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Offshoring boom to continue unabated
But don't judge on cost alone, warns Datamonitor...

By Will Sturgeon

Published: Tuesday 02 November 2004

The offshoring of call centre activities will continue apace according to a new Datamonitor report which explores the pros and cons of outsourcing call centre work overseas to certain countries and workforces.

The report names Argentina and the Philippines as two of the most attractive destinations, based on cost-efficiency, and added that the attempts of such countries to steal India's crown as the top offshore spot will increase competition and drive growth.

However, the report warned companies not to rush into an offshoring agreement simply because the headline cost of doing so appears compelling. Mark Best, Datamonitor's call centre analyst, warned of hidden costs and long-term considerations.

Best said: "As low-cost nations other than India aggressively pursue a portion of offshore-outsourcing, outsourcers and end users must not lose sight of hidden costs and other risks in locations around the globe. Besides complicating the decision to move customer care services offshore, they could potentially prove costly."

For example, cost must be balanced against any political and social instability.

The report mentions Mexico as one of the most expensive locations - nearshore for the US - for bi-lingual English/Spanish speaking operatives but said it is also one of the most stable.

At the top of that scale is Canada, according to Datamonitor - representing the most secure, stable and expensive location.

Other countries trade off perceived instability against extremely low costs. Staff in Argentina which has been rocked in recent years by rollercoaster patterns of inflation and financial uncertainty, as well as political turmoil, typically earn just 12 per cent of the wage paid to UK customer service agents.

Datamonitor also predicts wage deflation in UK and US call centre sectors and conversely predicts inflation in offshore locations, bringing a greater degree of alignment and a dilution of competitive advantage.

But the bottom line, according to Best, is an increasing trend towards offshoring.

"Although outsourcers and end-users need to consider the risks of moving call centre operations overseas, and more importantly, the benefits of a particular workforce, Datamonitor is confident that offshore outsourcing will continue unabated because of labour arbitrage," he said.