Last week in Germany

I didn't have much of a chance to write last week as I was in Germany and very busy with meetings. I like Germany a lot and was very interested to be in Munich for the first time.

Germany is an interesting example of a country where most businesses understand that they cannot compete on cost internationally. Instead, they have to compete on the value and innovation of their products. I've written previously on how that weakening dollar is causing problems, (notably for the Canadian contact centre industry "Why Canada might illustrate some coming European Contact Centre trends"), but the impact on euro area businesses is also significant.

You might think that while Germany would be affected by lower manufacturing work moving to lower cost locations, service would not move as well. The German language is spoken primarily in high cost countries (Germany, Austria, Switzerland) and without high quality language skills telephone service is difficult.

The reality, though, is slightly different. Telephone service is important, but e-mail is also of importance. Internet and branch are major channels for German organisations to interact with customers and so the remote service route for these channels can be as much e-mail as traditional telephony traffic. Although Voice over IP and Skype have generated interest, most German organisations I've encountered are most interested in small to medium contact centres with significant e-mail capability. The important thing about e-mail is that as the interaction is not real time, and so it could potentially be off-shored to an agent with much more limited German than would be appropriate for a voice call.

In a market dynamic like this, the only way to compete is not on cost of agent but on value and draw on manufacturing for lessons. In manufacturing automation has been reducing the number of workers per task since the industrial revolution and service industries are heading that way. Automation and pre-scripting for e-mail responses makes an agent much more productive, as does blending voice and e-mail so agents can manage both. In the same way that production lines reduced the demand for craftsmen, so service management can be industrialised. At a more strategic level quality of service is a brand value, so competing on reputation means the quality of the agent can be important as a brand value for what it tells customers about your organisation.

I've written a little about the industrialisation of service previously in the "Contact Centres, Process and Six Sigma", and I suspect it's a subject I need to cover in more depth.

Why Canada might illustrate some coming European Contact Centre trends

Just before Christmas I was interested to see that the province of Nova Scotia was setting up a call centre association. This is primarily a business driven initiative (as you can see on their website), rather than the more usual government agency approach that I've seen in Europe.

My interest was partly because I knew some of the people setting up the association from when I worked with Scotiabank (a major employer in Nova Scotia), but it was also because the challenges they face seem very relevant to Europe.

In the past the Canadian Contact Centre market has been driven by two factors, firstly nearshoring operations as US companies looked to take advantage of a nearby, skilled workforce that was at least 25% cheaper than its US equivalent due to the weakness of the C$ and secondly by a strong domestic market. This is all changing as the US$ declines and the C$ appreciates driven by Canada's natural resources. This currency change is a long term trend and while it takes place, Canada will loose it's ability to compete on cost. Good news overall for the Canadian economy, but probably bad news for places like Nova Scotia on the far edge of the Atlantic and with limited natural resources.

Europe has in some ways a very similar challenge. The Euro has gained in strength during the current turbulence, and while this is not driven by a commodity based economy, the effect is the same as those pricing in Euros will not be able to compete on cost. For call centres in France and Germany this is perhaps not a major issue. For the German market, most possible contact centre locations (at least with native German speakers) are already in the Euro zone or are priced in the equally strong Swiss Franc. For France and the French speaking market the cost challenge comes more from Morocco and North Africa than within the Euro zone. I've covered some of this previously (in the post "Offshoring and mainland Europe"), but currency issues are likely to be minor factors for the French speaking market, as North African currencies may appreciate too with the rise in commodity prices.

The real challenge from the strength of the Euro will be felt in the more marginal areas of the Eurozone that are furthest away from the French/German economic centre. The Irish Republic is one are where the strength of the Euro has already caused inflationary problems and earlier this week RTE were reporting on a potential loss of competitiveness. While the Irish economy remains strong and has a very favourable tax regime, it is unlikely to remain able to compete purely on the basis of cost. The part most affected will be those Irish contact centres focused on serving the UK market. That part may struggle as UK pound weakens against the Euro and perhaps even reverses the traditional trend. Other areas whose contact centres that may struggle with a stronger Euro are Portugal (I would not be surprised to see more offshoring to Brazil or even Africa, especially Angola & Mozambique) and perhaps Spain.

In short, while a strong currency is generally a good thing, it does have significant implications for contact centres that previously competed on cost.

Dimension Data/ Cisco Speech survey

I'm in Frankfurt this week and it's always good to catch up with colleagues and partners.

I mentioned the Dimension Data/ Cisco survey on Speech automation in a previous post ("For a Friday - why are contact centres so disliked?"), but it was good to hear today Tim Pearce, one of the survey authors present the findings.

You can find the Dimension Data/ Cisco survey on CRMxchange as a webinar and it's worth watching.

