New offshore developments in the European Market

The blog is back from a week's sailing and is much refreshed. (Apologies to readers, but this is the European Contact Centre Blog, so please understand that the blog takes a European approach to getting enough vacation!).


I was very interested to see two new developments in contact centre offshoring while I was away. South Africa and Egypt may not be countries that instantly say "Europe", but both are making big plays for a share of the European outsourcing market.

The first was that South Africa did extremely well at the Contact Centre World EMEA awards on the 17th June. There were South African gold medals wins in the categories of Best Community Service Award for Kelly, Best OutSource Partner for The Institute of Performance Technology and in the the Best Supervisor for Zainool Abedeen Bux from Rewardsco Contact Centres. there were also a number of good silver medals and other runners up awards. There's a good report here at the Contact Centre World EMEA site or in the news section of the BpeSA Gauteng site. I've long thought that South Africa was potentially the next big thing for offshoring (see past posts like "Offshore - why I would go for South Africa over India") and the evidence seems to support this. I like the focus and the marketing on "business process offshoring". This is is a good differentiator over the "your mess, for less" approach of some of the Indian firms that have competed simply on the lower cost of Indian agents. Instead, a focus on process allows the South Africans to stress the value add potential of their work that comes with the cost advantages of their local labour market. I've always thought that with the widespread use of English and Dutch in South Africa (I know it's Afrikaans, but it will work for the Dutch/Belgian Flemish markets), that the South Africans have a potential advantage in any offshored work that required good language skills.

Meanwhile, on June 11th, Cisco announced that it was setting up a significant contct centre operation in Egypt that would to provide service for Europe and the Middle East. This is a 300 person centre which will provide customer service for Cisco's emerging markets customers in Arabic, English, French, German, Italian, Spanish, and Portuguese. This is a very interesting example of the power that government intervention and support can have, as the Egyptian Ministry of Telecommunications has been building up the country's contact centre and IT capabilities. The Egyptians were quite prominent at the UK's Contact Centre Expo last year (see my post "UK Contact Centre Expo Day 2") as the South Africans were the year before, which was what prompted me to write the "Offshore - why I would go for South Africa over India" post.

My suspicion is that there is enough market in Europe for both South Africa and Egypt to win share. I also suspect that this won't hurt the competent and forward thinking European call centres who understand the need to add value and be efficient. I suspect the casualties will be those older contact centres in Europe that weren't adding much value and are no longer meeting customer needs. Of course, one other important point is that both Egypt and South Africa have the opportunity to become regional hubs for Africa and they will both I suspect have opportunities to grow beyond the outsourcing market.

Axa to create 600 new UK contact centre jobs

A piece of good news reported on CCF, "AXA to create 600 jobs". I was particularly interested to see that these jobs are onshore in the UK.

The blog has looked at Axa contact centres before, at least the Swiftcover bit of the business) in the post "Are call centres so bad they hinder business?", so it's good to see that another part of Axa has more confidence in the power of customer service.

It's one of those things where the insight comes from the detail. The part of Axa creating these jobs is Axa Helathcare, and the part with the aversion to call centres is Swifcover who specialise in motor insurance. These are very different business, with different margins, expectations of service and complexity.

I've written on this a lot before, but Axa encapsulates this neatly. If the service required is simple, move it to the web. If it's complicated and a brand differentiator, then think about onshore and service quality as higher priorities than simple cost to serve metrics. It's noticeable that this contact centre will not just be onshore, but be in Kent (not the traditional lower cost contact centre areas of the North of England or Scotland). Presumably the ease of access to London and Paris, as well as access to high quality labour from a large catchment area influenced the thinking.

The view of automate or keep it high-quality isn't just my thinking, more authoritative writes than me have covered this, such as Sramana Mitra and her controversial article "The Coming Death Of Indian Outsourcing" in Forbes (covered on this blog at: "Indian Outsourcing, is it in decline? ").

I can see strong value in offshoring some back-office functions (see "Lloyds TSB offshores IT, not call centre"), but I do believe that if customer service is to be valuable, then it needs to be done with quality agents who understand the environment the end customer is in. This partly why I do see roles for countries like South Africa (see: "Offshore - why I would go for South Africa over India"), but I struggle to see a role for countries that try to bid for customer service business on a cost basis.

