1.2 Offshoring
The premise is straightforward. Given modern telecommunications capability, it matters little where telephone support is based. India, with a large population of English-speaking graduates and low (by Western standards) wage rates is an obvious choice. The significant cost-savings look very attractive to many organisations.
Early examples of this practice of ‘offshoring’ were not without their well-publicised problems. In 2004 Norwich Union proposed to move 7000 UK call-centre jobs to India by 2007, much to the fury of the Trade Unions, but were persuaded to scale back their initial plans by a less-than-enthusiastic customer response. In 2003 Dell computers in North America were famously forced to discontinue offshored support for their PC customers in the wake of widespread complaints about the quality of support on offer. Nevertheless, the lessons of history suggest that the quality will rise more quickly than the cost.
In the UK in particular, the disappearance of call-centre jobs is an emotive topic. Much of this ‘industry’ is located in places like Scotland, the North East, the North West and South Wales, areas where many of those involved had already endured the disappearance of traditional smokestack industries less than a generation earlier.
Not everybody has immediately jumped on the offshoring bandwagon:
The Royal Bank of Scotland, having conducted a successful pilot, nevertheless ‘concluded that the best outcome for our staff, shareholders, and customers is to employ people in the countries in which we operate’ (Financial Times, 17 October 2003). Similarly, Halifax Bank of Scotland (HBOS) has stated, ‘The call-centre operator is the voice of the company … It's a big enough challenge to ensure that all of our people in the UK are aware of changes in everyday issues, without having to worry about an operation that is 3,000 miles away’ (Financial Times, 12 January 2004). For the Alliance and Leicester, the decision was related to security concerns regarding exporting ‘potentially lucrative financial information to low wage countries’ (Herald, 25 February 2004). The Nationwide Building Society, in announcing substantial investment in its existing UK call-centres, underlined its strong links with local communities (Banking Business Review, 13 January 2004).
(Bain and Taylor, 2004)
For the moment at least, the very real cost savings available from offshoring customer support need to be balanced against other considerations.
Software development is another industry where the location of the work is relatively immaterial; due to the nature of the product, delivery costs are effectively zero and hence the work will be done at whichever location can achieve the required quality at the cheapest cost. Even relatively bespoke services such as gents' tailoring can now be provided using laser-technology in London, detailed specifications transmitted to Hong Kong and finished suits delivered to your home.
A detailed examination of these phenomena in purely economic terms is beyond the scope of this course; it would need to consider such things as local wage-rates, working conditions and infrastructure-driven social overheads through international exchange rates and tariff agreements to the cost of compliance with environmental legislation. The overall lesson is however clear; globalisation would seem here to stay and the need to work ‘smarter’ seems unavoidable.
Activity 1 Offshoring
What aspects, if any, of the business of your organisation are currently offshored? What aspects might be amenable to offshoring? What costs and benefits are involved – especially beyond the more readily quantifiable?