Outsourcing: Rick Ferry, COO of C3 (Part 3)

Sramana Mitra: What is your sense of what will happen to the call center industry in the U.S. over this decade? Obviously, the cost structures are changing in Asia. For instance, the cost structure for India is changing substantially. There is some level of burnout going on because of the time zone issue. You can talk about what’s happening in the Philippines as well. What do you think is going to happen to call centers catering to U.S. customers, based on those dynamics, and what is a trend that you see?

Rick Ferry: Timely questions. What we see going on right now –I have to add a caveat by saying that this clearly is opinion, however well researched. It represents our opinions of the business. In Asia, outside of China, there is increasing pricing pressure. The arbitrage between North American and  Asian pricing, albeit still sizable, is shrinking. It’s significantly less favorable than it was 10 years ago, for example.

To underscore what you’ve said, what we’ve seen in India in particular, is that there is a high level of turnover due in some part to the time zone issues, the countercultural issues, if you will. By that I mean what we refer to as graveyard-type issues where people are working overnight. It’s disruptive to a normal lifestyle, and that’s not for everyone. We’re also seeing increasing wage pressure as wages and salaries continue to escalate. To a lesser extent right now, in terms of its acceleration curve, we’re getting that a bit in the Philippines as well, although the Philippine economy is much more dependent on BPO revenue, so there’s a different cultural acceptance in Manila and in the Philippines at large.

The other dynamic that’s in play right now is a repatriation effort, for lack of a better word, of many applications that are U.S.-indigenous back to the United States for a variety of reasons. Some are more subjective reasons, and they are the reasons of having a greater affinity to culture. Others are more practical reasons. For example, monitoring, the progress of deployments in Asia may require staff to be kept on the road for extended periods. Some U.S.-based companies are taking a look at the time value and expertise of that staff, asking if it can be more effectively deployed in the U.S. And what’s the cost of keeping so many people in transit for such extended periods? How is that offset by some of the other factors that may cause them to repatriate?

We’ve seen a good mix right now. We’ve seen some U.S. companies in our client book going offshore for the first time. We’ve seen many more that are reconsidering their offshore deployments and pulling back into areas in the U.S. What we’ve done in particular is gone out to areas around the United States where for a number of different reasons, the areas may have been hit a little harder by the 2008 downturn. We’ve been able to go into these areas and find a wonderfully adept workforce that can compete on a cost basis with some of the international implementations. For example, among our centers here in the U.S., we’re located in Twin Falls, Idaho; in Tucson, Arizona; and McGregor, Texas. The biggest city that we’re in is Salt Lake City.

SM: What is the cost structure ratio between your U.S. call centers and a Philippine call center or a Latin American call center?

RF: For the U.S. versus the Philippines, in our best comparative on a cost basis, [the U.S.] is still about three times higher than the Philippines and about 2.5 times higher than in most of our Latin American sites. Sofia, Bulgaria, lies right in between. Glasgow, Scotland, is a bit more expensive than the U.S.

This segment is part 3 in the series : Outsourcing: Rick Ferry, COO of C3
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