Onshore outsourced contact center activity to face challenges in economic recovery: Ovum

Since the onset of the economic recession in 2008, many firms have felt strong need to outsource contact center work domestically. It became a preferred business model for most of the outsourcing companies. However, now that the recession is declining, the onshore outsourcing industry is likely to face serious challenges. Vendors of outsourcing services will be forced to decide how to address challenges related to potential cost increases and supply shortages. And it seems that offshore outsourcing could make a comeback in the near future.

Ovum's recent report, titled 'Profiting from Onshore Contact Center Outsourcing during the Recovery', provides a snapshot of the challenges that onshore outsourcing is likely to face as the economy recovers. According to the report, the demand for domestic services may wane under cost pressure.

Another aspect of onshore delivery that may be prone to cost increases as the global economy recovers is real estate. In many western centers in North America, Europe and Australia/New Zealand, vacancy rates are already substantially higher than usual. However, already this sector is showing some signs of life. Outsourcers will be now faced with potentially higher price-points for purchasing and leasing land. Again, such increases will be borne by the client.

Peter Ryan, Ovum lead analyst for contact center outsourcing and BPO says, “As the economic recovery begins to unfold, contact center outsourcing vendors will be quickly faced with an appreciation of input costs associated with running their facilities. Specifically, while unemployment is currently sitting at very high levels, this will shift in Western countries as many verticals begin to bring staff back on.” Ryan also believes that outsourcers could be faced with a prospect of losing talented agents, unless they are able to offer more money and benefits. This will invariably put up prices paid by clients, which is not a terribly competitive situation for the vendor.

At the beginning of the economic downturn, contact center outsourcers have adopted for onshore outsourcing due to stable price points, as well as pressure to maintain jobs at home. However, as the recovery becomes more apparent outsources will be challenged to maintain stable prices so there is still hope for outsourcing vendors of finding onshore opportunities.

But cost increases may also render offshore locations attractive once again. Offshore outsourcing beats onshore in terms of cost-effectiveness. The cost of business processing is minimized to a greater level with offshore outsourcing. However, there are certain hidden costs involved in it, such as communication charges, training, travelling charges, and so on. But yet, the company can have significant savings by outsourcing the work offshore.

From the Indian perspective, it seems that business recovery will lead to increased offshoring in India. According to a research report from the Everest Group, Indian offshore outsourcing has seen a spurt in activity during the third quarter of 2009. This increased momentum stems from the business recovery in global outsourcing. This report has also confirmed that the offshore outsourcing industry in India is gaining on the heels of higher demand.