The growth of call centers

Providing global support: The growth of call centers

Moore, Kathleen

Call centers have had a huge impact in the past decade, but will they continue to play a major role in a rapidly changing telecommunications environment?

FEW TYPES of business facilities entered upon the economic development scene with greater speed and drama than call centers and related administrative and support-office operations.

Somewhere around 1930, an enterprising taxi company realized that since it had a dispatcher on duty all the time anyway, it could make a little extra money by having an extension telephone line from the local doctor’s office ring in its office at night. Not much changed for about 50 years.

Only in the past decade has there been a coming together of technology, human resources, regulatory climate, and other conditions that have allowed the extraordinary growth of this business. The call-center industry has expanded so that it provides a wider range of services and operates in a wider range of geographic areas than virtually any other type of business facility.

More than 200,000 call centers are estimated to have developed in the United States and Canada. Mexico, having recently privatized and deregulated its telecommunications systems, is also seeing major growth. Parts of western Europe are also seeing much new activity.

Definitive data are not available, since call centers are not well defined by most business statistics. Also, many administrative offices are often lumped together with a company’s other activities. What appears from the outside to be a warehouse may include a variety of sophisticated telecommunications activities, from telemarketing and other sales enterprises to automated material-handling systems electronically linking the facility with its suppliers and the dispatch and control of trucks.

The idea of managing vital business and personal affairs by telecommunications is now widely accepted. The tumultuous growth of call centers over the past five or 10 years is poised to continue, but in what form?

Existing Types of Call Centers

The use of telecommunications and data-processing technology for various elements of sales and administrative support has grown so fast that it is difficult to provide a comprehensive overview. New uses for telecommunications are being developed on almost a daily basis. Most existing facilities fall into one of the three following broad categories: telemarketing, administration, and technical assistance centers.

1. Telemarketing and other sales activities: In the original and most basic form, college students at these centers make outgoing marketing calls, and “operators are standing by” to receive calls generated by late-night TV ads. But they have expanded into much more complex facilities. Some call centers are colocated with warehousing and logistics services, a combination typically known as a fulfillment center.

The greatest telemarketing growth area has been the outsourcing of selected telecommunications functions to a contractual call-center operator. This can serve a range of client needs. The fundamental rationale of salesoriented call centers is accessibility whenever the customer wants it. Few individual firms have enough telecommunications activity to justify a “critical mass” of agents on duty 24 hours a day. The problem becomes manageable to a professional operator providing callcenter services to many clients.

Clients may also benefit from cost savings, the avoidance of having to manage functions outside their core business, the use of the special equipment and expertise needed to run a first-rate center, the flexibility to accommodate seasonal load variations, and other factors.

Customers and managers of this type of call center recognize the potential for large sales to savvy and demanding consumers. They are careful to use marketing techniques that are professional, polished, and effective.

Telephone agents are highly trained to provide diverse assistance to customers: advice about stylish purchases, the recommendation of gifts for the hard-to-please, the resolution of billing problems. More sophisticated call centers use specialized computer hardware and software to manage calls and make optimal use of staff resources.

Staff members are “empowered” to act on their own initiative to address customer concerns. Managers realize that a clever recommendation, an extra courtesy, or an immediate response to some problem (even if there is some cost or risk to the company) can earn the loyalty of clients who make multiple large purchases every year.

2. Administrative and processing centers: Call centers can be efficient managers of many types of data: insurance applications and claims processing; financial services; medical information; and travel consulting, reservations, and ticketing. Such facilities are primarily inbound call centers, to which various users phone in to obtain or provide information. In insurance claims centers, for example, operators complete claim forms electronically from data provided verbally by the callers. This saves the company money by eliminating the middle step of making claimants fill out paper forms. Customers like the convenience; both parties benefit from quicker transactions.

