The call center industry is famous for offshore outsourcing, sending jobs overseas to places like India or the Philippines. While outsourcing customer service to an offshore call center cuts costs, it often comes at the expense of customer satisfaction.
But outsourcing practices are evolving. According to the Site Selection Group, the No. 1 country for foreign direct investments in customer contact, shared service, and technical support centers is now the U.K., with the U.S. in second place.
In particular, customer service call center jobs have been returning to the U.S., largely thanks to a trend called “homeshoring.” We’ll examine the homeshoring trend as well as the advantages and disadvantages of offshore and domestic call centers.
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What is homeshoring?
Homeshoring is the process of using at-home agents in the U.S. to achieve cost savings and a high level of customer satisfaction. The homeshoring trend is the result of the evolution of call center models and technologies.
Traditional call centers are located in office buildings with hundreds of cubicles and buzzing phone lines. In the U.S., where workers tend to be highly educated and demand more pay to meet the relatively wealthy standard of living compared to much of the world, this setup was costing call centers a fortune. For this reason, offshore outsourcing became a trend, allowing businesses to provide customer service without substantial payroll expenditures.
But, while outsourcing customer service to an offshore call center saves companies money, the practice can take a toll on customer relationships. Customers regularly reported language barriers, difficulty understanding agents’ accents, and other communication issues. Additionally, agents in other countries are not always subject to the same vetting requirements as U.S. employees, raising concerns about data security and privacy.
As communication technologies advanced and internet-driven connectivity became ubiquitous, a new solution emerged. In the homeshoring model, customer service staff can use secure business laptops and headsets while working from home, accessing customer information via secure data transfer. There’s no need for costly office infrastructure, and hiring an offshore call center isn’t necessary.
“The basic beauty of homeshoring is that you’re able to tap into a talent pool with individuals who are highly educated,” said Peter Hargittay, former vice president of marketing and sales operations at Arise Virtual Solutions, one of the companies that pioneered the homeshoring movement.
Nearshoring is offshored outsourcing that (in the U.S.) focuses on Central and Southern America – areas that share the same time zones as the U.S. and offer more cultural and linguistic alignment.
What are the benefits of homeshoring call centers?
Homeshoring call centers have various benefits for businesses, employees and customers.
Homeshoring benefits for businesses
- Significant cost savings: Because employees work remotely, businesses don’t have to pay the costs of leasing office space to house customer care and technical teams.
- No hiring location restrictions: When using the homeshoring model, businesses aren’t restricted to any particular geographical area when hiring call center agents. They can search for talented customer service and technical support representatives across the entire country.
- Improved customer satisfaction and retention: When customers get prompt attention via a stable connection, and can communicate well with customer service agents empowered to solve their problems, they’re likely to have a better experience and be happier.
- Potential payroll savings: If a homeshoring call center employs independent contractors on an as-needed basis, it doesn’t have to offer additional benefits or abide by regulations that apply to large companies.
Whether you have in-house or outsourced customer service, it’s essential for agents to employ proper phone etiquette in their customer service calls.
Homeshoring benefits for workers
For employees, homeshoring provides more than just employment opportunities.
- No need to commute: Homeshored customer service employees can ditch the stressful commute to and from work.
- Flexible working hours: Agents have flexible schedules while they work remotely. For independent contractors, how much they work depends on how much they want to earn.
- Opportunity for full-time work with benefits: Some virtual call centers employ full-time remote customer service agents. These agents are entitled to the same benefits a customer service agent in an office would receive.
- Freedom to pursue other opportunities: People who are self-employed or have side hustles (other sources of income in addition to their primary employment) are growing in number. These individuals can request homeshored customer service shifts that suit their schedules and needs.
The COVID-19 pandemic accelerated the move to homeshoring at a time when business leaders and politicians were discussing the importance of work-life balance.
Homeshoring benefits for customers
Customers also reap the benefits when companies take the homeshoring approach.
- Better customer experience: Homeshoring benefits callers who prefer to speak with naturally fluent English-speaking agents over a stable phone connection.
- Localized service: Hargittay said his former company can route calls to the nearest available home-based agent to connect the caller with someone in the same region or even the same state. “The idea is to provide localized service and use local talent. If you’re calling in from Louisiana, we want to have that call routed to as close to that location as possible.” Routing calls to home-based agents wherever they might be is critical in a natural disaster. Incoming calls to a business affected by a storm, for example, can be routed to an at-home agent outside the affected area.
Homeshoring has emerged as a win-win-win for the call center service industry. The business cuts costs, the at-home agent has more flexibility and employment opportunities, and the customer connects with a domestically based customer service agent.
Domestic call centers vs. offshore call centers
If you’re considering a domestic call center setup (whether in-house or with remote workers) or an offshore call center, you must weigh the pros and cons of each model before deciding on the right solution for your operations.
Advantages of domestic call centers
- Direct management: With an in-house domestic call center, you have control over onsite management. You can dictate the ratio of representatives to managers and designate training programs for new hires and ways for experienced staff members to increase their knowledge. It’s also easier to measure key performance indicators (KPIs) with a domestic call center.
- Control over recruitment: You can give onsite or outsourced HR staff detailed specs on the skills and experience new hires need for call handler and management positions.
