Bill Kohnen July 2014

Options for Customer Service Call Center

Sample Decision Process Template for US Based Company Considered Moving Customer Support Outside of the US.

Assume Company has some non call center presence outside of the US

Bill Kohnen July 2014

Goal

• To find cost effective plan for growth of customer support needs.

• Focus efforts of higher cost US based call center operations on higher value and impact Tier 3 issues.

Bill Kohnen July 2014

The Philippines

• Good English speaking skills. • Mushrooming call centers are putting pressure on

labor supply• Call centers were located only primarily in Manila and

nearby Makati but now big centers in Cebu and other areas

• High infrastructure costs. • People are completely in tune with US culture.• Strength is customer service and less technical

problem solving and resolution.

Bill Kohnen July 2014

India

• India has a huge reservoir of educated workforce comfortable with English language.

• It has a 12-hour time difference with US and 6 to 7 hours with Europe.

• Low labor cost but high attrition rate. • Low infrastructure cost• Strength is technical support and cross and up

selling

Bill Kohnen July 2014

Ireland

• Shares the same time zone as EU countries. • Highly developed infrastructure. • Well educated workforce. • Language advantage• Option for European Support

Bill Kohnen July 2014

Call Center Cost ElementsCost Structure Includes % of Total

Variable labor Loaded cost for CSRs and Supervisors 70.40%

Fixed labor Loaded cost for management and operational analysts 5.40%

Tech support labor Loaded cost for IT and Telecom support staff 4.50%

Technology IT and Telecom technology depreciation and maintenance costs 2.60%

Telecom/NetworkingVoice network per minute, cell phones, and depreciation and support for voice and data network infrastructure across sites 4.60%

Facilities Rent, maintenance, utilities

Miscellaneous overhead Travel, chargeback for other departmental services (e.g., HR, 7.20%

accounting), and per-person, budgeted miscellaneous expenses 5.30%

Labor is clearly the biggest cost and Variable labor cost and grow directly as operations scale.Other costs will grow upon growth but not at same rate.

Bill Kohnen July 2014

By offshoring to India and the Philippines the companies can save as much as 50% to 60% of the cost compared to the US

Example Compares with 76.7 Spend In US

• India narrowly edges out the Philippines in terms of costs.• However, India under greater Labor cost growth pressure forcing some call

centers to move to more rural areas.

Bill Kohnen July 2014

Labor Makes up major Cost ~ 75%

• Labor costs form a major portion of the total operating expenses in call center economics.• Low labor costs in India and the Philippines (almost 12%-15% of US levels) make them attractive call center

destinations• Prevailing attrition levels and the surge in call center numbers in India are adversely affecting

the labor cost advantage

Bill Kohnen July 2014

Overall Comparisons

• India and the Philippines a very close on overall cost measures. Both the countries have scored over the others primarily because of low labor costs and availability of an educated workforce.

• India’s cost may rise at a higher rate than the Philippines in the coming years.

Bill Kohnen July 2014

Option 1: Develop own Call Center at Existing Site in India or the Philippines

• Leverage existing Infrastructure• Keeps knowledge internal• Will have to hire Manager• Will have to create call center operation from

scratch• Will become fixed cost• Will still need oversight and interface with US

based Executive Management

Bill Kohnen July 2014

Option 2: Engage with Service Provider in Country you have operations in

• Quick Start Up

• Could still Manage from India or Philippines

• Would not create fixed cost

Bill Kohnen July 2014

Option 3: Philippine Based Call Center Service ProviderShort Term Fast Savings and Start up

• Cost comparable to India• More accessible from West Cost than India• Arguably English skills more similar to US

speakers.• Headquarters of many Philippine call centers

based in the US and/or account Managers would be US based and experienced.

• As needed business trip costs to Philippines are 60% of that to India.

Bill Kohnen July 2014

Option 4: Colocation

• Set up “colocation” call center within another corporations site.

• More control over hiring• Can get better people• Long term more control of cost• Must set up operation in PI• If successful could transition out to own site• More risk

Bill Kohnen July 2014

Option 5: Hybrid Model

• Develop Customer Service Team at own site in India or the Philippines but augment with third party provider onsite with backup offsite.

• Minimizes investment• Flexible capacity• Problem is it adds additional complexity to

manage.

Bill Kohnen July 2014

Survey of Main Options

• India – Good for big scale and technical and script related

• Ireland – Good Base for Multi language EC support

• China – Emerging for Global support but still early

• Philippines – Best total cost and capability options for next 5 years

Bill Kohnen July 2014

Suggestions

• Before Developing own center with potential other providers operating both in India and the Philippines

• Conduct preliminary interviews with potential Mangers of your own center or those that will Manage 3rd parties

• Get benchmark pricing

• Interview people at those providers and see how they compare to the people you could hire