Globalisation Coursework - With Natwest's New Advert will the Decision to Not Move Call Centers and Stay primarily based in the UK be a benefit or a loss to the company?

Globalisation Coursework – With Natwest’s New Advert will the Decision to Not Move Call Centers and Stay primarily based in the UK be a benefit or a loss to the company?

There has been much debate over the subject of banks moving their jobs from call centers in the UK to new Call Centers in other mainly eastern countries. The prospect of offshoring is not new to companies but there is always a large debate on whether it can lead to good or bad in the long run, with companies taking up positions on both sides of the argument. Offshoring can sometimes be labelled as outsourcing, but in fact the two are very different.

Outsourcing (or BPO - business process outsourcing) has been the national solution, contracting the administration of a company to a third party, frequently transferring staff and systems in the process. The outsourcer can generate savings through more efficient processes, management and economies of scale if the business is consolidated with other similar processes from similar businesses.

Offshoring is the permanent or long-term relocation of operations to low-cost countries such as India. Other countries that have been used for offshoring recently are South Africa, China and the Philippines as well as Eastern Europe. The main advantages are lower operational costs through relatively low local wages, good availability of well-qualified staff, and (sometimes) time zone advantages.

From this debate Natwest Bank have released a new advert showing that they have ‘people not robots’ on the end of their phones to talk, direct telephone lines to each branch, and that they haven’t moved their call center operations to India. India is now the most common country that is referred to when talking about moving jobs offshore, but there are other places that the jobs go to including the Philippines and China, and others. In one piece of research done by the DTI (1) on the UK’s contact center industry, it shows a comparison between countries for their key competition markets and compares countries such as Ireland, The Netherlands, but also usual places such as India and South Africa. In the report they showed that call center jobs in Ireland had the same basic costs with only salaries and few other costs varying marginally (1). In the Netherlands they found that general costs including salaries were roughly the same, but rent was hugely cheaper, with call center office space in Amsterdam coming in at 30% of London office rental costs and 64% of Birmingham office rental costs (2).

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Why then would Natwest Bank ignore these cost savings and stay based in the UK unlike other rival banks like HSBC? Well they are partly relying on the old fashioned idea that you feel more comfortable talking to a British person than a person from India. This is a fairly good decision by the bank, as from research done by A & L(3) shows that about 87% of people would not be happy having to speak to someone abroad about their account, while a small 9% had no preference. In my own questionnaire my results showed that 38% of people would prefer to talk to a British Employee, and the other 62% had no preference (4). This does not agree with the results Alliance & Leicester had gathered. This may be because as they are a bank themselves their results were not completely free from bias, as

to keep a positive attitude towards the company. However my results may have also been flawed as there are only based solely on the region of East Yorkshire whilst the Alliance & Leicester questionnaire would have been national

The main point though about moving call center jobs to countries abroad (mainly India) is that huge savings in costs are made with an average 40% saving in operating costs as wages in India are 10 to 15% of UK wages (5). From the evidence shown below (6), it is apparent that the operating budget changes from the UK to India. This shows that salaries account for over 72% of a typical UK call center’s operating costs, compared to 59% of an Indian center. The gap between agent salaries is even more noticeable decreasing from 64% to 39%. Other elements such as IT, telecoms and utilities are less noticeable in change and some may even be more expensive offshore than in the UK. Some of the main cost savings shown here and throughout the industry are made in the difference of employee salaries.

In a place like India the main cost advantages are wages which are hugely different. From this source (7) it shows that Indian employees are gaining little in comparison to UK employees and that it seems as if the companies offshoring their services are exploiting the people. This is not the case as the researchers who published this source also stated that these employees are actually earning more than most other jobs offered in that country at that specific age and qualified status. However in my independent questionnaire my results

gathered showed that a staggering 58% of people believe that the companies are doing this as they can get away with paying cheaper wages, and the other 42% believed that companies offshored work as they could increase their profits (8). This shows that people then don’t know that companies moving to eastern countries do pay good wages relatively.

So with all this evidence pointing to mass savings through lower wages and other expenditures why is it that Natwest has decided to stay in the UK? Well one other reason for this is that other independent research has shown that although India graduates can be just as or even more productive than their UK counterparts, callers are more likely to call back if they are calling an Indian call center. This is what is called First-call resolution, and the levels of this resolution range from 60% in India to 87% in the UK meaning that 27% more calls made to UK center are resolved first time without he caller having to call back (9). If the caller does have to call back this pushes costs up as more employee time is in use, it reduces customer satisfaction and can also lead to a demoralizing effect on the employee taking the call.

What’s more, although India boasts a highly developed IT sector, there is a weak telecoms and electricity reliability, with regular power cuts and interruptions to service. Voice and data bandwidth are also restricted. In some places the tariffs that the company may have to payout for international calls can equalize the labour cost advantages.

There is also other research showing that 55% of customers in Scotland would consider switching their account to another bank rather than having their accounts managed in India. This switch is equivalent to Lloyd’s TSB losing 7.8million accounts to those of its competitors which are staying based in the UK (10). This would be a huge loss for the company, but in actual fact there would be little shift in accounts as there was little shift when HSBC decided to move call center jobs and other services to India. Also my questionnaire showed that a mere 28% of people would even begin to consider moving their accounts if their bank did more work offshore (11).

Furthermore UK employees answer 25% more calls per hour than Indian call center employees, who also take an average of one minute per call longer as well. These long call times don’t just have a negative effect on the Indian call centers because of additional costs but they can also lead to lower customer satisfaction. On the other hand with this in mind there is only a little difference between customer satisfaction rates for the two countries call centers with India having a 68% satisfaction rate whereas the UK has an 81% satisfaction rate (12). Some UK companies feel that although the cost benefits may be real, capital recovery could take a long time and that the customer’s experience may worsen.

With all this evidence is it a positive move for a company to offshore work to India and other foreign countries? Firstly that would depend entirely on the company in hand and what serviced they offer, but for a bank then the answer would rely on the company itself and the decisions made by the governing committee of that company. Natwest believe it is a point they can market to customers, and they now have some right to as there has been some recent reports of insourcing. This is western firms taking back services previously offshored

to India. The two larger cases are Dell computers and the Lehman Brothers investment bank. Companies should seize these examples and record what ever may have gone wrong, including customer responses and the media reaction using it as a template to base future decisions on offshoring work.

So overall is it a good idea to offshore work to India? I would have to say no as the evidence doesn’t look good for companies thinking of moving services out of the UK as it can influence customers to feel negative about that company (13). There is an uncertainty of who you are going to talk to on the end of a phone when calling call centers with 69% of customers wanting to know if they are calling an offshore location (14). With this large percentage wanting this option there must be a negative feeling when calling an offshore location and it can generally just make people fell cheery talking to a British employee. However this has been taken on board by call centers now and there are beginning to train their staff in British events such at the weather, Coronation Street and even times of major football matches (15). But this luxury training can also begin to equal out more costs that the company may have saved, and this is why I believe that yes it would be a loss to the company of Natwest if they did choose to move out of England.

13 - Article in “The UK Contact Center Industry: A Study” (DTI)

14 - Article in “The UK Contact Center Industry: A Study” (DTI)

15 – Watchdog: Bosses claim staff are second best (Evening Mail)