Many American companies, under pressure to reduce costs and gain access to fresh labor pools, are interested in an offshore location for their call centers. However, they may be aware of political pressure to keep jobs in the United States. Also, they’re starting to hear stories about the challenges of locating this vital part of their company’s operations in far-flung places like the Philippines and India.
Where does Canada fit into the global picture for contact center location strategy? It is becoming increasingly clear that this is a global marketplace, and with the current low cost of overseas communications, it is technically feasible to locate a contact center in a wide variety of places around the globe.
So, are there aspects of contact center location strategy that make Canada a good choice? In many cases, yes – but it is important to understand the relative strengths and limitations of any location decision.
The “training wheels” approach
One situation in which a Canadian contact center location choice may be wise is when a company is new, or is building a unified contact center capability, or is just considering an overseas expansion for its contact center function.
For many American companies considering operations abroad, the challenges are formidable. There may be a different legal environment, a new business culture, possibly language issues – as well as time zone difficulties and the length of travel for onsite meetings and inspections.
Because of these challenges, it makes sense for Americans to start foreign operations in a country that is much like their own. It’s much like when a child learns to ride a bicycle – parents often add training wheels that keep the bicycle upright as the child learns to balance.
In this way, Canada can be your “training wheels” for international expansion.
Particularly in a contact center environment, Canada can be a good starting point. Many American companies have discovered the advantages of learning the basics of foreign operations in Canada.
Similar culture. Canadian business culture, laws and ethical expectations are similar to those of the US. American companies can expect contracts to be respected, laws to be enforced fairly, and the tax system to be fair and transparent. The water is safe to drink, driving practices are similar, the phone system is reliable,and there is a good education and medical system -- unlike in some parts of the globe.
Employees understand US culture. It is particularly relevant to call center location decisions that Canadians share many cultural similarities with Americans. Canadians, listen to Avril Levigne, Celine Dion and Shania Twain – all of whom are, incidentally,
Canadian. They laugh at John Belushi films, and watch their NBA, NHL and major league baseball teams – just like Americans. This means that they understand American culture and idiom, and can communicate with American customers on that basis. Third World contact centre employees, while they can be taught these cultural references, often find understanding American idiom and culture a challenge.
Language issues. The business language of most of the country is English, and even in areas where French predominates, there is generally a good talent pool of bilingual staff available. This means that communication with Canadian employees, suppliers and service providers will be in a familiar language.
Canadian pronunciation of English is virtually indistinguishable from that of many Americans, so that there is no need to deal with the non-standard accent issue.
As a bonus, Canadians offer a huge advantage over many parts of the globe – the ability to work in a variety of languages. Canada is largely a country of immigrants, so many people are fluent in two or more languages. In the Greater Toronto Area, for example, almost half of the population was born outside of Canada, making it the most ethnically diverse city in the world. A company serving customers in Spanish, Portuguese, Punjabi, Hindi, Tagalog, Italian or almost any other major language can find contact center staff able to provide fluent service in those languages.
This factor is becoming more important in a global economy, in which US companies rely on international markets for an increasingly large share of their sales. Being able to serve customers in South America, Asia, Europe and other parts of the world in their own language will be crucial to success in these markets.
Geographically close. Most of the Canadian population lives within 200 miles of the US border, and the distance issues are no greater than for any continental US location. This means that management meetings, inspections and trouble-shooting are no more a challenge than locations such as Omaha or Kansas City. American executives can get on a plane in the morning, travel to their Canadian location, and be home again that evening.
Time zone: Unlike India or the Philippines, the Canadian workday is the same as that of the US.
All organizations are interested in reducing their cost of doing business, and Canada has a role to play in this area as well. It is important to consider the entire cost structure when planning a contact center strategy.
Certainly, Canadian payroll costs are higher than those of Third World locations. Our research indicates that annual contact center agent wages in India average $5,000; the Philippines $8,000 and South Africa $10,000. Canadian agent wages average $24,000 (for comparison, US agents are paid an averageof $38,000).
However, when factoring in fixed costs, a different picture emerges. Our studies have found that in remote locations, it is often essential to build a facility from scratch, and install backup power, water supply and redundant telecommunications networks because the local services are not reliable.
In India, because of the time difference, serving the US market means working nights, and employers are legally required to provide transportation to and from work, for all employees. They are also required to provide meals at no cost to employees.
This means that fixed costs tend to be a much larger piece of the cost total than American companies are accustomed to – and this tends to eat into much of the expected savings in actual wages.
