For call centers, offshoring is a double-edged sword

A version of this article appeared in the February 2013 print issue with the headline: The root of all upheaval.

Reducing costs is the strategic guiding principle in the location, operation and management of commercial call centers — today known as "contact centers," because they use voice, e-mail and text communications.

Even though contact centers are the key interface between customers and corporations for sales, service and support, "most senior executives see them only as cost centers, with expenses that need to be minimized," said Donna Fluss, president of DMG Consulting, a firm based in West Orange, N.J., that specializes in contact center analytics.

"Few companies appreciate the value that effectively run contact centers bring to the business," Fluss explained. "So, CEOs and CFOs do whatever they can to reduce their contact-center costs, even though it may hurt their corporate relationship with customers."

This is not a new phenomenon, according to Colin Taylor, CEO of Taylor Reach Group, a contact-center consulting firm in Toronto.

"The focus on reducing contact-center costs underlies the entire history of this segment," Taylor said. "This is why call centers have migrated from downtown locations to the suburbs, to small towns, and ultimately to third-party-run sites in other countries."

A gigantic global industry

There's a good reason for CEOs and CFOs to worry about contact center costs: this segment is gigantic, in terms of the people employed, equipment used, and bandwidth required.

"It is huge," said Bruce Belfiore, CEO of BenchmarkPortal, a contact-center training and consulting firm in Santa Barbara, Calif.

"There are over 50,000 call centers in the United States alone, employing over 3% of the working population," Belfiore said. "Similar statistics apply to several other countries, so customer contact is an important component of economies around the world."

That said, nobody really knows just how big the contact center industry is, according to Fluss. "This is because it embraces both formal and informal contact centers, with anywhere from two to 1,000 people," she said.

However, one clear metric does exist that speaks to the size of the segment.

"The call center technology industry today is valued at approximately $8 billion," said Mariann McDonagh, chief marketing officer at inContact, a Salt Lake City provider of cloud-based contact center services. "With the advent of new technology in social media and mobile communications, industry estimates place this number at approximately $12 billion by the end of 2015." McDonagh added that these figures do not take into account workforce expenses, which typically represent 75% of a contact center's budget.