Stan Lepeak, Managing Director, EquaTerra Global Research

U.S. Senator Chuck Schumer recently introduced a legislative bill that if passed would impose a $.25 “excise tax” on any call center calls that originate within the U.S. but are serviced outside of the country. Additionally, if passed, the bill would require organizations using non-domestic call centers to disclose to callers where their calls are being transferred to and handled (i.e., “this call is being routed to Mumbai”). These organizations would have to annually certify to the Federal Trade Commission  that they are complying with this requirement or face “civil penalties.”  The purported goal of this bill (beyond simply adding another tax on business to help the budget) is to “rein in outsourcing of call center jobs” and “go a long way toward keeping American jobs right here at home.”

While “saving” or creating domestic jobs, particularly under current economic conditions, is a laudable goal, there are several elements and potential ramifications of this bill that merit serious scrutiny. The first is economics. If, for example, the cost disparity between a domestic and non-domestic US call center is 50% (e.g., $30/hour fully loaded cost domestically vs. $20/hour non-domestic) the offshore resource is still cheaper when answering up to 40 calls per hour, a number higher than virtually any call center role outside of directory services. Add in the additional higher costs of domestic supervisory and management staff, training, facilities, infrastructure, etc. and the non-domestic resource is still cheaper per unit and even more so in volume. So in this respect, even adding in the cost of compliance to this bill, the non-domestic model is still more economical, especially for organizations or service providers with existing given sunk costs offshore.

The second factor is quality. When U.S. companies and organizations first began to take contact center work offshore in the late 1990’s saving money was a big driver but so was quality. Domestic call center work was never a glamorous or highly sought after job for most people and employee satisfaction levels were – and are today – often low. Unhappy workers with high rates of turnover do not deliver a high quality service. At META Group (not part of Gartner Group), where I was employed until 2004, the call center benchmark practice defined three common “attributes” of domestic call center workers: 1) I hate my job 2) I hate my boss 3) I’m underpaid. Setting aside whether or not non-domestic workers are any more satisfied with their jobs, it is not as if domestic call centers are bastions of happy and well paid workers with clear career advancement paths.

The third element is the continuing automation of call center services. The number and percentage of employees and customer interactions that have been automated over the past ten years has increased many fold. In many circumstances, access to live agents is not even an option today (have you ever talked to someone at Amazon or eBay??) or is difficult to do. This trend will only continue as self-service system capabilities continue to improve and generations of people that have grown up in a self-service, Internet environment come to represent the majority of organizations employees and customers. Moves to tax call center agents will only further accelerate adoption of greater automation.

The recent HP announcement on automation, while not driven directly by call center worker tax threats, nonetheless exemplifies this trend. Every outsourcing service provider that EquaTerra works with has similarly touted the need and desire to introduce greater automation into their service offerings, especially in call center work. So in this respect the Schumer bill is protecting yesterday’s jobs and helping to accelerate their demise instead of focusing on creating tomorrow’s job.

The final element is more straightforward and fundamental. Should the U.S. government micro-manage how organizations and businesses operate, especially in an increasingly competitive global market?  The answer to this typically depends on your political and economic leanings and philosophies and is mostly a moot point because whether or not the government should micro-manage it does. To the users and purveyors of call center services, however, it would be wise to carefully study the likely real – as opposed to lauded – ramifications of this bill and other similar legislative efforts before responding.

Filed under: Call Centers, Market Trends and News, Offshore & Captive Centers, Outsourcing, Regulations Compliance by EquaTerra