Offshore call center outsourcing

Feb 23


Rob O'Malley

Rob O'Malley

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If you crawl the call centre newsgroups on the Internet,Offshore call center outsourcing Articles you will find countless articles for and against offshore outsourcing. The articles in favour of offshore outsourcing are generally written by people who have a financial interest in their success and the opposing articles written by people who stand to gain should they fail. So, we at Asian Call Centres decided to thoroughly examine the offshore industry so that we could predict what would actually happen over the next 5 years and write it without the usual bias we see in other articles.

If we take a close look at the industry today, it is in many ways following the development of both the in-house and outsourced call centre industries in The United States and United Kingdom.

Where to and from?

As you would expect, The US will lead the drive for offshore call-centre outsourcing and 2 countries namely India and The Philippines will dominate the market. The Philippines will actually take over India in terms of number of agents before the end of 2003 for more high value work into the US market due to the higher standard of English there. The vast majority of offshore outsourcing will be English speaking with Spanish, German and French falling way behind mainly due to public adversity to outsourcing and the importance of labour groups in these countries. The Spanish speaking market will mainly serve Spanish-speaking communities based in the United States and will be served by Mexico and South American countries. Almost all work will be conducted in major commercial cities with companies unwilling to risk ventures in provincial towns until the market has matured considerably.

Impact Back Home

The domestic markets in The USA and UK will be affected but only minimally for the “in-house” call centre market. We have already seen that companies who operate predominantly in-house centres in the UK are far less likely to outsource offshore. However, there is and will continue to be a major shake-up for outsourcing companies. There is already over-capacity in the domestic outsourcing sector and the growth of offshore call centres will continue to squeeze margins and force consolidation. As a result, some vendors will be forced to downsize or go out of business. The overall market is still growing and vendors willing to transform and move up the value chain will continue to prosper. Those companies engaged in low-value outbound activity will be acutely affected as offshore facilities drive down costs in this area. Companies focusing on the “out-of-hours inbound” market will also see their market reduce as companies adopt a “follow-the-sun-approach”.

Structure of Vendors

The current offshore market is made up of local entities, global players and partnerships combining both these groups. The larger vendors will continue to develop partnerships with Asian vendors with the Western company operating as a sales and account management function. Unfortunately, many of these partnerships will fail as these partnerships fail to bring the benefits originally sought. More Western companies will look to set up their wholly owned centres in order to gain additional control over the operations. This will be opposed by a number of wealthy families and conglomerates in these developing countries that will attempt to pressure their Governments to enforce foreign ownership rules. Those Governments who buckle under this pressure will lose out to countries offering more liberal laws. By the end of 2006, over 80% of vendors will be 100% owned by British and American shareholders. The local brands already have a poor reputation in the American market, which has severely tarnished the reputation of this entire group. As more of these centres set up, the average quality of these vendors will continue to fall, which will then push this group to near extinction. More and more foreign vendors will seek to bring “middle management expertise”. There has already been severe criticism of the quality of middle management in offshore centres and this will become even more apparent with the rapid growth anticipated over the next 3-4 years.

Pan-European Centres

Companies which have previously centralized their call-centres on a pan-European basis in countries such as The UK, Ireland and Belgium may continue with this option but will certainly be reviewing their options particularly with the English speaking requirement. Very few of the countries offering low-cost, English-speaking offshore services have large numbers of people fluent in other European languages.

Size, Scale and Growth

The size of each operation moving to offshore locations will steadily grow.
In terms of specific industries, the growth will vary hugely from industry to industry. Publishing will be the major mover and some utilities except when it could pose political embarrassments. Some utilities are still heavily unionized and this may slow the progress of offshore outsourcing. The I.T. industry will also look to take advantage of specific technical skill-sets in India for help-desk activity and will push lead-generation and telemarketing work to reduce costs in a market with shrinking margins. Although travel is generally considered a low value call-centre activity but it is unlikely to see much movement except for foreign airlines who will seek to take advantage of low telecommunications costs to centralize their call centre operations in their home countries. The financial services industry will be a significant player except in sensitive areas of the industry where there will be little movement. There will be little movement in FMCG and Government. Unfortunately growth will not meet the expectations of many venture capitalists, which have pumped millions of dollars into the Indian call centre market. The newer vendors have been very careful about spending vast amounts of money on technology like the early players and as a consequence are able to be cheaper than the early players who are trying to pay off investors. These “early players” may well find the conflicting demands of their investors and clients may force them out of business.

There are essentially 3 periods for the offshore industry.

Honeymoon Period (until 2003)

Call centre companies are currently experiencing a honeymoon period with their shareholders, employees and Governments. For the vendors in these offshore locations, finding good quality staff is easy. Any industry seen as a growing industry encourages an abundance of employees especially when it is seen to be part of the “developed world”. Investors are still investing large sums of money into call-centre ventures even though it is not clear when they will start to see a return on their investment.

Decision Time (2003-2005)

Decision time is already starting on a small scale. Companies are starting to ask the following questions:

·Is offshore outsourcing for my business?
·Which types of work should I be outsourcing?
·Where should I outsource?
·Should offshore outsourcing be part of my strategy or simply a tactic to fulfill a short-term requirement?

An economic recovery limiting the availability of agents in developed countries, and continued downward pressure on costs will fuel the growth of the offshore industry.
Governments in Asian countries will continue to develop new initiatives to encourage call-centre investment. A number of Indian owned companies will go bankrupt, sell their facilities or merge with foreign partners. A number of these will go bankrupt as a direct result of their over-investment in costly IT infrastructures, which are too expensive to maintain with the margins, which will be increasingly tight. The interest in accreditation bodies such as COPC will continue to grow in developing countries but this will be short-term as clients and vendors fail to experience the promised benefits.

Consolidation (2006 - )

Growth will slow and it will very difficult for new companies to obtain a significant market share. Some call-centres will start to set up in more remote areas. Less and less centres will be set up in Manila, Delhi, Bangalore and Mumbai as centres look to reduce costs further to maintain their competitive advantage and compete against their rivals who are continuing to drive down margins. The size of each vendor will be substantially larger than now but there is likely to be less vendors. These vendors will operate in a number of locations and possibly across international borders.


There is a very rosy future for the offshore call centre industry but it will not grow as fast as many have anticipated and quality will become far more of an issue than at present. Poor quality call centre companies at home and abroad will face extinction within the next 3 years. The market will become more sophisticated and the level of management will slowly improve over the medium term. My advice to call centre companies would be to remain focused on quality and not on over-rapid growth or expensive marketing campaigns. Vendors with good reputations will be sought out. Focus on what you are good at and bring in the areas where you lack. My advice to customers and potential customers of offshore companies is to keep your eyes open. Many of the companies with account management teams in London and New York often do this at the expense of quality ex-patriot management in their operations. Use multiple vendors in multiple countries and constantly evaluate all areas of their service. Be patient and you will reap the rewards. To call centre companies in The United States and United Kingdom, I would say, “Move up the value chain. We can’t make widgets as cheaply in the U.K. as they can in China so just give up and do something that they can’t do as well in China.” Finally, my advice to technology companies such as Avaya and IBM would be “Keep to making the boxes and stop trying to over-hype the industry in order to sell more of your equipment. The success of offshore call centre companies will be driven by their ability to successfully manage high quality call centre projects and not by the size of their equipment or their debt mountain”.

This articles was written by Rob O’Malley of Asian Call Centres, a leading offshore vendor of call centre services.