The big thing for me is the difference between what vendors and consumers think of speech automation. Vendors, for example, tend to underestimate why consumers will accept automation (such as to avoid offshore). They also overestimate things like the ability of speech automation to partially meet callers needs and underestimate its ability to meet all needs for some callers. Some good research and well worth a look whether you implement telephone automated service or are considering it.

Offshoring and mainland Europe

I have to admit that most of my discussion of offshoring has been around the UK and Ireland experience, in posts such as: "Offshore - why I would go for South Africa over India".

Today I saw some research in TelecomPaper, "Spanish call centre staff numbers to fall 4% in 2007" that looked at the impact offshoring to Latin America was having on the Spanish market. This might seem a startling percentage drop for a single year, but there's some good insight on this at TMCnet giving figures from ACE, the Spanish call centre trade association. Part of the reason for the percentage shift is that compared to the UK or Ireland there are not that many call centres in Spain. In 2006, the number of call centers outside of Spain serving the Spanish market rose from 9 to 20, but more than 225 call centers remained in Spain. As TMC comments, and the UK's experience confirms, Latin America might win business initially on price and cost of labour, but they will have to meet quality expectations if they want to keep that business.

Of course, like India for UK companies, the physical distance between Spain and Latin America creates management difficulties. These aren't technology difficulties (an IP network can let you route calls anywhere in the world) but rather relate to the challenge of flying managers out and keeping expats overseas to manage the offshore operations. Interestingly, here the French have a distinct advantage. With much of North Africa having some French, many French companies have located in Morocco. This has the huge advantage of only being a few hours flight from France and in the same timezone. As long ago as 2005, Africa Investor had identified Morocco has having 55 French call centres with 6,500 employees. Today, numbers are harder to come by, but with major companies like France Telecom and SNCF having Moroccan operations and a dedicated annual trade show (SICCAM), the local industry looks fairly robust.

In other parts of Europe language will probably prevent widespread offshoring for voice (even in eastern Europe, German is not that widely spoken, for example), but I think e-mail may be another story. Without the need for a high standard of both accent and fluency, the non-time sensitive aspect of e-mail may lend itself to offshore management, but that is probably another post.

UK Agent Attrition

An interesting article on silicon.com about UK contact centre agent attrition increasing for the 5th year in a row.

I actually wrote a post on the survey (and HSBC's response to agent attrition) last week "The contact centre agent experience - First Direct", but the silcon.com article has a good quote from the analysts Contact Babel.

"Steve Morrell, principal analyst at ContactBabel, said in the report: "The lack of growth in agents' salaries is certainly a major factor in producing high levels of attrition. Businesses should be working to move low-value interactions onto web and phone self-service channels, and to use the savings created to pay higher salaries to their agents. This will attract and retain high-quality staff, a move which will immediately and permanently benefit both the business and the customer base.""

All very much thoughts this blog has been discussing in terms of moving from call centre to contact centre and making contact centre part of a multi-channel strategy. I'm not sure, though, this will necesaarily translate into higher UK salaries as I see high-skill offshore like South Africa being a significant factor in the market.

I've always stressed the importance of moving to converged IP because it makes managing multi-media in a multi-channel environment so much easier. Silcon.com aren't making the connection as explictly as I do, but they do produce the quite interesting statistic that:

"...pure IP infrastructure will be commonplace in most UK call centres within the next two years, with 41 per cent of respondents saying their operations will be fully IP-architected by the end of 2009.
Currently only 17 per cent of call centres have an full IP infrastructure, with a further 28 per cent using a hybrid IP/TDM network."

I suspect that one of the other big drivers to IP (besides multi-media management) is the ability to virtualise across borders. I know this is a message Cisco has pushed strongly, and I think it's the right messge for many enterprises. This is especially true in Europe where the continuing integration of the EU offers many opportunities to distribute work more efficently and more widely. Agent jobs (especially in areas like e-mail, where language skills and accent are not so crucial) will go to areas where the work represents a higher salary and on-shore will be left with higher skill, higher value agents.

Speech market share - the role of non-European langauges

Some very good comments on the "Speech Market Share" posting I did in October, especially from Martin on Telisma and why they might have achieved such a large growth in European marketshare.

I was particularly interested to see that Telisma support Hindi and are working on another 18 Indian languages (including Indo-Arayan and Dravidian). This could be very interesting for a couple of reasons.

Firstly it's the established capability developed for the domestic market that I see as crucial for successful offshore operations. This is partly why in previous posts ("Offshore - why I would go for South Africa over India"), I've tended to rate South Africa ahead of India as a location for off-shore contact centres. If India can build a domestic capability then it's ability to take on offshore work will also improve. Also, and perhaps further off, the skills developed by Indian software developers working on speech for the Indian market could be very helpful for South Africa with its eleven official languages develop speech for its domestic market.

