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Expert's Angle: The Business Case for Repatriation of Contact Center Jobs Back to America

The experiment is over. The results are in. Companies are rapidly bringing back contact center jobs which were sent to India, Philippines, Mexico, and even Central / South America merely ten years ago. However, some companies, late on the off-shoring wave, are still sending jobs and customers off-shore. They haven’t heard the news – it doesn’t work!

My position is not based on nationalism. American centers do not do everything right. In fact, many back office functions, properly re-designed, can be effectively off-shored at a fraction of the cost – as long as there is no direct customer contact. So, we are not against off-shoring because it is an "America First" position. We are against off-shoring customer contact because the economics prove it rarely works well. It is generally not a good business decision. Customers don’t like it. And it is not a lower-cost solution. So why do it?

Off-shore tax legislation is unnecessary

The recent off-shore tax legislation that did not pass in Congress was unnecessary. It was shelved, and rightfully so. Companies who off-shored customer contact are already experiencing financial penalties from customers who are taking their business elsewhere. Historically, a bad decision that affected customer service took about three years to fully impact shareholders. We know that cycle has shortened considerably in recent years.

Today’s business leaders preach that service is not a commodity; but a differentiator – so why treat service as a commodity, and off-shore it to the lowest cost provider? That does not make good business sense.

Terms and Trends

Outsourced vs. Off-shored. The writers of the new TV program "Outsourced" clearly have not done their homework. The term should be "off-shored", not "outsourced". Outsourced refers to companies who contract for some of their work to be performed by another company that specializes in a process and delivers better value. Off-shored is what the name implies – sending work across the ocean to another part of the world, with a perceived labor rate advantage.

Near-shored. Generally refers to a trend to send work to a nearby country, such as Mexico, the Dominican Republic or Canada. For Spanish-speaking calls only, Mexico has been a good alternative. Countries like the Dominican Republic, whose populations have many relatives in the US, have had some limited success.

Most centers we see returning to the U.S. or their country of origin are exiting India, but others are returning from near-shore countries also. Last year, a highly respected personal investment firm brought their call center jobs back from Costa Rica. Their customers spoke out. The company listened.

Two years ago, a premium credit card company brought their jobs back from India and the Philippines to their customers’ points of origin in the UK, Australia and Canada. They realized a reduction in their total costs by up to 15%.

Captive centers. Captive off-shore centers are run by U.S. or local managers of the core company. These centers seem to be operating better than those belonging to companies that have both off-shored and outsourced. While there are exceptions to this rule, our experience suggests that creating two barriers (off-shored and outsourced) between your company and your customers is problematic. This is not based on a scientific study, but an observation and consensus from a number of industry consultants and experts.

Country-jumping. Annual turnover rates can exceed 150% in India, and four-year contract renewals, rate increases can exceed 40%, due to the shortage of strong English-speakers to meet the demand. Accordingly, it is no wonder that companies are participating in this new exercise. In the last five years, the migration has been from India to the Philippines. In India, the problem most customers experience is lack of context. The reps are trained to read from a script, and, if any divergence from the script is necessary, the rep is lost (sometimes repeating the script over and over again). Another common problem is the inability of Americans to understand the cadence of the Indian dialect. And, most people don’t even consider the reverse problem – if we are having a hard time understanding the Indian representatives, they are having equal difficulty understanding us.

The Philippines has been somewhat less problematic. They have 50+ years of history working with Americans following WW II. Their English is much easier to understand. Philippine agents are less formal in their demeanor and speech pattern, and more conversant with how Americans conduct business. But with well over 200,000 call center jobs currently in the Philippines, we will soon tap out that market again because of language limitations, wage inflation and turnover issues. Then the global search for the "next best location" will begin again. In fact, it is happening already. We get calls at our company all the time asking where to go next?

Think about making it the U.S. for American customers.

Three reasons companies embraced off-shore

Internet Infancy. Ten or fifteen years ago, when off-shoring of call center jobs was in its infancy, the internet was, as well. Internet commerce was not yet adept at automating or answering the easy calls. The IVRs were not facile at ANI capture and were poorly designed. So, easy calls were still handled by phone reps. Fast forward ten years. Any smart business has now automated the easy calls – either through IVR, internet or mobile apps. Tier 1 calls, like password resets, order entry or information calls, have generally been automated. What remains are Tier 2 or 3 calls -- problems, complaints, suggestions, and complex sales transactions. These tier 2 or 3 calls cannot be handled by entry-level positions. They are context-sensitive calls requiring complex interpersonal skills, cultural sensitivity and the ability to work the high wire. That is, without a strict script or call flow guide.

Demand for lower cost. An emphasis by companies strictly on their next quarter’s earnings created a requirement for lower costs. Many of these companies thought they could achieve dramatically reduced costs off-shore. Additionally, domestic companies could avoid the costs of higher-cost benefits. Many large outsourcing companies readily complied with these objectives, since the outsourcers’ profit margins were much higher off-shore than on-shore. Outsourcers gave their clients what they wanted – and often did not understand or advise them of the consequences.

Introduction of VOIP. In the mid 1990’s, international telecom options allowed for lower telecom costs through the use of VOIP. Prior to that, the cost of call delivery was prohibitive.

