Companies Want to Keep Customer Service Closer to Home

Last July I wrote about the decision of several U.K. companies to promote the fact that they only used local contact centers. I asked the question: Xenophobia or just good business?

I cited one consultant's statement that offshore centers "feed into the perception that companies aren't interested in their customers" and also noted a 2004 ContactBabel study that seems to indicate that offshore centers are not as inexpensive as believed because local agents are typically more productive and effective in resolving customer-service issues than their offshore counterparts.

I've heard anecdotal accounts that support such ideas. At an outsourcing event I attended earlier this year, a speaker from a large U.S. retailer discussed his company's decision to send its contact-center work to India to save money. But the experience proved a disaster, with droves of customers complaining about poor service. The company first switched to a different Indian provider, then to Canada, before moving customer-support positions back to the United States.

What seemed like a "no-brainer" was a near-disaster because most callers sought help with products and services unfamiliar to Indian contact center agents, he said. The company couldn't afford to wait for agents to get up to speed, he said, because its business is largely based on repeat customers making frequent, low-margin purchases.

An increasing number of U.S. and European companies appear to be reaching similar conclusions, according to the 2008 Black Book of Outsourcing. A story in The Economic Times notes this statement from the report:

Companies are bringing parts of their customer service back onshore and even in-house, because it is a key part of the customer experience.

The story also cites Lloyds' decision to close a 600-person contact center in Mumbai in 2007, a move attributed to customer feedback. This seems especially striking in light of the fact that the banking sector is expected to boost offshoring by 72 percent in 2009, according to another Economic Times story about the Black Book report.

In addition to companies' growing belief that onshore agents are simply better at dealing with customers, a weak dollar and soaring salaries and attrition rates in countries such as India are giving companiesless economic incentive to offshore, as I wrote last June. In fact, Indian university graduates are not at all eager to work in contact centers, due to the long hours and often stressful work environments.

Indeed, the managing director of BPO adviser Avasant tells the Economic Times that onshore centers likely will make more economic sense in cases that require only limited scale. However, he adds:

... where scale is required, no country beats India. We will see Indian service providers have a larger global presence in the next few years and become less offshore-centric.

He isn't the only one who predicts Indian providers will become "less offshore-centric" in coming years. That's another major trend highlighted in this year's Black Book report, as I wrote in another post.