Consumers expect a wide range of products to be available cheaply, and at a moment's notice. But that desire spawns unintended consequences. As former Labor Secretary Robert Reich wrote in a February 28 op-ed piece in The New York Times: "Many of us pressure companies to give us even better bargains. I look on the Internet to find the lowest price I can and buy airline tickets, books, and merchandise from just about anywhere with a click of a mouse. Don't you?"

The problem, writes Reich, is that "the choices we make in the market don't fully reflect our values as workers or as citizens." As consumers, we enjoy the benefits of globalization, such as being able to receive live help whenever we need it with many of the products we buy. But these benefits do come at a cost. As Reich explains, "The prices on sales tags don't reflect the full prices we have to pay as workers and citizens."

Consumers want the products they purchase to cost less and less, yet they also want these products to continue to offer the same, if not more, value. With the exception of certain types of technical support, customer service isn't something that consumers believe they should pay for. But no matter how efficiently technological advances like the Internet enable companies to serve customers, there's no getting around the need for, and the cost of, live people to communicate with customers.

The price of a product includes the cost of receiving service. If consumers want things to cost less, than they are inadvertently demanding that companies lower the cost of service. To fulfill this implicit demand, companies have two options: use technology to automate service, and find ways to reduce wages for those who assist customers. And, as is apparent to anyone who has dealt with call centers, these are the primary options companies have chosen.

Many Americans understand offshoring as a signal that service itself is somehow worth less. The reason consumers feel this way is that they are increasingly aware that many companies bring their call center operations offshore to take advantage of lower-cost labor.

But as more companies seek these advantages, the less significant these advantages become. No matter where you employ call center agents, the same rules of supply and demand still apply; when demand for labor grows at a faster pace than the supply, wages go up and so-called labor cost advantages begin to evaporate. As Gary Pudles, CEO of the outsourcer AnswerNet (Princeton, NJ), says, "Wages are going to continue to rise for people who do the best work." This is exactly what's happening with IT outsourcing in India, as documented in an article titled "India's Dwindling IT Labor Advantage," in the September 2004 issue of Optimize.

If there is a potential benefit of offshoring, it's the dissemination of best practices that transcend geography. The implications of this approach apply not only to offshoring, but also to outbound communication, in terms of bridging the gap between what companies want from customers and what customers want from companies.

The biggest problem with thinking about offshoring strictly in terms of saving labor costs isn't that these savings diminish over time; it's that lower costs, in themselves, don't add any value. The same is true with outbound efforts like telemarketing; they're only effective when companies, and the customers they serve, both perceive these efforts to be valuable. A number of people share this observation, as we found when we asked them what value the practice of originating calls overseas brings to the efficacy of outbound communication beyond reducing labor costs.

"Other than [reducing] labor costs, I do not know of any value," says Kathleen Kelly, CEO of TeleDirect International (Scottsdale, AZ), a developer of predictive dialing systems.

Frank Fuhrman, vice president of marketing with the service bureau American Customer Care (Bedford Hills, NY), acknowledges that offshoring "does indeed lower the cost of labor," and finds that this practice "is part of the teleservices mix." But he also says that he's "seen more and more clients coming back from offshore."

So where is the value that offshore telemarketing ought to bring? The answer: With telemarketing, or any other outreach to customers, the value isn't in the location or in low wages; it's in the communication itself.

Lynne Levy, principal product manager with Concerto Software (Westford, MA), a developer whose products include predictive dialers, says that due to do-not-call legislation in the U.S., "the number of people that organizations can call for telemarketing purposes has decreased." With this in mind, Levy explains, these organizations "need to look at their base of customers and approved prospects and be creative in approaching them with new opportunities." Levy characterizes these efforts as "cross-selling and up-selling new services and products that they might find beneficial."

But, as she cautions, "it is important when this occurs, though, to not make the customer feel like they are being sold to, but rather that they see the added value in the opportunities presented." The worst thing companies can do, says Levy, "is to frustrate the customer and have them ask to be put on your internal do-not-call list."

What offshoring and outbound telemarketing have in common is that they engender in customers not demand, but rather the desire to curtail or even eliminate these practices entirely. Many companies have tried to minimize backlash from consumers by segmenting certain operations, so that, for instance, they bring technical support for individual consumers offshore while providing technical support for corporate entities closer to where these entities are located. Companies are also striving to keep what they understand to be strategic, like customer service, onshore while moving processes they consider to be tactical, like telemarketing, offshore.

But such segmentation doesn't automatically make offshoring or outreach to customers more effective. The best example we've seen of a company that successfully combines offshoring and selling (without telemarketing) is Alaska Airlines. Rather than opting to employ call center agents in locations where wages are lowest, the airline has brought a strategic process, namely evaluation of agents' conversations with customers, overseas.

The evaluations come from people located in India, but the agents serve customers from the U.S. What's more, the evaluations emphasize strategic objectives; among the criteria that the evaluators factor in are whether agents encourage frequent-flyer customers to sign up for the airline's credit cards.

Ultimately, offshoring and outbound communication can become strategic if you recognize the difference between saving money and creating value. You can always find someone who is willing to work for less. But if your aim is to employ people who share the same goal as your company ¡ª serving customers better the more you communicate with them ¡ª then the value of a conversation, and not just its cost, is what should emerge as your primary gauge of performance.

