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In the 1990s, management consultant and author Peter Drucker famously said, “Do what you do best and outsource the rest.” It's a principle that many leaders have embraced, and for good reason—it’s proven successful for many businesses.

That said, while this idea has stood the test of time, the world we work in today is much more complex. The business landscape and outsourcing options have evolved, bringing new opportunities and considerations that require a more nuanced approach.

Expectations in customer experience (CX) have shifted too. According to a 2018 global survey of 15,000 people by PwC, 70% of customers ranked speed and convenience as top priorities in their CX. Yet, many companies still fall short in their contact centers, with customers reporting frustration over long wait times and frequent handoffs. This often leads to high abandon rates and unresolved issues.

How well does your contact center measure up to today’s CX expectations and opportunities? If you’re considering improving your CX and weighing an in-house versus outsourced call center, there are several factors to consider. In this article, we’ll guide you through the decision-making process by highlighting both common and less common factors to evaluate when deciding whether to outsource.

Call center management options

Call centers handle a wide range of services that streamline business operations and improve customer experiences. These include answering customer support calls, generating leads, processing orders, telemarketing, and conducting market research. Companies have several options for managing these functions.

Self-managed

• On-premise: IT infrastructure hardware and software applications hosted on-site
• Cloud-based: Application and infrastructure resources hosted online

Outsourced

• Onshore: Services provided by a third party within the same country as your customers (domestic outsourcing)
• Nearshore: Services located in a nearby country within a similar time zone
• Offshore: Services located in a distant country and time zone

These options vary widely in factors like labor costs, service quality, data security, technology, language proficiency, cultural compatibility, specializations, and accessibility.

Outsourcing contact centers to third-party providers, known as business process outsourcing (BPO), is a popular choice. Many businesses start with outsourcing to save on costs and later realize additional benefits, such as improved service quality, access to skilled workers, and the ability to adapt to technological or regulatory changes. However, there are concerns, such as losing employee and customer insights, security, and control.

Call center costs and comparisons

Understanding the costs involved in operating a call center—especially if you don’t currently have one in-house—can help guide your decision.

• Capital expenses: Initial costs for setting up a call center, including hardware, equipment, and software licenses
• Infrastructure: Facilities to house operations (unless using a virtual call center)
• Human resources: Costs for hiring, training, and managing staff, including salaries and benefits
• Operations: Ongoing monitoring of productivity and effectiveness

For reference, a 2006 HBR article noted that setting up a typical 250-seat call center could cost $5.2 million.

Outsourcing call center operations typically cover the costs of staffing, training, and infrastructure. Additional advantages include:

• Trained and experienced agents
• Security, as the outsourced provider is accountable through a binding agreement
• Scalability, allowing for easy adjustment of resources as your needs evolve

Call center destinations

The cost of outsourcing contact center services varies depending on location, and there are several popular destinations. Common countries for call centers include Argentina, Brazil, India, Malaysia, Poland, the Philippines, and the United States. For instance, a call center seat in Cape Town costs one-third more than in India but is about half the cost of operating in the UK.

Outsourcing options will continue to grow. A 2023 research report by Technavio forecasts a 4.8% compound annual growth rate for the call center outsourcing industry from 2022 to 2027. This growth highlights the increasing availability of new outsourcing destinations, emphasizing the importance of evaluating more than just cost when choosing a location.

Additional considerations

As outsourcing contact centers become increasingly attractive, it’s important to assess the factors that could affect the long-term success of your partnership. Understanding the minimum requirements of an offshore solution and weighing the benefits and risks is crucial.

Here are a few additional considerations when evaluating domestic, nearshore, and offshore outsourcing options:

• Political stability: It’s vital to consider the geopolitical stability of a provider’s country. Certain events can have a significant impact on the IT services industry, highlighting the importance of selecting a partner in a geopolitically stable region.
• Specializations: Different regions excel in different areas, shaped by their education systems, access to technology, and industry focus. India is known for its IT sector, Latin America for its adaptability, Tunisia for its expertise in finance and healthcare, and the Philippines for its strong work ethic. Understanding these regional strengths can help ensure you choose a partner with the right specialization for your needs.
• Currency: Currency fluctuations can impact the cost of outsourcing, as exchange rates and inflation affect both wages and overall service costs. Be mindful of these changes when structuring contracts and setting expectations.
• Government incentives: Some countries, such as the Philippines and India, offer government incentives like tax exemptions and import duty exemptions to support the BPO industry.
• Technological advancements: As automation and AI become more prevalent, customers expect fast and seamless experiences. AI-driven technologies, such as chatbots and virtual assistants, are transforming CX. Outsourced contact centers often have the resources to adopt and integrate new technologies, which can help enhance service quality.
• Security: Given the sensitive data that call centers handle, it’s essential to vet providers carefully to ensure they have strong data security measures in place. The country of the provider should also have robust data protection laws.

Leveraging an advisor for CX

Effective contact centers are critical to the customer experience, and choosing between outsourcing and managing in-house can be complex. Outsourcing offers benefits like cost savings, scalability, and specialized expertise, while in-house options provide greater control and alignment with company culture.

If navigating these complexities feels overwhelming, a CX consultant like AdviseCX can help. We guide clients through the decision-making process, perform cost-benefit analyses, and help find the best solution tailored to your unique needs and goals.

Our experts have the experience to mitigate risks and avoid potential disruptions, ensuring a smooth, successful partnership with your outsourced provider. With our network of reputable and reliable BPO providers, we can connect you with the right partner to meet your CX goals.