In the 1990s, the management consultant, educator, and author Peter Drucker coined the phrase, “Do what you do best and outsource the rest.” Many leaders have adopted this black-and-white ideology, and some have experienced success.
However, at face value, the principle doesn’t leave much room for strategic examination and prudent decision-making. Some 30 years later, the business landscape and outsourcing possibilities have (naturally) changed dramatically and grown increasingly complex.
Expectations in customer experience (CX) have evolved, too. According to a 2018 global survey of 15,000 people by PwC, 70% of customers reported speed and convenience as top priorities in their CX. However, many companies are missing the mark in their call centers, with customers reporting frustration with long wait times and frequent handoffs, leading to high abandon rates and low issue resolution.
How well does your contact center hold up against today’s CX expectations and possibilities? If you are interested in improving your CX and exploring an in-house versus outsourced call center, there are many factors to consider. In this article, we will guide you in your decision by highlighting some of the common and less common factors to consider when determining whether to outsource.
Call Center Management Options
Call centers perform a range of services to streamline business processes and enhance customer experiences, most commonly answering customer support calls, generating leads, collecting payments, processing orders, telemarketing, and performing market research. There are several options available to companies for managing these functions.
- On-premise — IT infrastructure hardware and software applications that are hosted on-site
- Cloud-based — Application and infrastructure resources that exist on the Internet
- Onshore — Services from someone outside a company within the same country as the customers (also known as domestic outsourcing)
- Nearshore — Services located in a different country than the customers but in a region that is nearby and in a similar time zone
- Offshore — Services located in a different country and time zone than the customers
The differences among these options are vast, including labor costs, quality of service, data security and technology, language proficiency, cultural affinity, specializations, and accessibility.
Call center outsourcing to a third-party provider, commonly referred to as business process outsourcing (BPO), is a popular choice that usually starts with saving costs and then follows by improving service quality, recruiting and managing skilled employees, and adopting technological or regulatory change. Conversely, top concerns include losing employee and customer insight, security, and control.
Call Center Costs and Comparisons
Knowing the associated costs of operating a call center, particularly if you don’t already have one in-house, is helpful.
- Capital expenses — upfront costs of establishing a call center system, including hardware, setup, equipment, and software licenses
- Infrastructure — facilities to house operations (unless utilizing a virtual call center)
- Human resources — hiring, training, and managing the staff of managers and call agents who operate the system, plus salaries and benefits
- Operations — monitoring productivity and effectiveness
For reference, according to a 2006 HBR article, setting up a typical 250-seat call center costs $5.2 million.
Outsourced contact centers, either through a shared or dedicated service, cover the above costs of staffing, training, and infrastructure. Some additional advantages include:
- Trained and experienced call agents
- A sense of security as the outsourced call center provider is accountable to the binding mutual risk agreement
- Scalability, adding or reducing resources according to a company’s evolving needs
Call Center Destinations
Actual costs of call center outsourcing differ by location, and there are several. The most common countries for call centers include Argentina, Brazil, India, Malaysia, Poland, the Philippines, and the United States. For a cost comparison example, a call center seat in Cape Town costs one-third more to operate than in India but about half what it would cost in the United Kingdom.
Options for outsourcing will continue to increase. According to a 2023 research report by Technavio, call center outsourcing is estimated to grow at a 4.8% compound annual growth rate from 2022 to 2027. The key driver of this growth is the emergence of countries willing and able to be call center destinations, emphasizing the need to know more than just the cost differences among the options.
As the idea of delegating a call center to a third-party provider grows more appealing, companies need a process that involves knowing its minimum requirements of an offshore solution and assessing the benefits and risks for today and the future. It is critical to evaluate the current and forecasted conditions in the various labor markets and how they will likely affect a provider’s operation over time.
Here are some other factors to consider about domestic, nearshore, and offshore options.
Before outsourcing anywhere, businesses should know about high-risk events underway and those that could unfold. The ongoing Ukraine-Russia crisis has had a massive impact on Ukraine’s IT services industry, including operation shutdowns and talent relocation, affecting surrounding countries, too.
To ensure long-term safety and security in your outsourced partner, stick to companies based in countries with promising geopolitical stability.
Different regions excel in unique strengths and specialties forged by their educational systems, access to technology, and industry orientations. Avoid compromising on business and industry-specific knowledge — potentially even enhance your service quality — by drawing from expertise that aligns with your business. India has a vast IT sector and technical education, Latin America excels in adaptability, Tunisia specializes in the IT, finance, and healthcare sectors, and the Philippines is known for its serious work ethic.
Further, it’s helpful to know the number of suitable professionals available in a given region who possess the necessary language skills, technical knowledge, and professional abilities. Argentina is often a good choice for call center outsourcing because of its strong education, high English proficiency, competitive rates, and abundant talent.
When considering call center outsourcing, the financial dimension extends beyond costs to include currency differences. Foreign currency valuation leads domestic companies to outsource abroad but it can fluctuate — sometimes in a dramatic swing with multi-million dollar implications. Currency fluctuations are caused by supply and demand, interest rates, inflation, and political events, any of which can affect the exchange rate between your and your provider’s currency. When fluctuations occur, outsourcing companies will end up paying more or less than they expected, depending on the direction and magnitude of the change.
Additionally, inflation in the provider’s country will influence their wages, expenses, and profit margins, which can affect the quality of their service. Understanding the implications of foreign exchange policies is important to guide the decision-making process and the structuring of contracts.
Some countries, such as the Philippines and India, offer government incentives to support the growth of the BPO industry, including tax exemptions, enhanced deductions, and importation duty exemptions.
Automation and artificial intelligence (AI) are sweeping all industries, and CX is no exception.
Customers are loyal to brands that consistently provide exceptional value and service with minimum friction or stress. Fortunately, advancements in customer service technologies, including AI-driven chatbots and virtual assistants, are helping make CX fast and seamless — and that pleases customers. According to the same PwC survey, about 75% of customers prefer personal interaction, but this doesn’t necessarily have to be with humans; AI technologies are perfectly viable options.
Adopting new technologies can be demanding, but failure to do so will likely result in a less favorable experience for both customers and contact center agents. Third-party call center providers are equipped to bear the process and costs of changing technology as needed. Many offer integrated approaches that combine human touch with self-service methods, like self-support webpages, chatbots, and intelligent voice assistants.
Call centers handle significant amounts of sensitive customer data and financial details. Data security risks involved with call center outsourcing include data breaches, loss, and misuse. It is nothing short of critical to properly vet providers to choose one that is reputable with appropriate controls and processes in place. Ideally, the providing country would also enforce data protection laws. There are several strategies you can put in place as well, including data security requirements and regular audits.
Leveraging an Advisor for CX
Well-run contact centers are essential to the customer experience, and the numerous options and factors complicate the process of determining whether to outsource. Outsourcing offers cost savings, scalability, and specialized expertise, while in-house operations provide greater control, cultural alignment, and data security.
If thoroughly sifting through all the complexities becomes too time-consuming, taxing, or simply frustrating — it’s understandable. A CX consultant like AdviseCX can help you make sense of all the options, perform a cost-benefit analysis, and accelerate toward the best solution tailored to your priorities, resources, and needs.
Our experts are equipped with the experience and knowledge to avoid the risks of loose terms and conditions, service disruption, and geopolitical tensions. We have the network to connect you with licensed, reputable, and reliable outsourced call center providers and the sourcing strategies to protect and benefit both parties involved.