By Andy McCue, 6 May 2004 16:40
NEWS A consumer backlash is the only thing that will prevent UK firms moving call centres to offshore locations such as India and South Africa, according to a report commissioned by the Department of Trade and Industry (DTI).
The UK call centre industry will employ over one million people by 2007 - four times as many as India - but that growth rate is slowing dramatically and the DTI warns that more investment needs to be made in 'soft' communication and customer service skills to compete with offshoring.
But a consumer backlash is identified as the key factor in determining whether UK firms continue to outsource call centre functions offshore.
"Put simply, if UK consumers abandoned businesses which offshored customer care, then there would be no way that offshoring could be successful," the report said.
Yet two-thirds of people in a study cited in the DTI report do not mind where their calls were handled as long as they are done properly. And despite the negative reactions of many people, only 37 per cent of UK customers have knowingly dealt with an offshore contact centre.
The report claims around 30 big UK-based firms have outsourced some 50,000 jobs to India to date, although it points out that jobs being outsourced overseas does not necessarily equate to jobs being lost in the UK. The report also puts into perspective the size of the Indian market the country only currently employs around 92,000 contact centre agents.
"There is a common misconception that jobs created in offshore locations equate to jobs lost (or at least, not created) in the UK. This is not necessarily the case: it is certainly possible to open a contact centre in an offshore location to provide a new service (e.g. to sell a low-price product proactively) which would not be economic to attempt within the UK," the report said.
The report also paints a detailed picture of the state of the UK call centre industry. The typical contact centre worker is female and in her mid-to-late twenties and average length of tenure is just under three years. Annual salaries for new agents start at around £12,000 - £13,000, compared to £1,500 in India.
The UK's main competitive advantage currently lies in providing high-level call centre sales and marketing work while countries such as India are able to offer operating cost savings of 30 to 40 per cent on the low-value repetitive commodity services. But the report warns that the UK industry cannot be complacent and needs to train staff to keep hold of high value services.
Patricia Hewitt, secretary of state for trade and industry, said in a statement: "We do need to position ourselves according to our strengths. Others are unbeatable on cost, but we are unbeatable on quality. The best British call centres are the best in the world, offering high value businesses, high skill professionals, but we need to bring the quality of the rest up to that of the best."
The study was carried out by an industry consortium comprising CM Insight, the Call Centre Association and research firm Contactbabel.
Comments
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1. Carl Maycock
Interesting that the average wage has been mentioned. In india £1500 is fairly decent wage. £12-£13K in England is terrible. Yet we still want quality and knowledgable people answering. I worked for a call centre environment a few years ago and the high turn over of staff was a major problem. The major problem was the low wages paid and the transient nature of the role. I can only assume the wages are lower now than ever due to competition. At least workers in India have more reason to stay in the role longer. Why on earth would anyone want to stay for long in a low paid, boring, thankless and unsecure job ?
2. Charles Wood
Call centres are an interesting new capitalist problem as they expose the flaws by working across international boundaries!
Britain can never compete in a market where the wage bill is the key factor. I Guess someone was paid huge sums of money to say that with authority!!1
3. Guy Kirkwood
Patricia Hewitt is to be praised for her (and the DTIs) support of BPO and offshoring. Competition is nothing to be scared of, in fact the net gain is not in the direction of India, but back to the UK.
I do however have to question her assertion that high-quality call-centre staff are the preserve of the UK. To hear some of the muppets I have spoken to in call-centres (why is it always banks?), the words "monkey" and "trained" come to mind.
In a global economy, the main ability looked for in a call-centre is not skill of interaction, but language skills. Until the DTI persuades the Department for Education to incentivise the teaching of languages as effectively as English is taught in schools in continental Europe and the sub-continent, the UK will *never* provide the best service to most of the rest of the world.
4. Karen Challinor
So the government has taken roughly a year to arrive at the conclusion that the UK can't compete on price, I arrived at the same conclusion almost instantly.
During this time thousands of jobs have been exported and more people are drawing benefit as a result.
Will the government now do anything ?, probably not because that would be protectionism and thats a bad thing isn't it ?
Compared to the prospect of an ever shrinking workforce supporting an ever expanding group of job seekers it doesn't sound quite so bad.
I wonder how long the government will take before it arrives at that conclusion ?
5. Anwar Khan
I'm glad to see that a more pragmatic approach is being taken to assess the pros and cons of offshore outsourcing. We're currently working with two UK based call centers and our association has allowed them to increase their 'capacity' by 35% without having to invest additional capital. Our services are mostly used for small-medium companies that cannot afford professional contact center services at UK prices.
6. Alex Scattergood
What a load of nonsense, India has just built its first Intel chip, its designing & manufacturing a Rover car, most IT companies over there have CMM level 5. How can we 'keep hold of high value services'?
Suggesting the UK can continue to compete on quality seems like the supreme arrogance.
Indian companies are cheaper than UK ones because they aren't taxed as much in their home country, they don't have restrictive labour laws and we don't tax imported services at the same levels as UK based ones.
We have a slight historical advantage in knowledge but thanks to the unbridled issuing of work permits and the prevalence of the internet we have now lost that.
If we want to compete then I suggest the government makes the cost of importing workers to the UK under the Tier 1 & HSMP the same as hiring UK workers. Lets ensure there is a 20% levy on their first year salary (just as an employment agency would), their salary is the same as a UK worker (instead of it being a third of UK salaries) and that it is taxed in the UK as well.
If we import services, then lets make those importing services work to the same employment standards as the UK. Thats not protectionism its just common sense. I feel an IS0 or similar accreditation on working standards would be a sensible solution. Those overseas companies without the accreditation cannot import goods & services into the UK.
Just think no more stories of trainer manufacturers employing 10 year olds and Indian call centre staff working 12 hour days with no sick pay. It can be sold to our competitors as a Labour government worried about international labour as well.
7. phil shears
I have voted with my feet..i will not subsidise any company that moves its call center operations overseas... Norwich union have lost 3 car insurances and a house and contents Insurance.