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Article : Choosing The Right Call Center Outsourcing Partner

In today's changing global economy, offshore call center outsourcing has become a sensible strategy for many customer service companies in the United States. However, when deciding on an offshore partner, firms are caught in a balancing act. On one side, managers are feeling pressure to improve their customer service, but on the other, they are under pressure by senior executives and shareholders to reduce costs. Companies are attempting to meet both objectives when deciding on their offshore partners. When making the outsourcing decision, managers must first determine their decision criteria and balance cost against other priority objectives. Although less expensive outsourcing countries like India, Malaysia, and the Philippines are dominating the headlines, Datamonitor, a market analyst company, reports that many U.S. call centers are not moving overseas, but "nearshore," just north of the to Canada. Peter Ryan, a Datamonitor callc enter analyst, states, "We expect the Canadian call center growth to be swift. It will be driven to a very large extent by United States companies, because of low cost, accessibility, stability, common culture, and infrastructure in Canada" (Myron, 2003). border,

A 2003 Datamonitor report entitled "Profiting From Canadian Call Center Outsourcing: Lowering Risk and Maximizing Savings", predicts the number of outsourced call centers in Canada will rise from 450 in 2002 to 600 by 2007, a 33% increase. Accordingly, agent positions are to rise by 52 percent in the same period (Read, 2003). Given this forecasted growth, it is no wonder why many U.S. companies are choosing Canada as their cost effective and high quality outsourcing partner.

High Quality At A Lower Cost
A 2003-2004 report by The Aberdeen Group, an analyst firm in Boston, Massachusetts, found that American and Canadian firms with call centers prefer Canada (11.0%) to India (7.1%) and UK/Ireland (5.3%) as their offshore outsourcing provider, primarily due to higher quality found in Canadian call centers. As Richard Bencin, president of R.L. Bencin Associates, states "Canada is not the lowest cost country to outsource to, but it offers some cost savings, a strong work ethic, low turnover, better educated people, and familiarity with Americans" (Read, 2003).

There are four main qualities - low turnover, proximity, cultural affinity, and political stability – that are the driving force behind Canada's lead in call center outsourcing.

Low Turnover
For obvious reasons, English-speaking countries such as Canada, the U.K., and Ireland, have a clear advantage in quality compared to other call center outsourcers. Canada, however, is distinguished from other English-speaking competitors due to its superior agent retention rates. Canadian turnover is as low as one third compared to the U.S. As Chris Fletcher, VP of Aberdeen Group, notes, "The turnover rate in U.S. call centers is abhorrent. A rate of 50 to 60 percent is not uncommon with some more than 100 percent," (McCracken, 2003).

Canada's low turnover rates can be attributed to high unemployment rates in some areas, and an overall stronger work ethic amongst Canadians. Datamonitor points out that some provinces, such as the Maritime provinces (eastern Canada), have experienced unemployment rates in the double digits for several years. Given this, it is likely that the higher the unemployment rate, the more likely people are to stay in a secure job. Another reason attributed to low turnover is that Canadians entering the call center industry view it as a long term career move, not just a temporary job used until a better one comes along (Myron, 2003).

This lower turnover rate experienced by Canadian call centers compared to the U.S. ultimately translates into additional continuity and greater stability for outsourcers. This factor proves to be much more important in the long run than the initial cost savings encountered in less expensive offshoring countries (McCracken, 2003).

Proximity…Leading To Cultural Affinity
When choosing an offshore partner the issue of proximity is an important factor to consider, especially when creating a long-term alliance. Many companies are hesitant to send part of their business half way around the world, and thus find Canada a closer, more comfortable choice. Using Canada as a nearshore option is well suited for complex business processes that require close proximity to the home office operations compared to offshore options such as India and Malaysia.

Common Culture
A direct result of Canada's proximity to the U.S. is its cultural affinity, which is another significant advantage for U.S companies who choose to outsource to Canada. Canadians are very similar to Americans and thus have a greater understanding of American consumer concerns (McCraken, 2003). This natural understanding can translate into many advantages for U.S. companies. For example, although outsourcing is effective for routine options, it is sometimes regarded as risky with high priority customers. But with Canada, the cultures are so similar you can rely on Canadian call center agents to treat your high priority customers well.

AMR Research ,a technology research firm, reported three general levels of interaction in call centers (see Figure A below). Offshore centers in eastern countries such as India can provide advantages at level one, but Canada can also help customers at the additional levels of service, two and three.

