitiveenvironment to offer for their customers. (Harvard, 2000)

However, with the tremendous growth pattern viewed in the expansion ofcall centers, British businesses also realized that there was a crucialneed for an approach that would provide for needed end results andoptimization of their outsourcing objectives. For example, theselection of an outsourcing partner was one such area, which requiredneeded diligence and an equally cautious approach. It was largelyobserved that in their endeavours to increase their market share andcompete in their respective industries, majority of the Britishbusinesses failed to recognize that competition and offering truly highstandards of services and products called for an equally high standardsof capabilities and services. This was only possible in the appropriateselection of an outsourcing partner who fulfil

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