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.

How Call Centers vary across Europe

One of the things I find interesting about my work is seeing how call centres vary so much across Europe. The European call centre business is often simplified into a north vs. south situation but is actually it's much more complex than that.

It could as easily be seen as a west vs. east or even a split by language groups and the culture that each has. The simplified view is that the northern nations (the UK and Ireland, the Nordic countries and the Netherlands) were early adopters of call centre technology and the culture of the country is comfortable doing business on the telephone. The southern nations (especially Spain, Italy and Greece) are much slower adopters and have cultures that prefer doing business face to face.

As with all simplifications there is some truth in it, but it hides significant variations and the market has changed quite rapidly over the last few years. Within the northern nations, the Nordic countries are often much earlier adopters of technology than the UK. A smaller, more technically enabled population means that integrating the web and telephony channel is often higher on the agenda in the Nordics (where there is high penetration of broadband) than it would be for UK decision makers. Similarly, with a smaller, more homogenous population to serve, Nordic companies can implement newer technologies more easily. Also in northern Europe telephony has generally been cheaper for consumers, making the telephone a more attractive channel for business. For the UK, scale and cost are two major concerns. UK call centres are large (often only surpassed by those in the US) and the telephone represents a major customer facing channel for the financial services sector, telecoms and utilities. Although UK customers are less than happy about the levels of service at some companies the telephone is still used extensively for complex interactions, while simpler interactions have often moved to the web or e-mail channel.

In southern Europe, face to face still remains a cultural preference for many transactions, but the rise of the web channel is changing this. One of the things I'm seeing is that organisations in these countries are building call centres as a channel to support the web, rather than as an existing to channel to which the web was added. Perhaps unexpectedly, mobile telephony has also brought about a growth in call centres as it has made the telephone cheaper and more widely available than when it was the monopoly of the state owned Telco's. The mobile operators need call centres for their customers, but other organisations have then had to respond to the sudden increase in telephony traffic this has brought about.

The final significant variation is between west and east in Europe. Generally speaking (...and this is very 'generally'!) labour costs in eastern Europe are substantially less than those in western Europe. There is also no legacy of contact centre investments from before the 1990s. As a result, while in western Europe contact centre is a mature part of most organisations with an existing telephony infrastructure, in eastern Europe many contact centres are greenfield implementations but, with EU accession, greenfield in an advanced market. With no concerns about telephony migration and transitioning from TDM to IP Telephony, it's been very interesting to see how this market has adopted IP Contact Centres. Obviously, as I work for Cisco, it's something I've seen quite a bit of and am enthusiastic about, but for the contact centre operators it means they can approach the contact centre business in entirely new ways. As an example, many traditional management structure for contact centre have evolved because all agents need to be within (approx) 200yrds of the ACD. In an IP world that physical restriction does not exist and it then becomes a matter of choice as to whether concentrating all your agents in one place is a suitable business strategy.

The changes in the call centre industry is a subject I'm sure I'll be covering more of in the future, but that's probably enough for now on the high level trends across Europe.