February 2009 Archives

There has been a lot of fanfare lately of contact center work being brought back to the U.S. from other countries, most notably India. Yet unless the additional demand is managed effectively, the result could be higher costs, less service, and more automation and fewer jobs.

The key reason for this return is the apparent inability of offshore agents to provide high quality customer-satisfying-and-retaining service that trumps cost arbitrage. The market for qualified affordable offshore English-speaking labor that are willing to work in contact centers appears to be shrinking, leading to rising compensation, turnover, and overall operations costs.

India's workforce are leaving the contact centers and entering higher-level BPO and IT fields that are better paid, have more sociable hours i.e. daytime rather than night shifts, and are more prestigious. Consequently contact centers have had to drill deeper into the labor force, yet many of the individuals hired may not have as solid English language skills and are less able to relate to those of American, British, Canadian and other cultures i.e. cultural affinity as their predecessors.

The Philippines is at risk of risk of contact center saturation because its labor market is much smaller. The nation's appeal is based on low costs coupled with a more customer-service-oriented culture and a greater exposure to and affinity with Americans compared with India thanks to a long and recent history with the U.S. Yet even there at a certain point firms will have to draw from less qualified labor pools that will result in customer service issues.

A few words on cultural affinity are in order. It is not, as others may perceive, about nationality or race. It is instead about understanding and empathizing with others derived from shared experiences. You can't gain this from watching TV or training videos, or linguistic classes, a la Henry Higgins in Pygmalion/My Fair Lady which some Indian outsourcing firms have attempted to resolve this issue. You can only obtain this insight by living amongst others and immersing yourself in that culture. That is why many immigrants to the U.S. face difficulties returning home even for visits: they have become 'Americanized'.

There is another side of the issue and that is American customer service is often not exactly worth having a flag-waving parade about. There are many horror stories about customers' experiences with poorly selected, educated, trained, and motivated U.S. contact center agents. U.S. contact centers suffer from high turnover, much more than one would expect in a difficult economy because they are not often managed and supervised effectively.

The saving grace for the American industry is that lower-cost self-service has not become as popular as projected thanks to poor IVR DTMF implementations and expensive and slow speech recognition technology development and deployment.

Self-service deployments will grow, though thanks to new tools and processes like outbound notifications, standardized language libraries, speech becoming parts of UC solutions, and to value-rich and affordable speech outsourcing. And when the choice is between dumb machines and well...the machines win because they cost less to operate.

Organizations are, in response to these issues, turning in greater numbers to 'homeshoring' i.e. home-based agents to the point where this option to traditional contact centers is reaching a critical mass. So much so that CB Richard Ellis, which has long been a contact center site selection leader now offers homeshoring labor market analysis: if you can't beat'em...

Homeshoring represents the best alternative to managing contact demand because it enables higher quality, more productive service by attracting better-performing agents while lowering costs by slicing facility expenses. The net benefits range from $10,000 to $20,000 per agent/year. Homeshoring also part of the environmental, energy, and traffic solutions by eliminating commuting. All the key issues with homeshoring: voice/data connections, security, monitoring, supervision, training and staff communications have been sufficiently resolved to remove them as barriers.

There will still be offshoring, though at lower levels because many firms are satisfied with its cost/quality equation. There will also be if fewer live agents because self-service cannot replace people where high thought and touch are needed; some of those individuals will be traditional centers mainly because some organizations don't want or see the need to change.

Yet a growing percentage of agents will be at home, because there is no place like it to supply quality, cost-effective customer care and sales.

Now that some $7 billion+ will be spent on rural broadband expansion, thanks to President Obama's just signed $787 billion economic stimulus package, the interesting question becomes which broadband technologies, wired or wireless should be supported i.e. subsidized to deliver it.

To get at the answers let's look at the two key benefits of this program:

1. It opens the door to truly effective e-commerce to residents and businesses, thereby increasing the availability of competitively priced products and services, and enhancing the economy, and to more information and services like distance learning and telemedicine. That means less gas, vehicle wear, and time in the long drives to the nearest urban centers

2. It enables job creation in rural areas such as from telework

Many rural communities have missed out on the recent economic boom. Unemployment and underemployment have been high and is getting worse. A recent story in The Daily Yonder reports double-digit rates in many communities. The recent economic downturn has for example decreased demand for resources such as forestry products. Fewer new homes means less need for local loggers, sawmill workers, and truckers.

Telework--via broadband--enables organizations that have forward-enough management i.e. supervision-by-performance rather than by-pointing-to-heads into this excellent supply of hard working individuals. It can also save them money: $10,000 to $20,000 per agent per year and improve customer satisfaction and retention, and revenues.