Add to this the fact that in many countries such as India and Pakistan, the available staff of educated, English-speaking people is extremely thin and they are concentrated in major urban areas such as Delhi, Bangalore, Mumbai and Karachi – meaning that it is not possible to find qualified employees in smaller towns and cities as is common in North America.
Also, turnover is becoming a problem – too many employers pursuing the relatively small talent pool of qualified employees. Indian contact centers experience an average turnover of 35 percent per year and over 50 percent among employees going to another contact center, our figures show – and 35 percent leave the industry each year. In the Philippines, turnover is around 27 percent per year with about the same number leaving the industry as go to another center; in South Africa it is about 19 percent for both. In Canada, about 18 percent of contact center staff leave for another contact center; about 19 percent leave the industry. Low turnover allows the contact centre to realize better returns from training and optimize agent productivity. Companies raiding competitors’ employees may indicate a smaller available talent pool of labor or higher training costs to make agents productive.
Costs of recruitment, selection and training need to be factored into the cost equation, as well as the effect of diminished customer service as new agents learn the work.
How does Canada compare to the US in costs? In many cases, Canadian costs are less than US costs, for what is essentially a comparable service offering.
Numerous studies sponsored by the Canadian government have shown that in many cost categories, it costs less to operate a business in Canada than in the US. Factors include wages, benefits, property costs, utilities, taxes and telecom costs (particularly long-distance toll charges).
These cost advantages vary by industry and location, of course, and are dependent on the fluctuations between the two country’s currencies. However, even if the Canadian dollar were to rise significantly compared to its US counterpart, the Canadian cost advantage holds true.
It is clear that companies making location decisions need to consider more than just the wage differential, which may appear so dazzling when comparing North American with Third World locations. Factors include, in descending order of importance:
Labor pool: Contact centers, unlike some manufacturing operations, need staff who are educated, articulate, and multi-skilled.
Telecom network: Because poor telecoms service can reflect badly on any organization, it is vital to have reliable, efficient, cost-effective long-distance and local service.
Real estate location: An affordable location that employees can reach is important. The location must have a sustainable base of qualified employees for start up as well as replenishing employees with normal staff turnover. If public transit is not reliable, it is necessary to make sure employees either have their own transportation or company transportation is available. Management must also be easily able to access the location, which may mean focusing on locations close to airports.
Language: Fluency in English is important, and multi-lingual skills are an asset as well.
Business practices: It is important to have a stable government and business sector, a high standard of ethics, freedom of the news media, an effective and transparent legal system, and a lack of corruption.
These factors have combined to make sure that despite the hype and current trends, most of the world’s contact centers are still located in the USA. One of the main reasons for the dominance of the US in this sector is that although wage costs are higher than in many other locations, the low fixed costs and the ability to apply the best customer service for certain segments is unparalleled in the world.
As can be seen from the map at the beginning of this article, however, we can see that Canada is a major recipient of US contact center business.
The portfolio approach
These issues are making it clear that there is no “one best answer” to contact center location decisions. As the industry matures, it is becoming clear that companies need to take what we call a “portfolio approach” to location. It is much like planning a an individual’s investment portfolio, which needs to contain a mix of assets – such as US Treasuries, municipal bonds, blue chip equities and growth stocks.
Wise contact center strategy includes assessing the needs of the organization, the strengths and limitations of each type of contact center location, and devising a plan that maximizes responses to the organization’s needs.
The Indian educational system, for example, encourages students to think in a linear way – meaning that Indian contact center employees may be excellent at process, able to solve straightforward problems for customers. Since foreign-based employers have great prestige in India, an American company will generally find it relatively easy to recruit employees to perform what is essentially the same task over and over again.
The Philippines can often be a good source of employees with a friendly, high-service capability, making them good at customer care.
What are Canada’s strengths in a company’s “portfolio” of contact centers? Our studies show that Canadians tend to be good at customer service. While many Third World employees are unable to type, talk, think, up sell, cross sell, and translate discussions into computer entries at the same time, Canadian contact center employees do not find this a problem. Their high level of education (a higher percentage of college graduates than in the US) means that they can solve complex issues that involve grey areas. They are able to up-sell and cross-sell products.
At the same time, Canada has long suffered from relatively high unemployment particularly outside the major cities, making contact center work popular and turnover low.
Canada has a population less than that of California; one large contact center can dry up the available labor in many of the smaller cities. This may mean that for larger operations, it may be best to look elsewhere or use a multiple contact centre location strategy.
In summary, no one location can “do it all” efficiently when it comes to contact centers. It is important to understand an organization’s needs, and the relative strengths of each location. However, it is also clear that Canada can continue to be a wise choice for many types of contact center work.