Emerging Trends in the Teleservices Industry

By Richard Zielinski

November 2004

The most significant development in the communications industry in the past ten years has been the dramatic rise in network capabilities and the subsequent fall in communications pricing.  These forces have opened the floodgates for the trade in employment services on a global scale.  The effects of this revolution have been felt in almost every sector including migration, investment, real estate, education, trading, governance, and law.  The empowering capabilities of advanced communication technologies will certainly be the pivotal force shaping economies and societies over the next 50 years.

In the 1980's businesses in the U.S. and Western Europe began to realize the potential benefits that telecommunications could offer in terms of wider customer access and improved service care.  A highly competitive business climate, falling telephony costs, and high telephone penetration combined with consumer demand helped to create a boom in teleservice employment.  In the U.S., call centers expanded quietly in the 1980's, aided by the telecom companies' decision to offer 1-800 ‘toll-free' calls from any region within the country.  By 2001, call centers employed close to four million Americans.

The rapid growth of call centers that occurred in the 1990s in the U.S. began to level off after the year 2000.  These leveling numbers can be explained, in large part, by the offshoring of these same teleservice jobs.  Initial estimates show that 1.9 million service jobs have been exported from the U.S. since 1995.  The Forrester Research Group estimates that 3.3 million service jobs will leave the country by 2015, a number that is considered conservative by many analysts.  Economists from the University of California at Berkeley estimate that the total number of U.S. jobs vulnerable to being outsourced is around 14.2 million.

While the costs and benefits of outsourcing to developed countries are hotly debated here in North America, developing countries are eagerly recruiting these jobs.  India, with its 25 million well-educated English speakers, has been a major beneficiary.  The typical call center agent in India is a young, recent university graduate working on a fulltime contract.  An equal number of men and women are employed in this sector and when offered jobs, the overwhelming majority of applicants accept.

In the services trade many highly skilled tasks are already being performed in developing countries.  Engineering, litigation, design, and investing services are all currently being imported from less developed countries (LDCs).  In the teleservices industry, jobs that can be standardized and are rule-based are the easiest to transfer and this is where most of the early growth has been.  Companies are effectively using call centers to save up to 60 percent off original home-country costs.  These phenomenal savings are driving companies worldwide to continue this trend, constantly pushing its limits.  As businesses and consumers warm up to this phenomenon, we will continue to see everyday services transferred abroad.  The limits of this type of trade are restricted only by the imagination and the creative abilities of entrepreneurs worldwide.  The economic forces and the technology enabling these practices are growing stronger and penetrating deeper into society every year.  As this process unfolds, the capabilities and opportunities for employment growth in teleservices for both LDCs and developed countries will grow.

Teleservices have the potential to be both a positive and significant tool for social and economic development worldwide.  Today we see remarkable examples of people providing high-skilled services over fiber optic cables and across continents.  Growing wage differentials between regions are driving these phenomena well into the future.  Ultimately, it is up to the citizens and entrepreneurs of developing countries to decide to what extent and to what level they can service the global market.  It takes a deep understanding of innovative technologies and an imaginative mind to create new business ideas and to transform them into reality.  Fortunately, many people around the world are doing just that and it is this entrepreneurial spirit that has emerged as the engine of global economic growth.

Richard Zielinski is a researcher at the Progress and Freedom Foundation, studying the digital revolution and its implications for public policy.  The views expressed are his own.  He can be reached at rzielinski@pff.org.  His Master's Thesis entitled, The Offshoring of Teleservices, Opportunities and Macroeconomic Effects on Developing Countries, can be viewed in its entirety at www.connectionsmagazine.com/papers.

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