Let's first take a look at what types of companies are expanding. For simplicity purposes, we have categorized these companies into two types - captive operations and business process outsourcers.
Captive operations are those call center/back office operations that are kept "in-house" and are operated by the actual company to serve its own customers or employees. Examples would include any major Fortune 500 brand ranging from Apple to Verizon.
Business process outsourcers, on the other hand, are third-party companies that the captive corporations hire on an outsourced basis to service their customers or employees. The largest domestic business process outsourcers include companies such as Convergys, TeleTech, and Sitel. These companies typically work on very thin operating margins, requiring them to seek out low-cost locations to increase efficiency. As a result, they pay lower wages and typically experience higher employee turnover than captive operations.
Chart A identifies the top 10 deals (in terms of employment numbers) announced in the call center/back office sector in 2010 within each of these categories.
What's Driving Growth?
There are three core factors driving the growth of the call center/back office industry in the United States today. It should be noted that these factors have changed over the years as the industry has matured.
Business process transformation - The industry started from simple transactional functions such as data entry and simple call center activities. Today, the types of call center and back office activities have expanded to include more complex functions such as claims processing, accounting, employee benefit management, and clinical healthcare support. The following list outlines the transition of lower-end functions to more knowledge-based activities:
- Data entry: The industry started with simple activities such as manual data entry, application processing, transaction processing, and document imaging.
- Contact center: The traditional call center type functions that are most commonly found include customer service, collections, telemarketing, and technical support.
- Back office processing: More knowledge-based activities such as claims processing, employee benefit management, mortgage processing, concierge, and general research activities are now included.
- Corporate shared services: Internal corporate functions once found in corporate headquarters - including accounts payable/receivable, human resources, IT help desk, and procurement - are now also included.
- Professional services and support: There's been increasing growth in true professional service functions requiring specialty degrees and licenses for activities such as legal, clinical healthcare, financial services, research/analysis, and risk management. (Chart B illustrates this progression.)
Diminishing advantages of offshore and near-shore locations - Over the last decade, the movement of jobs to "offshore" locations (e.g., India and the Philippines) and "near-shore" locations (e.g., Canada and Latin America) has become a way of life. The financial benefits of offshoring have proven to be incredible for corporations, but they are often too good to be true. There are several factors diminishing the advantages of offshore and near-shore locations, including the following: