On and Offshore: Call Center Economics

Much heat, and little light, is emanating from this season’s political debate about the offshoring of American jobs.

Like blind men trying to describe an elephant by touching and describing various parts, researchers and commentators have come up with very different assessments and conclusions, and there is evidence to support most opinions.

Moving Back On Shore

Offshoring is certainly one way for companies to save money, but the savings are nugatory without happy customers. Some people point to the growing list of companies that are taking back some or all of their offshored call-center positions as proof that the practice may have drawbacks.

Dell Computer took back call center operations from an Indian outsource vendor late last year when CIO Randy Mott determined there were too many complaints from customers of the fast-growing Optiplex desktop and Latitude laptop product lines.

In one article posted at, a Dell customer complained that the agents on the other end of the line were unable to help. He called their service “sponge listening” because the agents soak in the complaint but do nothing about it.

Dell isn’t alone. In July Delta Airlines took back services it had contracted to two Indian call centers because some customers complained about the operators’ accents.

And it’s not just big companies that are taking back big call center functions. Newsday reported on September 9 that North Fork Bank was taking back 80 call center jobs from India because the new CEO, John Kanas, has a bias for doing things in-house.

Kanas is something of a fanatic about customer service. According to Newsday, he put his office on the floor above the call center and installed his own direct line so he could listen in on calls and keep tabs on what was on his customers’ minds.

The man deserves a Nobel Prize.

Economic Effects

How does offshoring affect the overall U.S. economy? On that question there is little agreement. While some say the United States will generate more jobs than it loses, others point out that losing jobs can not go on indefinitely without adverse effects.

The distinguished economist Paul A. Samuelson is counted among the latter group. At 89 years old, the emeritus professor of economics at the Massachusetts Institute of Technology is still an active participant in economic debates.

According to the New York Times, he will publish an article in the Journal of Economic Perspectives later this month. The Times says that Samuelson’s article challenges the assumption that the economy will benefit in the long run from offshoring service jobs like call center and software development.

Historically the gains to the American economy have offset the losses, but not without considerable dislocation in the short term.

A case in point is the offshoring of manufacturing that started in the 1960s. The movement has accelerated to the point that foreign competitors now stand on an equal footing in industries like auto manufacturing, and other industries like electronics have been almost completely moved off shore.

While the U.S. economy has replaced manufacturing with high-tech and service jobs, many of the new service jobs have paid substantially less. This has led to a now decades-old stagnation in the spending power of the average paycheck.

Now China and India are building an increasingly skilled and technologically savvy work force, causing many U.S. workers to worry about job security.

The One-Handed Economist

But economists have a penchant for seeing both sides of a question. The phrase “on the other hand” crops up so often in the field that President Harry Truman once asked his staff to find “a one-handed economist.”

Not surprisingly, then, some economists take a more sanguine view of offshoring. In an interview with the New York Times, Samuelson protege Jagdish N. Bhagwati, a professor at Columbia University and a respected international economist, said he disagrees with Samuelson. In fact, he has written a new book on the subject called In Defense of Globalization.

But it will be years before we know the truth. By then we could find that another industry has left these shores.

Indian Burnout

Does any society or culture have a lock on doing call center work well?

According to the BBC News, even Indian call center agents get burned out. In an article titled “Greying of India’s Call Centres,” reporter Sunil Raman says that despite relatively high wages, turnover rates at call centers can reach as high as 50 percent — a number that will not shock managers of American call centers.

Working 7,000 miles away from your customers means working at night — a sure recipe for burnout. Other familiar complaints are the lack of status or promotion and insufficient training.

As the Times has pointed out, no country is brimming with people waiting to be call center agents.

As a partial fix, some Indian call centers have resorted to hiring older workers, who tend to be more stable, the BBC reported. But they also tend to be harder to train.

The Long Run

John Maynard Keynes once observed, “In the long run we are all dead.”

That may be the good news.

In the short run we can see the economic dislocation that offshoring produces among U.S. workers. We can also see the dissatisfaction of customers whose service calls are magically routed around the world but whose service problems are often not realistically addressed.

But it is the intermediate term that grabs — or should grab — our attention.

The Intermediate Term

In the intermediate term the United States needs enriching, well-paid jobs that do not burn out the employee — and that’s true wherever the employee punches the time clock.

There is no doubt that offshoring will continue to be an alternative that companies turn to when they need to lower costs or handle overflow.

Despite the advent of CRM as both a technology and a way of doing business, many call centers still focus too much on simply lowering costs.

The best way to achieve these sometimes contradictory goals may not be with simple efficiencies but by making better use of technologies that can deliver the right answer to the representative’s screen.

The answer lies in better and timelier answers. Without them, customers will not be satisfied. And call center workers will become unhappy. If that happens, India might start exporting jobs its workers no longer want.

Denis Pombriant is former vice president and managing director of Aberdeen Group’s CRM practice and founder and managing principal of Beagle Research Group. In 2003, CRM Magazine named Pombriant one of the most influential executives in the CRM industry.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

CRM Buyer Channels