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Admiral Insurance loves it, Orange won't do it, but BT, BUPA, National Rail Enquiries, Prudential, Royal Sun Alliance, Lloyds TSB, AXA, Powergen, Abbey and HSBC all do.

Taking call centre work offshore has become one of the biggest media cause celebres of recent years. With everything from trade union rumpuses on UK job losses to stories of dissatisfied consumers who feel that even their simplest problems aren't being dealt with properly, the offshore debate has at least challenged the media stereotype of UK call centres as sweat shops.

Seldom is the issue talked about without the word 'threat' attached, and just last month new controversy was stirred in from a data protection stance. Unions have written to the Information Commissioner in an attempt to prevent Lloyds TSB from closing its Newcastle call centre and moving work to India by inferring that it won't be able to guarantee the same levels of data security.

But amid all these battle cries it's not easy to get a true picture of the call centre landscape; whether life really is that bad and whether the UK centres that so lamented offshore activity have done anything to improve their offering to clients and raise the stakes.

If some of the latest reports are to be believed, the offshore honeymoon could soon be over. A recent Contact Babel study reported that Indian call centres are 27 per cent less productive than UK ones, with home agents resolving customer queries more quickly. In the business processing outsourcing sector, the attrition rate among Indian workers is also said to be reaching the same heights as the UK (up to 35 per cent).

Whether this is just what UK centre managers want to hear though is a pertinent point. The fact is, while the UK contact centre industry grew last year by more than the number of jobs that went to India (up seven per cent to nearly 850,000 people), the outlook is less rosy. Since October 2003, 15,000 financial services jobs have been outsourced, and 200,000 are predicted to go by 2009 in this sector alone.

Impact on UK businesses

Without doubt, this has affected players in the UK industry. "We know we've lost one piece of business to an offshore centre," says Liz Jackson, founder of business-to-business outbound appointment-making call centre Great Guns Marketing, which numbers L'Oreal among its clients.

This is a blow to those who believe the offshore threat only applies to basic back-office functions and not complex consumer interactions.

"The work was for a reseller of IT exchanges, where calls are made direct to IT directors," she says. "We're confident we'll win it back, but it's disappointing that marketers are thinking about price first and reputations second. Offshore labour costs are too cheap to compete with. But you never get a Porsche for the price of a Metro."

Maintaining a competitive edge without a price advantage has been more of a challenge to some than others. Broadsystem has been fortunate in that some clients have decided to work through UK centres alone as much as a PR exercise as anything else.

"Scottish and Southern Energy chose us because they wanted to work solely with a British company," says Phil Coley, call centre manager at Broadsystem.

"We're fortunate in that the effect of offshore activity hasn't had too much impact on us."

All, however, have had to invest in technology to keep ahead of the field - which can be seen as a benefit for clients, as centres scrabble for the slightest competitive advantage.

Improving services at home

For Ron Peerenboom, chief executive of BeCogent, this has been significant for more than one reason: "I helped set up McQueen - an outsourcing centre in Manila - one of the first to take business abroad. Now I'm on the other side of the fence, working to stop losing work in my own company."

Peerenboom argues that while most outsourced activity is production line, repetitive work, rather than complex customer interaction, UK call centres need to show they can do both before Indian call centres adapt and start taking their core business as well.

"The new model will be taking the volume work that might go abroad but with mass customisation added to it, so the value of the call is the content," he says. "This means finding out the role of the call and what you want from it."

To this end, Peerenboom has invested hundreds of thousands of pounds in a new system called Beassist, which automates the repetitive calls, but still has agents on hand in case help is needed. Triggers such as length of call or number of options taken will alert agents to interrupt and speak to the customer direct.

"Price-per-transaction costs quite literally collapse," he adds. "We've got many clients that have pulled out of India altogether that will be fed into the Beassist experience. The right service level will dramatically improve customer satisfaction. Already, eight of our 18 clients will use it."

For others though, if you can't beat them, joining them has been the next best option, with some UK centres entering into partnerships that use agents abroad, but that are managed through the UK. These include CPM, which has several 'nearshore' contact centres in mainland Europe, and New Logic, where for some campaigns back-office work is redirected to Latvia.