Going Offshore With an Outsourcer

When deciding to move call center operations offshore, many companies find it beneficial to contract with an offshore outsourcer.

Lower costs are the most common incentive associated with offshoring but increasingly, outsourcers are trying to differentiate themselves by their expertise.

"Offshore outsourcing offers additional benefits as companies face new business hurdles setting up in new countries, investing capital outside the U.S., managing remote operations and overcoming the natural cultural barriers that exist," says Andrew Kokes, vice president, offshore development with outsourcer Sitel, which has 87 call center facilities located throughout 25 countries. "Captive sites are much more expensive then outsourced sites, because of the lack of focus on driving efficiency. This issue is multiplied when also faced with the large travel cost associated with managing very remote operations."

But in the end, partnering with an outsourcer ¡ª whether offshore, near shore or onshore ¡ª offers many of the same advantages, like the ability to deliver service that's better, faster and cheaper than many companies can offer with an in-house call center operation.

Flexibility is another key advantage, especially for companies that might have seasonal businesses or varying call volumes. An outsourcer lets you quickly staff campaigns up or down, which can be useful if you have any foreign language requirements or customers in different time zones.

"The combination of lower cost and increased flexibility reassures companies that offshore outsourcing is a lower risk investment," says Ashish Paul, president of Cincom India.

Offshore providers include American companies that have part of their operations offshore as well as foreign companies that are trying to win business from American companies.

"Many foreign companies are combating the influx of American companies going offshore by hiring American business managers to handle the U.S. side of their operations, such as sales and account management," says Paul. "Cincom is unique in that while we are headquartered in the U.S., we have a separate subsidiary in India that handles most of our offshore outsourcing accounts."

Some offshore providers have attempted to transform themselves into Business Process Outsourcing (BPO). BPO providers, in addition to serving customers, can also handle back-office work such as billing.

"For those that understand the financial model that drives offshore operations, it's simply a matter of leverage," says Sitel's Kokes. He says that in addition to the typical fixed costs of operating a call center, such as facility depreciation, lease and management expenses, offshore has several other direct and indirect expenses that remain static. These include, telecommunication costs (often 10-15% of the total cost of doing business abroad) and the fact that unlike in the U.S., where you can hire part-time workers, offshore agents have contracts and are guaranteed set monthly wages.

"Taking all this into account, the cost of operations is still much lower than doing business in the U.S., Canada or the U.K., but driving additional processes over the outsourced assets is the best way to gain the biggest cost savings leverage once an offshore site is established," says Kokes.

Bill Rieke, senior director, international relations with Convergys, agrees there are financial benefits of combining call center and back office functions, but points out that for many companies, the call center is still a siloed operation. Often the decision to outsource back office functions is made separately from the decision to outsource the call center. Convergys has facilities in the U.S., Canada, Latin America, Europe, the Middle East and Asia.

Paul cautions that many offshore outsourcers don't have the on-site infrastructure needed to support BPO operations. "This is vital because an on-site infrastructure ensures better data security, project management and reporting, as well as the benefits of dealing with the same time zones," he says. Whether you decide to outsource call center or back office operations, quality remains one of the biggest concerns. When vetting potential outsourcers, you should be sure to understand how their training and quality monitoring programs work. Many outsourcers also give you the ability to listen to agents' calls at your convenience, usually via the Web.

Dadi Bhote, executive director of HyperSoft Technologies Unlimited, an India-based outsourcer, says that his company works closely with clients to train the agents about the campaigns they'll handle and any ethical issues involved. And since 80% of the company's business is in outbound calling, the company complies with all FTC regulations.

"Outbound quality is very similar both offshore and in the U.S.," says Cincom's Paul. With inbound calls, offshore quality is sometimes better. "For example, the technical knowledge of many Indian agents makes them better at Tier 1 IT support than agents in other geographic locations," he points out.

And according to Paul, over the past couple of years much of the company's outbound work has converted into inbound work due to do-not-call legislation. Says Paul: "Whereas before customers may have opted to use straight telesales, many of our clients are now producing more direct mail campaigns that encourage callbacks. Our agents are now doing more order taking, order management, and cross-selling and up-selling.

Security is another big issue for call centers. In many cases, data servers remain housed in domestic locations. Outsourcers often take precautions that onscreen data is well protected, such as restricting agents from bringing writing materials or cell phones into the call center facility.

"The [security] risks offshore are no greater than in any other facility," says Sitel's Kokes.

But before contracting with any offshore outsourcer, it's essential that you do your due diligence. Take a look at your operations and determine which core competencies are better kept in-house and which can be outsourced.

"It is important to understand the legal aspects of contracts with in-country providers, as governing law is not always U.S. law," says Thomas Moroney, vice president of international operations for Precision Response Corporation (PRC), which has offshore facilities in India, the Philippines and the Dominican Republic. "Additionally, if you're looking at a pure in-country provider, then you must validate that the provider has a clear understanding of U.S. standards and procedures, as this is a critical success factor to any offshore business."

Convergys' Rieke recommends that you pay careful attention to whether the partnership makes business sense. He advises asking the following questions: "Can the provider enhance your customer relationships and save you money? Will the vendor keep pace with your business changes and help lead you through the business transformation process to stay competitive?" In Rieke's view, "it is essential to determine if the provider has the technical expertise and experience to successfully handle your most valued asset, your customers."