Many businesses are attracted by the savings that offshore outsourcing can offer. Re-locating their ancillary services, like customer service, to a contact centre in the Philippines can free leadership and management capacity and be a lot cheaper than providing in-house services.
Typically, offshore outsourcing will save around 40–50% compared to an in-house or onshore outsourced operation. But having taken that decision, why not look for further savings? After all, it’s possible to save 50%, why not a few per cent more, with such a big saving already, an extra 10% or 20% can’t make that much difference, can it?
“It’s a mistake that is often made by businesses when they are looking to outsource,” says Ralf Ellspermann, CEO of PITON-Global, a leading call centre in the Philippines. And there are many low-cost providers who are keen to encourage it by offering those tempting deals. But why should they be avoided?
The 40–50% saving figure is frequently quoted because it represents a tipping point in the balance between savings and quality. Exactly where the balance lies will vary depending on factors like the contract requirement or exchange rates. However, contact centres in the Philippines operate in a highly competitive environment: over 800 of them are looking for business. But that also means that when there is a broad consensus on pricing, it’s there for a reason.
Contact centres can offer their savings because of several factors. First, they are highly efficient operations. They are specialist providers, so every aspect of their business is focused on that. Their HR, legal and finance functions, for example, only need to focus on one thing, whereas their clients might need HR specialists for a range of disciplines. They also operate from custom-built facilities and at scale. This means they can use their resource flexibly and efficiently, moving staff to meet changes in demand, for example, or making sure that their seats are in constant use as they service customers worldwide and around the clock.
But the biggest saving they offer is on staffing. Labour costs in the Philippines are low. But this does not mean that staff will work for less than they deserve. Premier providers will typically pay their agents a starting rate of around $6 (AUD) per hour, a good wage by Philippine standards, and enough to attract educated and highly fluent staff.
However, low-cost providers can typically only offer in the $4 (AUD) range. This simply is not enough to attract the country’s best agents. They may not have fluent English or lack the ability to exercise their discretion when talking to customers. And when around 70% of all contact center jobs are offering those higher salaries, the best and most competent call agents simply have no reason to work for the low budget providers.
“Low-cost providers are cheaper because they are employing lower skilled agents. And the consequences are predictable, they will have higher rates of complaints about communication and resolution difficulties, leading to falling customer satisfaction and retention. You might save a few dollars per hour with a low-cost contact centre in the Philippines but will pay a high price in the longer term,” explains Ellspermann.