Not surprisingly telework through home-based agents is emerging as a viable alternative to offshoring. The cost savings and productivity benefits through home agents have made U.S. and Canada viable competitors to other countries for call handling.

There is a wide range of existing and developing broadband technologies available. TMC Group Publisher Rich Tehrani has in a recent blog pointed to broadband over power line (BPL), along with satellite, 3G, 4G (WiMAX/LTE), and perhaps white space technology. He correctly points out that the 'jury is still out' on these choices, and for good reason.

While with the exception of satellite, whose setup can be problematic (ask a rural resident who has tried to get it going) most of these methods appear to be fine for Internet access and e-mail.

Where the issue lies, however, is with VoIP. VoIP can and has for many firms made teleworking/home-based agents possible by dramatically reducing communications costs. No more LD charges from the switch to remote workers 50+ miles away.

Yet according to conversations with firms such as inContact and MegaPath there are quality of service (QoS) issues with wireless: cellular and satellite transmission. These methods have apparently not delivered consistent high enough QoS that callers, and companies expect. There are also other obstacles to VoIP ranging from old copper and data networks to home networks, depending on who you talk to.

There has been sufficient concern with VoIP to prompt three prominent pure-play telework outsourcers: Alpine Access, Arise, and Working Solutions to prohibit VoIP by their agents. Meanwhile 'blended' teleservices firms like Convergys that permit their home agents to have VoIP can route calls to bricks-and-mortar agents.

Yet in another strike against wireless, for Internet access to work at home applications, Convergys also clearly states that "Wireless or satellite broadband does not work effectively with our desktop configuration, and therefore does not meet our requirements".

Even with the good QoS on the network there can be inconsistency. You can have two VoIP 'lines' at home, one for work and one for personal, being fed from the same source, yet the quality can be different for each.

The alternative to integrated high QoS VoIP+ data: broadband for Internet--assuming that it can support work-at-home hosted solutions--and PSTN for calls would become just as unwieldy for rural residents and businesses as it is becoming for those in more urban areas, many of whom are opting for voice/data through the same pipe.

The future of voice communication according to many experts is VoIP rather than old-fashioned PSTN. If that is the case the VoIP issue, along with the need to support intensive web-based solutions, needs to be explored and resolved before any tax dollars are handed over to companies to install rural broadband.

There has been some good news on the beleaguered U.S. domestic contact center front, courtesy of United Airlines.

The good news is that the air carrier will be opening 165 seats at its Chicago and Honolulu facilities, reports the Associated Press and carried in BusinessWeek, to handle written (e-mailed/letter mailed) customer commendations and complaints (CC&C): work that had been managed offshore in India. Those positions will, however, be filled internally.

United's spokesperson, Robin Urbanski, explained that the rise of Internet booking means it now makes sense to have reservation agents also handle after-flight calls from customers. She said the new arrangement would be "cost-neutral" versus having the calls answered in India.

She told Bloomberg.com "'More sophisticated conversations with our guests are much better suited for us to handle instead of a third-party partner. "We clearly have the deep industry expertise to help our guests navigate through their options.'"

The bad news, from this writer's perspective, is that United is ending handling voice CC&Cs. It would stop publishing its customer relations phone number, which will be turned off altogether at the end of April.

Bloomberg reported that once service that ends, United reservations agents will handle complaints. Here's the kicker: the biznews site says United charges a $25 fee to book travel by phone.

No changes are planned at United's third contact center, in Detroit, which will continue to take phone calls (including after-flight responses) from United's largest customers.

United is not alone in its action. The AP/Business Week story said that American and Delta also direct customers towards e-mail/snailmail for complaints and commendations.

Urbanski explained that United is able to respond better to customers who write, since they often include more detail, making it possible to provide a more specific response.

"'We did a lot of research, we looked into it, and people who e-mail or write us are more satisfied with our responses,'" she said.

A clang of skepticism is in order. When someone is ticked off they are more likely to call and yes maybe to scream than to compose an e-mail or letter. Those are the complaints you want to address ASAP to discover and tackle the root causes, reality or perception of it before the matters worsen.

Bad news always spreads faster than good, and on the Internet the rate is warp speed, penetrating social networking sites and impacting corporate reputations and business. An angry airline customer may just decide to change their bookings on the spot, let everyone in their network know about it and suddenly there are a whole lot of seats that have just come open. Can the airlines, given their precarious financial predicaments, risk to have that happen?

United's action is more one death-knell for offshoring. If these very literate agents--India's and other countries' staff come from the middle classes--cannot provide decent service than the cost savings from shipping high value interactions like CC&Cs are no longer worth the customers' aggravation. That is even in comparison with the notoriously bad high school education that many Americans receive, and the often poor reading and writing skills they possess. The ability to understand and relate to others clearly trumps precise grammar and spelling.