Still very good news in the current economic environment to see jobs being created.

Another outbound call that worked for me.....

I think it's like buses, you wait for ages for one and then two come along at once.

In the same way, I've complained about poor outbound calling for ages, and then have received two good outbound calls. The last one was from my utility company (see blog post: " Getting a good cold call ...and from a utility company too! "), this one was from my television provider.

Again it was a smarter offer than most cold calls. It offered me something I'd been thinking about doing (upgrading my package to watch the British Lions vs. South Africa rugby union test series) but I probably wouldn't have got round to doing. Instead with a bit of a nudge and quite a bit of a discount, I did.

I'm not sure if this was good use of analytics to identify customers by interests, but it was a well timed call with a good offer. Not rocket science, but still something beyond much of the witless automated outbound dialling that goes on in the UK market.

HSBC creates 250 UK call centre jobs & offshore in decline

After a week off sick there's been a lot to blog on.

I was interested in the Finextra story "HSBC creates 250 call centre jobs". The interesting thing for me is that these are onshore jobs. HSBC has always had onshore operations but has also been one of the firms that has pushed call centre jobs to India. The onshore operations have tended to focus on high quality customer service (see past posts like: "The contact centre agent experience - First Direct") whereas it's always been my suspicion that cost is the primary motivation for the Indian operation.

I'm not against either cost saving or offshore, I just have strong reservations that India for lowest possible cost is a sensible customer service strategy. If offshore is an appropriate option, I've tended to look at South Africa ("Offshore - why I would go for South Africa over India"). I know there are issues with South Africa as well (SA Telecom and crime being two of the big ones), but the cost savings and availability of English are strong factors in that locations favour.

HSBC is also just part of a larger trend back onshore. Earlier this month Orange announced that it was moving 500 call centre jobs back to the UK from India, but at the same time was shedding 450 onshore administrative jobs. This is very similar to what Lloyds TSB did last month, when it decided to offshore its IT rather than its customer facing operations (I covered the story here on the blog or here on Finextra).

In short, I think the trend for customer service to go offshore has almost come to an end but administration, back-office and IT might all go offshore to a much greater extent.

Indian Outsourcing, is it in decline?

Following up Monday's post, can I recommend a good article challenging commonly held assumptions. It's by Sramana Mitra and is called the, "The Coming Death Of Indian Outsourcing" and is available either on Forbes or on her blog.

Very similarly to my post on Monday she looks at whether it is sustainable to compete on cost in the longer term. She makes the good point that if India continues to experience wage inflation for skilled labour at current rates, it won't be able to compete on cost and it is debatable if it can compete on value. She writes generally about the Indian IT industry, but I think her points apply equally to the Indian call centre industry. Her point on innovation (or the absence of it in many offshoring propositions) is particularly valid.

My view is that some of the larger Indian companies (Wipro, Tata, etc...) probably will adapt and remain competitive, as will the the wholly owned Indian subsidiaries of multi-nationals like IBM and Accenture. These firms, though, offer a much greater value proposition than just cost reduction.

In contact centres, I suspect there will be a similar trend. Indian wage inflation will push work back to Europe (especially Eastern Europe) and to newer destination like South Africa (see my post from last year "Offshore - why I would go for South Africa over India" and "Offshoring and mainland Europe").

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.

Is cost a contact centre issue or a symptom?

One recurrent theme in contact centres is that of cost.

Mostly, the complaint is that contact centres cost too much. I would argue that this is because the cost is calculated for the contact cnetre operations alone and with little reference to the value that the contact centre might bring for the wider enterprise. I've touched on the idea before that cost is not only operational metric to consider (mostly in the post "Offshore - why I would go for South Africa over India") and that doing the same function at lower cost is not going to solve many of the bigger and more expensive problems. I would argue that cost is only a symptom of problems in the wider enterprise, a symptom that is shown in call centre.

The CMP magazine is taking another approach and trying to change perceptions by having an award ceremony to recognise the top 50 call centers in the UK. The difference here is that the adjudicators will be customers rather than industry peers, and so recognition will be based on absolute customer service outcomes with no reference to the cost of achieving those outcomes.