Paper documentation will not be eliminated entirely, especially where money is at stake. But even some of the most conservative public agencies access data remotely via telecommunications. One of the federal government’s most important and high-tech facilities – the FBI’s Identification Bureau in Clarksburg, W.V. – is in some ways a call center in that law enforcement agencies throughout the world use telecommunications technology to send and receive vital data.

3. Technical assistance centers: The “help desks” of computer manufacturers, software houses, and companies with in-house computer networks are the most recognizable examples of a technical assistance center. But these facilities take many other forms. Indeed, these are the elite of call centers, with some reaching high levels of capability and sophistication.

There are technical centers that support field-repair and maintenance specialists to convey all the information and guidance needed to fix any problem in the field. One of the authors once witnessed three technical assistance center engineers literally tear apart a complex electromechanical device so that they could tell a field technician on the phone how to put a broken one back together.

Transportation dispatching centers for the trucking industry receive input via radio, cell and traditional telephones, and mobile satellite dishes to keep shippers aware of the location of their materials, maintain pay records, divert drivers around bad weather or traffic jams, and manage other diverse activities. Railroads have well-tuned telecommunications systems where seasoned engineers can help the crew of a stalled train get a cantankerous locomotive running again.

Public safety “911” facilities are, for all practical purposes, call centers, dramatically emphasizing the importance of data entrusted to such facilities. Many now have remote telemetry equipment that transmits EKGs and other complex data about seriously ill patients to a center where physicians advise EMTs on treatment protocols.

Forces Supporting Industry Growth

An analysis of the industry shows that this remarkable expansion of call centers has occurred because of several parallel developments in diverse fields.

Technology: The most obvious advances today are the higher levels of technical services available to call centers. Telecommunications systems available in North America have taken truly extraordinary steps, offering new opportunities to administrative offices and every other economic sector. In turn, new demands by large users like call centers push the technology still further.

There have also been advances in technology within call centers. Most could not operate without very sophisticated hardware and software developed specifically to serve them. Systems can manage the processing of calls, assuring a fairly even distribution of workload across the agent pool. Electronic identification of incoming callers can be used for many purposes, even recognizing certain special “deep– pockets” customers and assuring that they get quick attention.

It is vital that these technologies themselves be widely available, reasonably priced, practical, and reliable. Only recently have these technologies advanced to the point where companies can entrust them with running their business. The call-center industry is highly competitive, many users are not very tolerant, and problems in any of these external or internal features might quickly put a facility out of business. Technology also allows call-center workers to achieve very high levels of efficiency and productivity in many fields.

Regulatory and tax environment: Only a fraction of today’s call centers would exist without beneficial public policies. Deregulation of the long-distance telecommunications industry has allowed rate negotiations and deep discounts for firms that purchase large volumes of service.

The rapid depreciation of most big capital investments that a call center must make – computers and related hardware and software – are permitted by most governments and provide a major economic boost to the industry.

Call centers are affected by legal issues including fraud prevention and consumer protection laws, confidentiality, and the validity and enforceability of verbal statements made by either participant in a telephone conversation. Interestingly, reputable call centers and their business associations have often pushed for new laws and regulations governing their operations. One executive noted that while laws in Quebec are a little more demanding than those in some other locations, the fact that the facility could operate in a more stringent regulatory environment “validated” the firm’s ethical conduct.

Human resources: Call centers require employees who meet several key requirements. Most importantly they need to have and project intelligence, alertness, empathy with callers, and other positive personal characteristics. Employees must manage customers and clients who are not always in the best mood: Their computer does not work, their order is overdue, or they have some other frustrating problem that has prompted them to seek help. Call-center professionals must convey concern, competency, responsibility, and intelligence, and must do so primarily by spoken communications. Impatient technonerds need not apply.

Telecommunications workers obviously must also develop expertise in the business area that the call center serves. This can be especially tough when the call center provides sophisticated technical data (a software help desk) or when there is a wide range of services that the facility provides (some centers take orders for multiple clients). Most call centers also require a technical staff to keep equipment and systems running.