I would wish, though, that United (and the other carriers) would keep or reinstate voice lines for CC&Cs, though. There are less expensive alternatives available, such as speech rec with near-realtime analytics to capture and alert others of critical issues, and home-based agents. A friendly voice, even if it is canned, can only help one's travel through the 'Friendly Skies'.

The ghost of Smoot-Hawley is baaack...and it is a real horror that spread misery worldwide, and could do again unless elected officials have the guts to drive a stake in its latest resurrection.

Smoot-Hawley is shorthand for the infamous tariff brought in the honorable Senator Reed Smoot from Utah and the honorable Representative Willis Hawley from Oregon, both Republicans, signed by GOP President Herbert Hoover in 1930. Infamous because economists then warned the President that that passage would worsen what became the Great Depression, and they were right, for it sparked a zero sum trade war whose net outcome left even those who would benefit with less and in too many cases with nothing.

The spirits of Sen. Smoot and Rep. Hawley appear to have taken over the bodies of North Dakota Senator Byron Dorgan from North Dakota and Representative Peter Visclosky of Indiana, this time both Democrats. Sen. Dorgan is sponsoring the "American-made" rule for construction and other equipment that would be used in the economic stimulus program, which funds public works, water, transportation and other construction projects as well as broadband communications deployments and energy research. Rep. Visclosky has strengthened the Buy American portions for steel in the recently-passed House version of the legislation.

Yes, protectionist measures are not new, trade agreements or no trade agreements. That's why non-U.S. firms like Bombardier have built manufacturing plants to comply with Buy America for transit equipment, at costs passed onto American taxpayers.

Yet steel especially, that's another matter. This is the raw nerve of industry--the European Union was originally set up to permit free trade in it--(in a 'past life' I had covered the steel trade), and a fair portion of the truly precious metal comes from Canada and other countries.

Mess with steel and you mess with other valuable commodities that come from other trade partners, like oil. You can bet that Canadian Prime Minister Stephen Harper will mention that one to President Obama in person when he visits Canada Feb.19. If not Mr. Harper's rival, Liberal leader Michael Ignatieff, will make sure the country will know it, based on reading a recent Toronto Star article:

'"We're not small beer here. We're the United States' largest energy supplier, not just oil, but also hydro, and they've got to understand that if they want energy security they shouldn't start putting up barriers to our goods and services,' " he told Global TV's Focus Ontario in an interview.

"'We don't need to talk about threats, but they need to understand, and this will be a message I will pass to the president, that we're a force to be reckoned with.'"

Here's the real nightmare: Smoot/Hawley (or Dorgan/Visclosky) spreading to other industries...like infotech. Does the U.S. really want to go there? After all silicon is to Silicon Valley what steel is to Gary...

There are creeping signs that this sector may be next, with contact centers as the thin edge of the wedge. As reported in the January issue of Customer Interaction Solutions, federal lawmakers may reintroduce a bill similar to H.R. 1776, The Call Center Consumer's Right to Know Act, which would require contact center agents to disclose the physical location of such employee at the beginning of inbound and outbound calls. Firms would also have to annually certify to the Federal Trade Commission (FTC) their compliance with such requirement.

H.R.1776 is an attempt to restrict offshoring by making customers aware that their calls may be going to or originating out of country. The bill's supporters hope customers and negative publicity would pressure firms to bring such jobs back to the U.S.

The downsides are that such bills may significantly add to contact center costs in both onshoring and time spent location disclosing and in compliance, which would ultimately be paid for by consumers. In doing so bills like it that hike contact center expenses may also be self-defeating as they may result in fewer domestic jobs.

"The particular type of disclosure contemplated by H.R. 1776 is a burdensome additional disclosure without clear benefit to the consumer," American Teleservices Association (ATA) CEO Tim Searcy told the House Energy and Commerce subcommittee Sept.11, 2008. "Each time additional disclosures or compliance requirements are added to the call, call lengths are increased, and the cost of doing business by phone increases and the quality of the interaction with the consumer declines. The rising costs of compliance and regulation are causing many firms to contemplate automation only, or offshore solutions to stay cost competitive."

President Obama knows his history and the current economic and political realities and has signaled that he is no Herbert Hoover. He understands the pain being felt by the constituents of the likes of the two elected officials pushing for those measures. But he depends on the cooperation of Congress to get his stimulus package approved ASAP.

Are there enough elected Congressmen and Senators who are wise enough to set aside their specific interests to look after the greater good and avoid a near-repeat of history that will hurt even those who short-term benefit from protectionist measures?