This seems worthy, in terms of understanding and demonstrating how much contact centres can achieve. It also go me thinking, though, about something I've seen for a while. What often shows up as cost in the contact centre is actually a problem in a completely different part of the organisation. For example, it's obvious that badly made products lead to returns and complaints. The call centre of the organisation making those products would therefore have to be quite large, yet the problem isn't the call centres' ability to handle calls efficiently, rather it is the products that generated those calls. Similarly in financial services if a product is too complex for its target market that will generate extra service traffic. The problem there is not the cost of handling calls, but of insufficiently well designed products for a given market.

The cost conscious retort might still be "so what?". The products were sold, the revenue was booked, why worry about handling the calls on any level other than cost? Two good reasons come to mind immediately, but I'm sure readers will have many more. The first is that the cost of handling customer complaints well is far less than the cost of reputational risk and brand damage. Compare call centre costs with the marketing costs to rebuild a troubled brand and the sums are heavily in favour of good customer service. The second point is more subtle, but is about the ability of the organisation to adapt. If an organisation can understand what customers think of it in real time (that would be the contact centre that does that) then it can adapt and change in response. The cost savings from withdrawing a product or altering an internal process that is causing problems can be far larger than the cost of the call centre.

In short the value of the contact centre is in its ability to make the organisation responsive. That and the brand value it adds are key yardsticks against which to measure its cost.

Offshore - why I would go for South Africa over India

From previous posts you might have concluded that I'm against offshoring.

I'm not.

What I am very against is the offshoring school of thought that is 'your mess for less' or just aims to reduce all service levels to an absolute minimum. To me this misses the point that offshoring provides many opportunities to do far more than reduce cost.

My feeling (and it's only an impression) is that at least for the UK market, India sold itself very successfully on cost. That was a successful strategy to win business, but ignoring service quality (or being too low cost to deliver it) has been bad for keeping the business. A YouGov survey earlier this year found that over half of UK respondents' biggest gripe was dealing with overseas call centres. It wasn't just xenophobia or an objection to offshore, it was that only 4% of respondents reported getting good service.

UK companies have begun to realise that while contact centre operating cost can be cut dramatically by going to India, that cost saving is nothing compared to the news cost to your brand reputation and the cost of increased customer churn. It also can allow your competitors to gain market share at your expense (see Nat West bank's advertisements stressing their UK call centres) and the examples of companies like Powergen which last year closed its Indian operations and brought them back to the UK specifically because of customer service.

By contrast, South Africa (from what I have seen) has approached the market very differently. I was impressed with what I saw at the UK's Call Centre Expo a few weeks ago where the focus was on stressing South Africa's better service levels, native English, shared timezone to the UK and developed infrastructure. The infrastructure is an important point, particularly the IT infrastructure. Large South African firms like Old Mutual, Anglo-American and Telecom SA have all run sizeable IT operations and although skills are not in oversupply most technology skills are available. The local economy is also sufficiently advanced for there to be significant call centres serving the local market. Crucially this means that South Africa can look at providing more than just first line customer support and take on technical support, internal IT support and elements of back-office processes. Cost reduction is a key part of the value proposition to UK organisations (have a look at Cape Province's figures and references) but it is cost in relation to the higher value of the work that can be taken on. Similarly in Gauteng, IBM have grown substantially providing these type of service to European clients and Dimension Data also run substantial operations under the banner of their Merchants subsidiary.

Encouragingly, I don't think South Africa represents a large threat to UK call centre market and may well ending up complimenting it. I suspect we're likely to see processes split between countries with parts of work being handled onshore and parts going to South Africa.

Of course that requires companies to be able to manage data and voice traffic seemlessly across continents, and that's where Cisco has some very good technology. We have a number of customers using technology like our ICM product to deliver virtualised call centres across national borders and this seems to be a trend that is increasing. You can also get a good graphic of ICM in action here. There is a clear trend in multinational companies that if you are going to manage customer service properly, you should do it with all parts of your enterprise, regardless of where they are located and do it well. The capability exists to do it anywhere, but that decision should not be driven by cost alone.