There’s been a long-standing trend in the contact center industry that’s been at the center of cost reduction.
Specifically I’m referring to “labor arbitrage”: The process of substituting lower cost labor from other geographies.
This global phenomenon has gone through some unique phases:
- Lower-cost in-country resources
- Outsourcing to specialist firms
- Lower-cost cross-border resources
The economics behind this process have been extremely compelling for contact center managers. That said, from my recent conversations with executives, I have gotten the distinct impression that the arbitrage has slowed down or even stopped. Some companies have clearly pushed as much labor as they can across borders.
I was wondering how this looked at a global scale, and so I did a little analysis.
Datamonitor, a leading analyst firm that covers contact center agents and technologies, shows continued growth at about a 4% compound annual growth rate (CAGR) in agent positions worldwide. (For you math geeks who want to check out my calculation, here are the raw numbers - 2007: 7.9M; 2008: 8.2M; 2009: 8.6M; 2010 8.9M).
Now the comparison. Datamonitor shows that the CAGR for outsourced positions is dropping substantially for the
U.S.: 2006-2008: 15% vs. 2008-2010: 5%. That’s a huge shift in the rate of change of the rate of change (yes calculus fans, that’s the second derivative! Mr. Piatt, my math teacher, will be so pleased!). But what does it mean?My take: this validates what I’m hearing from executives. What we’re seeing is that most of the “labor arbitrage” that can be achieved has been ‘squeezed out’ of the system. It appears that the remaining positions can’t be taken across borders for structural reasons (legal/privacy restrictions, customer service quality concerns – real or perceived, availability of skills, management overhead, rising cost of labor globally, etc.).
Says Spock, eyebrow raised: intriguing.
Our perspective is the continued cost pressures faced by contact centers will turn to other fronts. In particular, this will continue to accelerate the adoption of self-service technologies, including kiosk, web self service, and of course voice self-service.
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