Since the early 90s, call centers have been shifting facilities to countries like India, China, and Philippines. The main reason for call centers being attracted to developing countries are the cheaper labor rates, availability of workforce, and government incentives. Global communication has also improved with advanced technology which made off-shoring viable for call centers. As a result, off-shoring accounted for many job losses in the U.S.
However, there has been a shift in the trend lately. Companies are slowly returning production back to the U.S. An estimated 5 million Americans are currently employed in 66,000 call centers. According to a recent article on Area Development, the Southeast, Southwest and Midwest regions of America have gained the most new facilities and call center jobs. Workers and real estate in these parts of the country are plentiful, and labor rates are reasonable. Texas, Kansas, Michigan, and Ohio have been described as major winners. The desirable markets in the East and West Coasts are already saturated with contact centers, and adequate workers are not available.
Furthermore, according to 2014 research conducted by Hackett Group’s Global Business Services Executive Advisory program, a total of seven cities from the Southeast, Southwest and Midwest lie in the top ten cities for off-shoring alternatives, which was conducted on more than 30 cities in the U.S. and based on a weighted mix of factors. The research shows cities in the U.S. which have become alternatives to offshoring for corporate finance, IT, and other business service operations.
The top city in the list is Syracuse, New York which has inexpensive real estate, qualified work force and government incentives.
If we look at expansion and new facility data of call centers, from 2009-2014, we can see that a total of 305 new call center facilities have been built, and 373 call centers, in total, have gone through some form of expansion in the U.S. The highest point in call center growth can be seen in 2009, where a total of 60 new facilities were established and 72 facilities went through expansions. This trend declined in 2010, and the lowest point of growth was seen in 2011 where only 40 new call centers were established and 59 facilities went through expansions. However, expansion of facilities have been up since 2012 as 64 facilities expanded in 2013 but only 42 new call center facilities were built during that year. In 2014, 58 call centers went through expansions and 49 call new call centers were built.
Expansion and new facility trends show the rise of call centers in the U.S. Call centers need locations with a vast pool of available workers. Call centers hire semi-skilled employees to highly-skilled employees. They usually hire 300-500 people, and in some cases, also require facilities which have the capacity to hold 1,000 people.
According to research by Reshoring Initiative, based on 300 companies, three call center companies have re-shored call center jobs back to the U.S. AT&T created 360 jobs in Birmingham, Alabama in 2009. Acco Brands invested $1.6 million in bringing 162 jobs to Memphis in 2014, and Lenovo created 185 jobs in North Carolina in 2013.
Rises in the wage differential of workers in developing countries and access to skilled labor in the U.S. are two major incentives for re-shoring. Over half of the re-shoring has been from China, followed by Mexico and India. According to a recent article in Area Development, rising labor costs in developing countries, minimal to no wage inflation in call center wages in the U.S, and the great recession and endemic under-employment, has made U.S. workers more affordable. There is also a surge in merger and acquisition activity in the U.S. involving many companies that rely on contact centers.
In addition, customer dissatisfaction is also one of the major reasons for call centers re-shoring their operations. CFI Group’s Contact Center Satisfaction Index (CCSI) of 2014 found that people are more likely to recommend a company/organization if they perceive their call center is located in the U.S. Respondents who believe they have called a customer service center located outside the U.S. are 44 percent less likely to recommend that company/organization. Nearly two-thirds of respondents indicate the location of a company’s customer service center impacts their likelihood to do business with that company.
Call centers based in the U.S. have slowly increased on-shoring facilities and have started to rely on American workers to get the job done. With this increase, we might see a possible surge of jobs and growth in facilities and expansions in the next few years. As expansions grow, companies will look to target areas which provide a vast pool of talent to choose from with reasonable real estate prices and government incentives. Bringing back call centers will not only create jobs and increase economic gain, but also improve quality in services.