Reshoring ' What is it & Will It Happen?
We've all heard the times offshoring, nearshoring, homeshoring, rightshoring & multishoring. They are generally terms used by companies or groups of companies designed to promote a particular idea. The latest of these to become a buzzword is 'reshoring' and the fact that Prime Minister David Cameron has decided to use the term gives it added prominence. This article looks at the reality of reshoring in the call centre industry.
In short, reshoring is the process of moving work back to The UK which had previously been offshored to a country with a lower cost base. We've all heard the arguments for and against offshoring but the important point is what companies actually do. In recent years, we've had a number of companies being very public about their decision to move work back to The UK. However, work which was previously being done in The UK is still being offshored and there has been far less publicity about this.
Why is it Important?
When vast numbers of call centre jobs were being moved to places like India & The Philippines, the Government really didn't seem too interested. The economy was doing well including in areas with high densities of call centre agents. However, the coalition Government which took over in 2010 was quite clear that there would be job losses in the public sector to deal with the country's deficit. This is important because the areas with high numbers of call centre agents such as North-East England, South Wales, Northern Ireland and parts of Scotland were the same areas as large numbers of Government employees. The other economic argument we have heard much of in recent years is the need to rebalance the economy. The economy of The UK had become too dependent on certain industries & so the government wants to bring in jobs in other sectors. Of course, the question is whether call centres is one of those sectors that the Government wants to grow as part of this. We are unlikely to see any significant financial incentives from Government for the call centre industry in the way you might see in high paying industries such as video game development or other high-technology sectors. In effect, David Cameron's rhetoric on rightshoring means very little in terms of call centre jobs coming back to The UK but it does reopen the onshore/offshore debate.
Cost v Value
The debate about whether to offshore, retain onshore or reshore jobs is increasingly based on cost or to be more precise, it's based on value. Offshore costs are still considerably lower than onshore costs but the difference is decreasing. Demand for quality agents offshore is very high and this has led to wage inflation. In contrast, UK salaries has stayed fairly constant. However, the cost argument is far more complex than this. The easiest way to compare the total costs is to look at outbound where companies consider the total cost per outcome. I was recently speaking with a company who used both onshore & offshore resources for telemarketing. The cost onshore was roughly 3 times the cost of those from UK outsourcers. However, the volume of sales per hour was 2.3 times higher in The UK than offshore and there are other factors which further complicate this. For example, the numbers of complaints offshore was higher as was the amount of mis-selling. The cost of management for each resource wasn't accurately measured but it was felt that it cost more per sale to manage the offshore resources. When you add in other factors such as the cost of data & the potential for negative brand image offshore, the company is now looking to gradually reshore work. Of course, in customer service, it may not be as easy to make this financial argument. Talk time is generally higher offshore as are complaints but even considering this, it is very difficult to make an economic argument for reshoring. When I say it's 'very difficult', this doesn't mean that it's impossible. I've already developed one model for assessing this and I'm developing further models specific to clients. However, the decision on whether to reshore is more likely to be made based on company values & resources & the intervention of our Prime Minster is unlikely to have any significant impact on this.