Is service a commodity or not?

If service is not a commodity, and truly a company differentiator, then why are companies off-shoring the service jobs to the lowest cost producer?

Consider the Contact Center Customer Satisfaction Index below for First Contact Resolution Rates. The effectiveness and customer satisfaction data differential between on-shore and off-shore centers is truly stunning.

2010 Contact Center Customer Satisfaction Index*




First Contact Resolution



Ease of Understanding



Overall Customer Satisfaction Index



*Source – CFI Group

The majority of the issues associated with low off-shore customer satisfaction rates have nothing to do with attitude or "willingness to assist". Rather, they have to do with language and the "ability to assist". Our experience consulting with companies, who have off-shored, indicates that when short calls are backed out, the real AHT was actually 39%-105% longer than on-shore calls of the same type.

Average handle times can at first appear lower in off-shore locations. But once "short calls" are factored out, the handle times are actually much longer. In monitoring inbound calls to off-shore centers, we listen to many "short calls". Short calls are not necessarily the reps’ fault. Short calls occur when the caller realizes they have reached an off-shore center, and simply hang up.

If you have an AVAYA switch, there is a pre-programmed "short call" report that shows the percentage of calls that were under 5 seconds in duration. You can compare your short calls for off shore, with short calls for on shore centers. If you see a significant difference, then maybe your customers are telling you they are trying to reach an on-shore center. There are other reports available from call recording systems that can report on under 30 second calls and under 60 second calls, both of which may indicate frustration with the off-shore process. Caution: If you are a large center with high call volume, don’t try to program the average ACD switch for this latter data, as it might bring your switch data reporting system to its knees!

Most companies won’t talk openly about repatriation

You’d think companies would herald the return of their contact center jobs back to the U.S. – but with the exception of a few companies like Delta, AT&T, Dell, US Airways and United, most companies won’t admit they have come back. We know of tens of thousands of jobs and many other Fortune 1000 companies that have returned. But they declined to let us use their names in this article. Wouldn’t you think they would make a big announcement? Isn’t this a customer- centric decision you would want to share with your customers?

The reasons why many companies won’t admit that they are gradually, or not-so-gradually, coming back includes:

  • Mea culpa. Not wanting to admit they made the original mistake.
  • Silo organizations. Decision making within a large corporation sometimes allows one division to bring back jobs, while others in the same organization want to keep their divisions off-shored. Customers would get confused if there was an announcement of bringing jobs on-shore, if some jobs remained off-shore.
  • Contract Obligations and Brand Messaging. Some divisions within companies have long term contracts with poor "out clauses" with which they must contend, while other divisions can terminate at-will. Again, customers might be upset if a company announced the return of US-based service, while one or more divisions remain off-shore.

It is interesting to note that the Contact Center Satisfaction Index (source: CFI) has improved by over 6 points since 2007. Is it a coincidence that this coincides with the repatriation of call centers back to America? We think not.

The business case for bringing jobs home

The reason many executives were originally sold on off-shoring was based on a myopic view of the wrong metrics – such as cost per call and cost per minute. We know now those are the wrong metrics of success – especially when taking into account first contact resolution (FCR). As a former consultant, I have helped many companies make the business case for bringing their call centers home- whether that is the US, or another country.

For the purpose of your analysis of whether you should consider repatriating your call center work, consider all the variables below. Note that we do not focus only on "Total Cost of Ownership", because we are not just evaluating costs. We also need to consider quantifying the intangibles – like customer loyalty, word-of-mouth advertising, as well as risk of wallet share, lost cross-sell and customer win-back opportunities.

As many savvy customer service and marketing executives know, FCR has a direct, and an almost one-to-one correlation with the sales conversion ratio. With more than 70% of all centers attempting to sell or cross-sell on service calls, we must focus on other variables in addition to costs.

Below are the principle variables you will want to consider.

  • FCR
  • AHT
  • % short calls (under 5 sec, under 30 or 60 sec)
  • Off-shore labor rate and average rate increases Vs. new US base operating models which include work at home (at up to 20% less than the brick and mortar model)
  • % Attrition
  • % X-sell, conversion ratio and average ticket
  • Effectiveness of acquisition and win-back programs
  • Risk of share of wallet (tied to FCR)
  • Customer Loyalty – quantifying word of mouth loyalty with CSAT differences

Coming home requires a new operating model. If you complete the analysis, and decide to come home, there are many other major factors to be considered. Are your brick and mortar buildings gone? Do you have the management talent to build a center? Does your company have the organizational infrastructure to manage the substantial changes to the existing operation? Will you be using an outsourcer? The same one that sent you over there? Will you be using a work at home model or a hybrid? All good questions. Fortunately, you have lots of options.

Limited off-shore successes. A few of us have had some great off-shore call experiences – recent experiences with an ISP and a telecom organization come to mind. But we experienced far too many horrific failures of communication. The great experiences appear to be "one-off" and not very repeatable. I speak at conferences all over the US about repatriation – and there is general consensus that our position is correct. We really like and respect the people we have met in the off-shored centers. They are good people who want to feed their families and have a better life. If companies want to off-shore, they should determine the right kind of work to off-shore. Work with a good business case that justifies its relocation. This other experiment is over.