Further, human resource costs are the largest of all business expenses for a call center and are difficult to offset. Telecommunications and computer equipment and service expenses tend to reach a level in the marketplace from which there is not much variation. The cost of space and utilities often is not that high to begin with, so that even if a price can be negotiated, its impact on the bottom line is not huge. Economic development officials are sometimes happier providing incentives to industrial plants with large fixed investments rather than to facilities that can relocate fairly easily.

Therefore, the call-center operator faces the apparently conflicting need for smart, empathetic people who are willing to work for competitive wages. However, call centers have more and better labor options than many other types of business facilities. They can move geographically into relatively untapped labor markets and, with flexible and attractive working conditions, spread their net wider within a given labor market.

Some Locations That Have Succeeded

Advances in technology and the widespread geographic availability of telecommunications allow call centers much latitude of choice in where to locate. Proximity to markets, historically a key locational determinant for many businesses, has been downgraded as a siting factor for call centers. Instead, location decisions and the geographic distribution of such facilities are a function of other criteria.

Work force characteristics are at the top of most call centers’ list of location criteria, especially as the United States experiences a significant labor shortage. The availability of the right kind of people under the right conditions has becx)me the “driver” for many call-center siting decisions.

Basic facilities: Low-end telemarketing facilities often locate in college towns, where large numbers of bright young people seek part-time employment. Their lifestyle, energy, and class schedules make them excellent prospects for working the odd hours required of some telemarketers. Their enthusiasm and good humor are desirable characteristics for people selling via cold calls to prospects who have not been highly prescreened. The resilience of youth helps them resist the irritation of high rejection rates. Turnover can be high, although some people are loyal employees through four years of college.

Thus these facilities are found near large public universities. Call-center operators also look for other labor resources, such as homemakers seeking part-time positions to supplement a primary wage earner’s salary or semiretired people looking for an interesting and respectable way to stay active. The location of low-end call centers is often a basic, opportunistic response to unique local labor availability.

Major facilities performing vital functions: The location patterns of high-end, professional call centers, however, show some fascinating geographic. trends, reflecting serious thought and analysis by site selectors. Several provinces of Canada have emerged as major call-center concentrations. They are leading the industry’s advance into new and more sophisticated technology and applications, resulting in call centers with a big impact on local economies.

The excellent academic systems and high average educational attainment in Ontario and Quebec have contributed to a highly qualified talent pool. Canada’s efforts to promote diversity mean that people do not simply study other languages abstractly but speak them in daily affairs. Telecommunications facility managers find that many locals have characteristics that serve the human resource needs of call centers well – friendly and outgoing but with reserve and dignity to avoid excess familiarity, businesslike and efficient without the brusqueness of New Yorkers, and a mild and pleasing accent.

What other factors have contributed to the Canadian call-center concentration? Wages are lower than in many U.S. cities of comparable size. More to the point, companies can get high-quality, professional, and loyal employees in return for moderate salary payments. A relatively high unemployment rate among university graduates is another factor. One callcenter manager observed, however, that the lower cost of higher education in Canada left graduates less desperate to pay off big loans than is often the case south of the border – so they might have more reasonable attitudes about compensation.

The small local markets and relative remoteness of New Brunswick and Nova Scotia diminish their chances to attract some types of industry but are no handicap to call centers. Indeed, new call-center employment opportunities provide a sought-after opportunity for natives of these provinces to remain close to home. Employee stability is high. The dedication and commitment of the work force in turn allows call-center operators to invest more in training and staff development.

The University of Saskatchewan is a global leader in agricultural-biotechnology R&D. Along with local commercial spin-offs in Saskatoon, it supports uses of advanced agricultural technology across the world. This includes providing data and counsel via telecommunications, whether to an individual farmer in the Ukraine or a business client in Chile. Canada offers other assets as well, ranging from a supportive attitude toward call centers by federal and provincial officials to low crime so that women do not fear traveling to and from a central city location at night.

