Nearshoring alternative to Offshoring for Australian Contact Centers

2010-03-11 - Australian companies seeking to outsource their contact center operations can achieve considerable cost savings by using "nearshore" regional alternatives in Tasmania instead of the more expensive capital cities and even offshore locations, according to a major industry report released by Access Economics.

In fact, extensive cost analysis by Access Economics has found that the price gap between operating a contact center in Tasmania versus offshore locations such as India and the Philippines is actually minimal. Despite common perceptions that Asia is much cheaper because of lower wage rates, once total operating expenses are factored in together with other risk factors the price gap is substantially reduced.

The hidden costs of offshoring
The report "Nearshoring: Examining true value in customer contact networks", jointly commissioned by Excelior and Tasmania's Burnie City Council, has found that, for many call center functions, nearshoring compares extremely favorably with offshoring when all the costs of outsourcing and managing a contact center are considered. Indeed, the gap in upfront costs is considerably narrowed and even eliminated in some scenarios.

The Access Economics research has found that the advertised price of offshore contact centre services in India and the Phillipines generally hides a range of other indirect costs facing the outsourcing company. These include staff training and indirect cost considerations such as overseas call charges and higher rates for call escalation, international travel expenses, management fees and other incidental costs such as extended hotel accommodation costs if Australian managers are required to be on the ground for long periods. Lower staff retention rates in offshore centers also lead to greater training requirements, and Australian companies also face risks associated with offshoring to less stable socio-political environments.

The costs of lower quality, where a minute of call time per seat in an offshore environment might not achieve as much, from the customer's perspective, as an equivalent minute in an Australian context, are also considered as an additional 'cost'. "The inclusion of these indirect, but nevertheless real, costs into the regional comparison serves to significantly reduce the cost advantage of offshoring," Access Economics said.

Picture: Niggl/aboutpixel

Author(s): Sarah Dreps

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