How Companies are "Reverse Shoring"
to Improve Customer Service

By Mark Wilson

March 2010

The economic slowdown forced U.S. companies to examine ways to reduce costs, streamline operations, and return to profitability.  As a result, many organizations in all vertical markets embraced offshoring specific IT and customer service positions to countries like India and the Philippines where, on average, labor costs were much less.

As recently as 2005, one analyst firm predicted that the percentage of IT jobs from the United States and other developed countries that were sent offshore would increase from less than 5 percent in 2005 to 30 percent by 2015.  "It's a tectonic shift," Gartner analyst Frances Karamouzis wrote in a report released at the firm's outsourcing conference in 2005.  There were similar trends in the customer service arena as companies sent contact center agent positions offshore as an expedient tactic to trim call center payroll expenses.

Indeed, offshoring may have produced short-term financial gains for some companies.  But, as with many business challenges, quick fixes don't always have lasting results.  In the end, companies that based their labor-sourcing decisions solely on cost realized that their short-term tactics failed to produce the long-term uptick on margins and profit and, even worse, may have negatively affected the customer experience. 

Today, there is a paradigm shift in the contact center arena.  While yesterday's model was laser-focused on cost cutting as a stand-alone option, today's strategy is more comprehensive and forward-looking and, to those ends, customer focused.  In sum, while the bottom line remains important, smart companies are looking to create an atmosphere where customer retention and loyalty are paramount and viewed as the primary way to drive long-term growth.

In the contact center environment, the customer experience begins and ends with agent interaction.  The main driver influencing the customer experience is the agent's level of knowledge and ability to quickly resolve issues, according to the CFI Group, which uses the University of Michigan's American Customer Satisfaction Index report.  This is a huge differentiator for U.S.-based agents.  According to the report, U.S.-based contact centers beat offshore contact centers at every level, especially in customer service representative performance and issue resolution.

Domestic agents perform impressively, scoring 84 out of a possible 100 points, while offshore agents score 26 percent lower at 62.  Additionally, U.S.-based contact centers do a better job of resolving issues on the first call (68 percent of the time) than those perceived to be located offshore (42 percent).

The report also states that customers are nearly twice as likely to recommend the company to others if they think the contact center is in the U.S.  At the same time, they are three times more likely to defect if they believe it is based offshore.  This was a common theme across various vertical industries, including, including banks, cable and satellite TV, cell phone service, credit unions, hotels, insurance, personal computers, retail, and government.

Not surprisingly, companies were taking steps to improve customer satisfaction even before CFI's recent report was released in June.  Several large firms, including Dell, credit card giant Capital One, and insurer Conseco, shifted at least some customer-support operations back to the United States several years ago. 

In early 2009, Delta Air Lines Inc. announced it had stopped using India-based call centers to handle sales and reservations.  According to a story in the Wall Street Journal in April, Delta said it stopped routing calls to India-based call centers over the first three months of 2009.  The story stated that customers had complained they had trouble communicating with Indian agents. 

A March 2009 story in Edmunds Inside Line states that automaker Chrysler is in the process of moving its customer assistance center from India back to the United States.  As a result, Dodge Challenger customers with questions or complaints about their car or other Chrysler vehicle now will talk to an agent in Michigan or Utah.  "In these difficult times, we all must view each customer as a keeper," Paul Alcala, Chrysler customer satisfaction director, posted on the corporate Red Letter Dodge blog.

Undoubtedly, not every offshore experience produces negative outcomes; companies will likely continue to look at offshore customer contact center options to determine whether they make sense for their respective organizations. 

At the same time, smart executives realize that, in this economy, companies cannot afford to lose customers from poor customer service.  Moreover, there are 100 percent domestic companies that operate a state-of-the art technology platform and employ experienced call center agents who are equipped to quickly resolve issues and up sell products and services, when possible.  This produces the short-term advantages of generating revenue and the longer-term goal of building company growth through satisfied and loyal customers. 

Mark Wilson is CEO and founder of Ryla, Inc., a call center solutions provider.  For more information, email mwilson@ryla.com.