Northern Ireland and the Republic of Ireland occupy a position in the European call-center industry analogous to the smaller Canadian provinces. Historically somewhat isolated from major population concentrations and having domestic markets of only modest size – but with a sophisticated telecommunications infrastructure and a pool of well-educated people – both countries have been successful in their quest for telecommunications-intensive business.

Within the United States, call centers have popped up in locations that might seem surprising. West Virginia is thought of as a heavy-industry and mining state, but many of its people don’t want to work in a mine or factory and eagerly flock to the white-collar setting of a high-end call center.

Critical Questions

Four major questions emerge from this assessment of call centers:

1. Are they successful? Unequivocally, yes. The proliferation and variety of call centers clearly indicate they serve a strong market demand that shows every likelihood of continuing. They also meet the pressing economic needs of their host communities, ranking high in the generation of new jobs, the creation of need for office space, and the consumption of computers and other high-tech equipment.

The technology and management of call centers have not yet been perfected. Some – not a majority but enough to irritate many users – have failed to make human and technical resources work together smoothly. Simply upgrading the background music from elevator to Elgar for the 15 minutes a caller is on hold is not enough. (And being forced to endure voice-over advertisements for the Ajax 100 Computer while waiting to get your own one running again is a world-class horror.) With regard to glitch avoidance, there is reasonable expectation that the marketplace will enforce acceptable performance.

2. Where is this segment of the telecommunications industry heading? The technical and social conditions allowing geographic dispersal of call centers have come at a time when companies have needs – for cost reductions, downsizing cumbersome and inefficient headquarters operations, more efficient relationships with customers – that are well– served by decentralizing or outsourcing many administrative functions. Many businesses and customers have become comfortable with the idea of handling certain affairs through discussions with people on the other end of a telephone line – as long as those people demonstrate professionalism and trustworthiness and the process is secure, efficient, and convenient. But no authority can definitively state whether the recent huge expansion of these facilities in their current form is the start of a long-term trend or whether the industry’s current fast growth is a relatively short-lived phenomenon that will morph into stable, more moderate ongoing development.

3. How will changing technology affect call centers? The technology that has allowed the development of call centers continues to gallop ahead at full speed. We have already entered the time when it is feasible for direct interface between humans and computers by untrained masses of people using simple equipment like the telephone. The need for human workers whose only job is to call up data on a screen is diminishing. There will probably always be a need for repositories of knowledge and expertise accessible by telecommunications, but they may be in a completely different form from today’s call centers. Many will have fewer employees, but these people will possess greater skill and receive better compensation.

4. What are the consequences of these events for economic development? Call centers have provided an economic development boost for a number of communities. Many places that have emerged as successful callcenter locations have characteristics and opportunities favorable to other business activities as well. Some of these alternative activities pay more and provide better individual and collective economic benefits for the employee and the community. As these communities continue to make economic development progress, it may be that call centers will become less mutually advantageous and move on to new locations. A future historical analysis of some currently “hot” areas may show that call-center attraction was a very helpful phase of their economic development, providing jobs and other benefits for a period of time, and equally important, helping create a base for even more sophisticated business activities.

Regardless of future events, call centers and associated facilities are having a big impact on a wide range of local economies throughout the world.

Kathleen Moore is a consultant at Fluor Daniel, Greenville, S.C. She earned a BBA from James Madison University and an international MBA from the University of South Carolina. Prior to joining Fluor Daniel in 1996, she worked in economic reform in the Ukraine and in the financial services industry.

Jim Bruce is a principal at Fluor Daniel, Atlanta, Ga. He has served as project manager on more than 350 facility planning and siting assignments, including the location of more than 25 call centers and similar back offices and fulfillment centers. A graduate of Emory University, he holds an MPA from Harvard University and has taught at Princeton and Carnegie-Mellon universities, the Georgia Institute of Technology, and the U.S. Military Academy.

Copyright S/H Publications Incorporated Apr 1999

Provided by ProQuest Information and Learning Company. All rights Reserved