The End of Offshore Outsourcing?

Darren Deehan explores the changes that have impacted offshore outsourcing – and the future of reshoring.

Back in the 1990s and early 2000s as the global economy continued to grow, there was a huge rise in European and US companies offshoring customer service operations to countries like India and the Philippines for contact centre outsourcing.

The reasons were simple. Driven by the demand to lower costs to increase profitability, labour costs were and, of course, remain much lower, so it was a no-brainer. It had been a practice that manufacturing companies have been using for decades, so why would there be any issue?

The idea certainly makes perfect sense, and in theory makes for good business practice. I don’t need to remind anyone what happened to the booming global economy during 2007-2009, but those events after the near meltdown of the global economy certainly impacted on that perfect ideal of offshore outsourcing.

Reshoring initiatives have brought thousands of jobs home

In the US, for example, there has been a major shift in Government policy in terms of the manufacturing industry and supporting the ideal of ‘American Made’, and bringing jobs home has been an initiative that has a groundswell of support both for the politicians looking for soundbites and column inches and for the public at large, especially when they have been out of work.

Over 80,000 US jobs have been created in the last 3 years with reshoring in manufacturing. One in six British companies have “reshored” production in the past three years, according to a study of almost 300 businesses by the EEF manufacturers’ organisation and the law firm Squire Sanders. The UK Government initiative to reshore as many jobs as possible was clearly driven by the vast number of public sector jobs that no longer exist.

Offshore customer service has contributed to customer dissatisfaction

There has also been a shift in opinion when it comes to the relationship with the customer. The move to offshore outsourcing customer services has overall not delivered when it comes to reductions in costs for the consumer. Instead it contributed to overall customer dissatisfaction and frustration, and quality of service, rightly or wrongly, was deemed poor at best.

The modern consumer is thinking more about quality of service rather than quantity. Most consumers feel that the place for customer service is somewhere they know and trust and can relate to, which is preferably on home soil.

When we look at what actually happens in a customer service scenario, there is a clear frustration felt by many when it comes to simply being able to understand the person on the other end of the line.

What happens next is basics for contact centre professionals: the metrics go through the roof. AHT goes off the chart, the ASA is then impacted, abandonment rates go up and service levels are not met. The number of times the customer has to re-contact the centre increases and the disconnect in the communication affects the back-office processes as errors are identified.

Unfortunately, the obvious impact is then on customer complaints, and those lines are traditionally held onshore. This drives the cost of customer service up even further, and thus calls into question the point of offshoring in the first instance.

Governments will continue to support reshoring initiatives

So what is the future? It’s clear to see there has been an imbalance in customer satisfaction over the demand to drive down costs, but can we see a point where it will completely revert? For organisations that have been founded on the contact centre model by mostly offshoring to hubs in Asia and the Far East, who operate in extremely competitive markets based on price alone, this might be a step too far.

We will continue to see headline-grabbing figures and governments will continue to support reshoring initiatives. However, whether we see the same government incentives for call centre types remains to be seen.

The cloud can help make reshoring a cost-effective reality

It’s logical that this argument will come down to cost over value.

Technological advances in cloud computing can offer organisations the option of reducing capital expenditure, ongoing fixed costs and labour costs, while also giving organisations access to the most up-to-date advances available.

With the flexibility of the cloud model to align costs with income, the business case for the migration back to shore is easier to prove.

With thanks to Darren Deehan at injixo