Picking the right location

For Phil Westoby, managing director of New Logic, this has been easier to establish, as the company is still new and without the shackles of having to protect an established UK workforce. According to CPM, the 'nearshore' approach has helped many clients that have been burned by going the other side of the world.

However, the issue of siphoning calls to the right place has become critical for many clients. Peter Telford is shared services business unit director at Vertex. In 2002 it bought 7C, which had an 1,000-seat operation in Mumbai which, under the company-wide umbrella, now fits into its Smart Shore model.

"What we often need to do is inform clients that the technological infrastructure of services abroad is exactly the same there as it is here," he says. "As for training, Indian workers are excellent, so it's really down to the client's attitude to risk."

Of the amount of work that could go offshore, only 25 per cent actually does, a figure Telford thinks could grow without damaging UK jobs, or marketers' prized brands. He argues that once clients begin to sample small outsourced activities, confidence increases and they grow into larger projects.

"Offshore is definitely moving up the food chain. We're dealing with the sort of complex debt collection, bill handling and other customer interactions that many thought wouldn't be suitable for offshore centres."

If this sounds like bad news for the rest of UK contact centres that don't have a foot in the offshore door, Telford and others argue that call centres must stop the moaning, and adapt or die.

"It shouldn't matter where in the world the call centre is, as long as the service is right," argues Westoby.

And as clients come round to this way of thinking more, UK centres will have to diversify or concentrate on different business. The call centre landscape is changing, and importantly, so are clients. As they become more familiar with moving work abroad, the gauntlet has definitely been laid down to the UK contact centre industry.

HOW HAS OFFSHORE AFFECTED YOU?

Paul Miller, business development manager, Prolog Connect

"We're experiencing the offshore impact in two ways. Firstly, some tendering exercises are beginning to state that location isn't a key factor and that a management presence in the UK is all that's expected. These are typically simple data-capture projects with very high volumes. Examples include the National Rail Enquiries contact centre, which was awarded earlier this year to a combined offshore and onshore service. These projects have never been a natural fit for Prolog. We offer clients highly skilled services and the benefits of tight integration with other parts of the process, for example, mailing or fulfilment activity.

"The second scenario is where some parts of our client's business are already contracted offshore. We often find that we get contacted by offshore contact centres to resolve the query which they then deliver to the end customer. We suspect that the amount of 'double handling' is underestimated."

SOUTH AFRICA: THE EMERGING OFFSHORE COUNTRY

India may be the main offshore centre at the moment, but joining its ranks over the next few years is South Africa - not least through the work of Luke Mills, executive director of Calling The Cape - a specialist investment agency supporting the development of the Contact Centre industry in the Western Cape Province. Mills is also the executive director of SACCCOM - South Africa's Contact Centre Community, which he helped set up this year to promote training.

"Virtually all of our time is spent making sure South Africans have the right training and skills development strategies," he says. The scheme has now helped develop the 11,000 call centre seats in Cape Town - 1,500 of which act as the outsourced destination for international clients, including Lufthansa and Budget Insurance (which owns Bennetts, see case study, last issue).

Admiral Insurance outsources its insurance renewal In South Africa, which also takes calls from the customers of Carphone Warehouse and Barclays.

"We think we offer another value proposition," adds Mills. "We don't save on price, as that goes to India, but we're making up for the staff shortages that UK call centres are experiencing on the customer interaction side."

THE VIEW FROM THE INDIAN CENTRE

Santanu Choudhury is call centre manager at GTL, headquartered in Mumbai (Bombay).

It is one of the growing number of multi-lingual contact centres in India, with 2,000 agents providing not only back-office processing for the banking and telecoms sector, but also CRM, registration and billing inquiries, well as up- and cross-selling activities.

Choudhury says he is able to compete at all levels: "The big issue is with the communication skills of agents, but we've been working extremely hard in our training. We're finding that our relationship with clients is ever-improving. As soon as we can demonstrate our effectiveness for one client, it's easier to talk to new clients to show them what we can achieve for them." He plans to take on 1,000 more agents in the next 12 months, working for customers mainly in the banking and finance sectors.

"Are we taking jobs? We're not sure," says Choudhury. "We work in the international market and we're seeing clients striving to see better gains from their budget. Price is still the advantage, but we're working hard to raise all our other standards."