- Control over training: Training call center agents is critical to maintaining customer trust. When using a domestic call center, if you notice customer dissatisfaction, you can swiftly address the issue and retrain agents if necessary.
- Linguistic and cultural familiarity: While companies should celebrate diversity, your domestic agents will likely share many linguistic and cultural norms with your customers, making communication more seamless and productive.
- Public relations: A company with a domestic call center can promote this aspect of its customer service. Many U.S. customers will feel pleased and more comfortable to learn that calls are handled domestically.
- Data security: Data usage and security practices vary worldwide. The U.S. approach to data security and handling prioritizes preventing and avoiding network security threats and vulnerabilities. Knowing that their private information is secure will increase customers’ comfort when dealing with a domestic call center.
Disadvantages of domestic call centers
- Significant startup costs: Outfitting a call center with the required technology in a location with fast and robust communications is expensive. If you directly employ your staff, you’ll have to deal with payroll and benefits. If you hire through a recruiter, recruiter fees will be particularly high to fill the call center from launch.
- Commercial and equipment leases: Because they need access to a broad hiring pool, domestic call centers are often located in city centers and high-traffic business parks. Annual rentals on these units are expensive and often require a 10-year lease or longer. Equipment leases can also be costly.
- Higher salaries: Salary ranges for call handlers, trainers, managers and other onsite staff are much higher in the U.S. than in most other parts of the world.
- Competition: If a competitor opens a call center near you and offers higher-paying positions, your business will be under pressure to raise wages to retain good employees.
- Financial incentives: To recruit and retain the most talented staff, you may have to offer bonuses and commissions, further increasing labor costs.
- Scalability: It’s difficult for any business to predict the future. If you sign a 10-year lease, you may run out of space before the lease is up as your company grows. Also, if the need for a call center in a particular location no longer exists, it can be costly to buy an exit from a lease.
Advantages of offshore call centers
- Lower wage costs: In the U.S., a customer service representative’s average hourly wage is $17. In India, the average wage is 99.19 rupees per hour, equivalent to $1.33.
- Non-employee agents: In most cases, overseas customer service reps are employed through a recruitment agency. While you have less control, the recruitment agency offers protection from legal action if local employment or associated laws are breached.
- Government incentives: Developing countries provide tax breaks and other incentives for American firms to relocate their customer and technical service teams.
- Multilingual support: There are fewer multilingual customer service job applicants in the U.S. and U.K. than in other countries. An overseas customer service center could communicate with your U.S. clients as well as customers in France, Spain, Germany, and more.
- Scalability: It’s much easier and cheaper to have a third-party outsourcer increase or reduce your representatives as needed.
- Business continuity: In an emergency, calls can be diverted to an offshore call center, allowing your customers and suppliers to speak with a business representative. A domestic call center could be affected by the same disruption and be unavailable.
- Severance pay: If you typically offer severance pay as part of your employee benefits package, you wouldn’t have to pay severance to call center workers you don’t directly employ. Because offshore agents technically work for a staffing company, no severance pay would be necessary for them if your company downsized or closed a department.
Disadvantages of offshore call centers
- Communication: It can be challenging for customers to communicate effectively if an agent has an unfamiliar accent. Customers might grow frustrated if they have a product issue or billing dispute and can’t communicate well enough to resolve the issue.
- Training: Before speaking with your customers, you must ensure service agents are well versed in your products, services, and company culture. But there’s no opportunity to offer in-house training to offshore agents, and there’s little to no incentive for an overseas contractor to train their staff to perform better for your company. It would be challenging and expensive to travel to an offshore site and train personnel to meet performance targets.
- One of many clients: An offshore call center business model requires a minimum number of people working at any given time. If you hire 20 people per hour from your offshore call center and another company hires 100, their calls might be given priority.
- Data security: Offshore call centers are not subject to U.S. jurisdiction, and the operating country’s data security laws may not be as stringent as in the U.S. Customers may be displeased to hear that an overseas supplier mishandled their personal data, leaving them vulnerable to financial loss and reputational damage.
- Quality of staff: You won’t be able to audit the call center’s employees to see if they’re meeting your performance targets and adequately addressing your customers’ needs.
Multichannel customer service
The move to remote working and homeshoring to address customer needs isn’t limited to answering phones, according to Aaron Kannowski, former marketing and media manager at Working Solutions. For instance, Working Solutions integrated social media management and communication with customers via online comment sections.
As customers reach out for help by phone, email, social media, and live chat, service platforms will begin to converge while customer service agents react to all communication requests from customers, no matter the channel.
“The end goal is to provide excellent customer service,” Kannowski said, “and in order to do that, you pretty much have to step up.”
Bringing jobs back to the U.S. with homeshoring
There are more than 2.9 million Americans in customer service roles, according to the U.S. Bureau of Labor Statistics. The number of customer service staff is expected to fall slightly over the next decade, even as the momentum enjoyed by homeshoring seems to gather steam.
Of course, the traffic is not all one way. Many American companies are still outsourcing customer services and other business processes to other countries.
However, the scale of the return of customer service jobs may be concealed by the number of people reentering the workforce in these roles as self-employed agents.
Mark Fairlie contributed to the writing and research in this article. Source interviews were conducted for a previous version of this article.