North American Contact Center Outsourcing
North American Contact Center Outsourcing
By Donna Fluss
Outsourcing remains a hot topic for contact centers around the world, principally because of its ability to significantly reduce operating expenses. It is an option that companies large and small should consider, particularly for activities that are not strategic and not required to be located on site. While attention has focused recently on the cost advantage of outsourcing to offshore locations such as India and the Philippines, North American outsourcers remain a good option for companies unwilling or unable to outsource activities overseas.
2004/5 Was Challenging for North American Contact Center Outsourcers
Even though many enterprises decided to outsource their call and contact centers, 2004 was a less-than-stellar year for the North American contact center outsourcing industry. Attracted by the possibility of reducing operating expenses by 25% to 60%, many companies in the United States and Canada selected offshore outsourcing locations offering lower costs and high quality labor. (Carrier costs are no longer a financial issue.) This placed great pressure on North American contact center outsourcers to reduce their prices, drove many to build a presence in India, the Philippines and other geographies, and forced others to sell out.
Outsourcing Market Matures and Consolidates
The migration of contact center outsourcing activity abroad sped up the maturation of this industry, bringing about mergers and some fire sales. An example is the $32 million sale of LiveBridge to ACS in July 2005. Currently, fewer than ten vendors dominate the North American contact center outsourcing market and these outsourcers are expected to expand through acquisition during the next few years. There remain approximately 80 small and mid-size contact center outsourcers that survived the downturn of the last few years. Additionally, global outsourcing firms, particularly those based in India, are making inroads in the North American market by purchasing U.S. and Canada-based companies in order to compete effectively. The global expansion of foreign-owned outsourcing companies is expected to continue in 2006. Currently, seven of the leaders in the North American market are: ACS, arvato services, Convergys, ICT, SITEL, West and TeleTech.
North American Contact Center Outsourcing Projections
Contrary to popular belief, the North American contact center outsourcing market is far from dead. Convergys, a U.S.-based company, remains the largest contact center outsourcer, and other U.S.-based companies are also very large and competitive. Many North America-based outsourcers are managed by seasoned and flexible professionals who have been able to respond effectively to market challenges.
2006 Will Be a Turnaround Year for Canada-Based Outsourcers
By the middle to end of 2005, the Canadian contact center outsourcing market started to see a resurgence. (Keep in mind that the Canadian market has a slight cost benefit over the U.S. because of the strength of the U.S. dollar. Therefore, enterprises that want to keep their activities in North America while curbing costs often look to Canada rather than the U.S.) Demand for Canadian outsourcing seats grew and a couple of new centers opened. This trend is expected to continue, particularly as some companies look to bring back activities that were outsourced to offshore locations. As these companies moved their activities abroad to benefit from cost savings, Canada has the advantage of offering prices a bit more appealing than in the U.S.
U.S.-Based Contact Center Outsourcers Will Add Capabilities
During 2006 and into 2007, U.S.-based outsourcers are expected to grow by adding new businesses and services. They will also continue to create packages for their customers to guarantee low-cost services, whenever necessary. Also expect to see these companies continue to grow through acquisitions.
Agent Costs and Attrition Rates Will Increase Abroad
As agent attrition increases abroad, so does the cost per agent. While India, for example, has a large and educated pool of agent resources, centers located there have found that they are not immune from agent attrition. Handling inquiries and dealing with the public is a tough job and not one that a large number of upwardly mobile young professionals want as a career. This has been a serious issue in U.S.-based contact centers (company-based or outsourced) for years and now it is impacting India-based outsourcing centers. Regardless of where a contact center is located, agents really will jump ship and change jobs for a small increase in pay, unless a company offers other benefits to retain them.
The Indian outsourcing market is the most mature of the offshore locations, so agent attrition and increasing salary demands are being felt there first. This doesn’t mean that all outsourcing companies around the world will have to pay U.S.-based rates, but it does mean that North America-based companies that move their contact center activities abroad will not necessarily realize the savings they originally anticipated.
North American outsourcers are responding appropriately to competitive pressure and this is bringing about new opportunities for enterprises. Worldwide competition has helped to decrease prices for many standard contact center services and driven a great deal of market innovation, including increasing use of at-home agents. During the past couple of years, many North American outsourcers, large and small, have developed value-added offerings that go beyond basic transaction handling. They now offer professional services to improve their customers’ operations and have expanded into business process optimization.
2006 and 2007 are expected to bring about more mergers between outsourcing vendors, further specialization, new value-added services (for companies that want to pay for them) and deeper penetration into BPO functions. Also look for North American vendors to expand their presence in offshore locations as offshore vendors continue to buy their way into the North American market.
Both North American and global enterprises should seriously consider North America-based outsourcers when selecting a partner. For a detailed analysis and comparison of leading North American contact center outsourcers, see DMG Consulting’s newly released 2006 North American Contact Center Outsourcing Market Report. The Report is available online at www.dmgconsult.com.