Figure A: Defining General Service Levels For Call Center Outsourcing

Source AMR Research 2003

Lance Travis, VP of outsourcing strategies for AMR Research, expressed the benefits to outsourcing to Canada, a culturally similar nation that "can effectively manage your most strategic customers at the higher levels at a lower cost and you have much better quality due to lower turnover. You are not only saving money, but you are providing better service to those customers" (McCracken, 2003).

Proximity and cultural similarity also becomes an important factor with respect to the type of work being outsourced. According to Service Management Strategies Consulting, "Some projects cannot be sent offshore so easily. They need more vendor/client integration, planning and coordination. Otherwise, the result is poorly defined projects, volatile applications, or work that is frequently changing. In these situations, Canadian nearshore outsourcing offers benefits of lower labor [compared to the U.S.], and closer proximity" (Bowen, 2002).

Canada's ideal nearshore location presents a clear advantage over offshore outsourcers and translates into reduced risk for U.S. firms. Not only are operations close by, Canadians' familiarity with the American culture ultimately converts into better customer service compared to offshore call centers. The Aberdeen Group submits, "High value, low volume transactions are best done in-house or with a U.S. or Canadian outsourcer. The cost of making a mistake and potentially losing a customer is much more significant. While you can start to acclimate agents in India to U.S. culture, it takes a while, and there is something lost in the translation" (McCracken, 2003).

Political Stability
Canada has a long history of economic and political stability, which is in sharp contrast with offshore locations. Although countries like India, Malaysia, and Mexico are more inexpensive, the political climate in these countries are unstable, making them a high-risk investment especially for a long-term proposition. Datamonitor states, "The stability factor [in Canada] goes a long way when you compare it to a place like India where there has been a lot of saber rattling with Pakistan, or the Philippines that has seen a number of violent controversies in the past two years. American firms need a good stable environment for outsourcing which Canada is able to provide" (McCracken, 2003).

The political climate of an offshore provider is an important issue to research before making a long-term business commitment. Canada's history speaks for itself and helps reduce anxieties of outsourcing services to another country.

Added Bonus : Pro-Business Agenda
Canada's recent pro-business agenda is an additional benefit to companies looking to outsource their call center services to Canada. Datamonitor reports that provinces have recently put efforts toward building incentives and tax cuts to promote outside investment (Read, 2003). As Datamonitor reports, "Many provinces have slashed taxes to bring investment in from outside. Every province has gone out of its way to bring in call centers from the standpoint of business climate, direct incentives or deferment of training. U.S. firms can't go wrong by looking at Canada" (McCracken, 2003).

Making The Decision –What Is Your Criteria?
When making the decision to choose an offshore outsourcer, the final selection criteria are dependent on the individual company and their overall outsourcing strategy. For some, low price may be the deciding factor, while others may tolerate a slightly higher price for better quality.

A report done by A.T. Kearney evaluated 11 countries based on three criteria: cost, environment, and people (see Figure B below). To determine the right outsourcer for you, you must first determine the relative weight of importance for each category.

Figure B: Criteria And Weights In Country Analysis

The trend towards companies outsourcing outside the U.S. is becoming more and more mainstream, and will continue to grow as pressures to reduce costs and improve customer service increases. The biggest decision for a company is deciding where to go. If your company's primary objective is to reduce costs, places like India and Malaysia are the least expensive options. However, if your company plans to build a strong long-term partnership with a call center, and if cost is one of many other important standards such as quality, employee education, political climate, and common cultural, then Canada builds a solid case for your outsourcing dollars.

Key Points
Canada is an extremely attractive option for many U.S. customer service companies due to:

  • Lower Turnover Rates - Canadians view call center work as a good career.

  • Lower Prices - Canada can offer lower prices due to the U.S. dollar.

  • Quality Labor Pool - Canada has an educated labor pool that is bilingual in many provinces.

  • Cultural Awareness - Canadians have a similar culture to Americans and can therefore understand consumer concerns.

  • Reduced Risk - Canada has a long history of economic and political stability, and is ideally located close to the U.S.

  • Pro-business Attitude - Canada has adopted a pro-business agenda, offering incentives and tax cuts to attract private enterprise.

About 24-7 INTouch:
24-7 INtouch is a Canadian call center outsourcing company that provides practical and affordable customer relationship management solutions across various industries. Using the most advanced technology in the industry and Certified Sales and Customer service eReps, 24-7 INtouch is dedicated to helping clients increase their sales and strengthen their customer service. Currently, the company's primary products are the outsourcing of inbound call center services and live online support solutions such as Live Web Chat.

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Published: Wednesday, February 9, 2005

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