The second, and perhaps more unexpected use of speech is to serve migrants in Europe. These groups can be significant demographic segments and well worth offering higher service for. For example HSBC launched a UK Islamic bank in 2003 and it is easy to envisage it offering multi-lingual support for its customers. Perhaps further ahead is Canada. When I worked there I was expecting English and French telephone banking, but was surprised that Scotiabank telephone banking was available in not just English and French (as you would expect), but also Cantonese and Mandarin. It turned out that these languges gave them a competitive edge for winning business in the SMB market segment.

Given my experience of working with Canadian call centres, I am surprised that UK banks have not moved further with multiple language support. This may be a cost issue (given how cost concius the UK is) and perhaps the ability to offer automated support will change that.

Workforce Management - is it only for high end call centres?

Looking back at my posts I notice that I've written a lot on speech and self-service, a bit on CRM and a bit on e-mail. I've written nothing, though, on one of the major contact centre application areas of workforce management.

For those not familiar with it, workforce management is primarily about managing staffing levels so that they handle call volumes efficiently. What might appear a straightforward calculation becomes much more complex when call volumes peak and trough dramatically, calls can only be handled by agents with the right skills (in financial services, for example, this is a regulatory requirement) and the workforce (with these multiple skill types) might be spread across several sites and perhaps timezones.

For many call centres (especially the smaller ones that are the majority in Europe) the single largest workforce management tool is Microsoft Excel. This has great advantages in being familiar to most managers, relatively easy to use and a simple tool.

Once you get above 100 seats, or have a high degree of complexity in what your agents are skilled to do, I feel that workforce management tools become essential. As an example, a small stockbroker might have 100 seats. On Monday they need 70 or so of those seats to have trading skills to handle the call volume for market opening. Tuesday needs only 40 seats to have trading skills, but 50 seats need to be have qualified financial planning skills and 30 need to have trade settlement skills. Once you have multiple skilled agents (as in this example) it is good for the business, but it can quickly become very difficult to manage, especially where holiday planning and exceptional events need to be built into shift patterns.

The big players that I've worked with are Calabrio Work Force Management , Genesys Work Force Management and Aspect Workforce Management. What I find quite interesting is that the Aspect and Genesys offerings are traditionally pitched at the very high-end call centre, e.g. not the stockbroker in my example where a few agents handle a very complex possible set of interactions, but more the retail banking model where thousands of agents handle a smaller, though still complex set of interactions. Admittedly this high-end is Aspect and Genesys' heritage and where demand for management tools came from but I'm not sure it's the future, especially once multi-media traffic is added to the traditional voice traffic mix. I suspect that as Genesys has always positioned itself for highly complex call routing in very large centres there is a natural market for Genesys Work Force Management plugged into Genesys CTI. The problem for most European centres is that they are not large enough to need the Genesys scale of solution, but are too complex for a simple switch or a PBX and ACD.

One of the interesting things I've found in my work is that small call centres (especially in the B2B environment) can be highly complex and handling very large value transactions and are not just small call centres for small companies. As an example, I worked with a very large cosmetics firm who managed all their European wholesalers from a 70 seat call centre. That (small) call centre ran over 100 product lines, several $B of business a year and did so in six languages. In terms of European call centres, language is obviously a key agent skill and scheduling the right mix of languages is crucial before any other skill can be considered. It might have been a small call centre but it was highly complex.

One of the things I like about the Cisco Contact Centre Express is that it's restrictions are mostly around scale rather than function and there is the option to buy with built in Workforce Management. As an OEM from Calabrio it has a nice look and feel for the user and avoids a lot of the integration issues that happen for any call centre solution when a 3rd party workforce management application is used. There's a good overview here with some screen shots. Importantly, it addresses a call centre market segment (small but complex) that has traditionally been required to either take an over-engineered solution designed for larger customers or a simpler solution for small users that didn't meet their needs.

Speech Market Share

A few days ago I wrote a post entitled "Technology Firms, Europe and Speech Recognition" that was really rather well received. In it I made the rather obvious point (to me anyway) that if you don't offer speech recognition in local languages, you are going to stuggle to get it adopted.

One thing I should have mentioned (and didn't) was that despite their limited languages both IBM and Microsoft had gained significant market share in overall speech shipments, at least according to Gartner's figures for 2006. The highest growth was from Telisma with over 200% growth. Worldwide IBM was looking at around 50% growth and Microsoft had growth respectably in the teens.

Of course, worldwide is not so useful when no languages is truly worldwide. More relevant for this blog is EMEA, where Gartner see Nuance, Talisma and Locquendo as the big players. Interestingly, EMEA is the only region (out of North America and AP) where IBM was not one of the top three vendors. I think this still proves my original point that language support is critical to getting market share, but perhaps I'm underestimating the power of brand and salesforce.