ECONOMIC ANALYSIS

Economic Analysis

Economic Analysis

Introduction

Offshore outsourcing is one of the most controversial topics in business today and yet it is a fast-growing aspect of the world economy, doubling from $3.7 trillion in 2001 to almost $7.5 trillion by the end of 2006 (Arora et al., 2006). A report by Forrester Research in 2002 indicating that 3.3 million US service jobs accounting for $136 billion in wages would be lost to offshoring by 2015, triggered huge public concern about the impact of offshore outsourcing on the lives of average Americans (Ross, 2003). In fact, the global call center market is also estimated by IDC to almost double itself from $45.8 billion in 2004 to $83.5 billion by 2009, at a healthy CAGR of 12.7 percent. Clearly, it is an important topic deserving much attention.

We begin this paper with a review of current literature in the offshore outsourcing and international services marketing area. Next, we describe our conceptual framework and develop a set of hypotheses incorporating several relevant constructs, including attitude toward OCC, perceived service quality, customer satisfaction, brand image, repeat purchase, and customer complaint intentions. Next, we describe the findings from a survey-based empirical study conducted in a large mid-Western city in the USA to test these hypotheses. Finally, we discuss the contribution of this line of research with some limitations and directions for future research.

Opportunities and the Risks of Offshore Call Centers: A Case Scenario

Outsourcing is a contractual agreement between the customer and one or more suppliers to provide services or processes that the customer is currently providing internally (Fan, 2000). In other words, outsourcing occurs when an organization transfers some of its tasks to an outside supplier (Siems and Ratner, 2003). The benefits of offshore outsourcing are well-known and numerous studies portray the strategic benefits of offshore outsourcing for firms as a means to reduce costs, improve asset efficiency, and increase profits (Quinn, 1997).

However, in recent years organizations have become more cautious about moving toward outsourcing and conscious of the need to protect their reputation, brand image, core skills and property rights (Briggs, 2005; Swartz 2004a, b; Venables, 2006). Companies risk losing potential customers for the parent brand due to poor customer relationship management by outsourced sub-contractors (Kennedy, 2002). Similarly, companies in UK have been warned of a possible customer backlash if they continue to offshore jobs to lower-cost economies, as it will undoubtedly harm their corporate image (Data-Monitor, 2004).

According to a study conducted by Compass Management Consulting (a UK-based management consulting firm), financial service organizations across the UK are not benefiting from offshoring their call center operations to countries (e.g., India) because of communication inefficiencies (due to differences in speaking the English language) between the UK customers and OCC agents (Compass, 2007). Offshore agents take twice the time to handle a customer query call as compared to UK-based agents and are able to close only four sales per day compared to ten sales per day by the UK-based agents. Due to all these problems many financial service ...