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The public and the national press have never had much affection for call centres, but the relocation of some UK customer service centres to India has caused real alarm. Scare stories in the tabloids about a jobs drain from 'offshoring' have been compounded by claims from the call centre workers union, Amicus, that 50,000 jobs have already gone and 200,000 more are at risk.

A general media outcry followed last month's announcement by National Rail Enquiries that it is to outsource some of its work to Mumbai. Coming in the wake of BT's decision to handle some directory enquiry calls in India, these moves have led to public grumbles about having to ring foreigners for phone numbers and train times. There have also been press reports of poor service from offshore centres, with customers having to spend longer on the phone.

Several big brands have found themselves in the media firing line, including Prudential, Lloyds TSB, Abbey, Aviva, AXA and British Airways, all of which have either begun using workers in India or plan to do so. They are vulnerable to the charge that they are sacrificing the interests of their customers to pursue greater profits for shareholders.

Others, among them Halifax Bank of Scotland, Alliance & Leicester and Royal Bank of Scotland, have exploited their rivals' discomfiture by publicly ruling out offshore centres. "Our customers prefer to speak to staff based in the UK, and our relationship with them is too important to jeopardise by exporting our call centres abroad," says Alliance & Leicester group chief executive Richard Pym.

But a strong business case can be made for offshore call centres, both in terms of its benefits to the economy and to consumers. For a start, the oft-quoted negative effects on the UK are disputed by economists.

Some claim the process allocates resources to where they can be most productive, meaning prices can be lowered, leading to higher standards of living. A report by McKinsey Global Institute suggests the net return to the US economy is about 12% for every $1 exported, and a similar ratio could be expected here.

Consumer advantages

Advocates also say cost cuts work to the benefit of consumers, not just shareholders. "The cost of a mobile phone user calling for a top-up will clearly be reflected somewhere in the call charges," says Chris Hollamby, managing director of Sitel, one of the UK's largest outsourcers, running call centres in India and the Caribbean. "A company that can reduce that cost by 40% will be in a position to drive down use or rental charges."

Hollamby also rejects the idea that a move offshore automatically takes jobs away from British workers. He says this claim is puzzling in an industry that finds it hard to recruit people with the right skills and suffers from high rates of attrition. Nor does he accept the argument that Indian agents are inferior. He points to internal benchmarks, which show they perform some activities better than their British counterparts.

But instead of highlighting the positives, companies with an offshore centre have been diving for cover.

Their strategy is either to ride out the media storm by saying as little as possible about its role, or to downplay its importance.

Several draw attention to the fact that at least two-thirds of the positions are for back-office functions, and do not involve talking directly to customers. AXA says only 10% of its 800 agents deal with customer enquiries and many of these come from organisations such as hospitals, not individual consumers. It adds that as a global company, its Indian operation is well-placed to deal with consumers in Asia.

For its part, BT insists no UK jobs have been lost as a result of installing 700 staff at call centres in Bangalore and Delhi. And BA stresses its much-publicised Indian activity involves no call centre work at all.

But should brands really have to apologise for putting call centres offshore? The savings are enough to make it a sound business decision.

Indian call centre agents earn an annual wage of £2000 or less, a fraction of the £14,000 average in the UK. Salaries account for about two-thirds of a UK call centre's operating costs, and even taking into account higher phone bills, companies can still expect to achieve savings of 40% to 50% by moving offshore.

Datamonitor recently predicted that 5% of global call centre agents will be located in countries such as India and the Philippines by 2007. Unsurprisingly, the government shows little appetite for intervention, and has argued the need for realism in the face of international competition.

But not all companies are finding it works for them. Catalogue giants Kays and Great Universal axed their 250-seat operation in Bangalore in January, complaining that Indian agents did not handle consumer queries as well as their British counterparts.

And O2 ended a six-month trial with a Mumbai outsourcer last autumn when it found its British agency LBM was achieving significantly better results.

According to O2's head of telemarketing, Richard Hudson, sales conversions were up to three times greater in the UK, while customer service quality indicators were up to 20% higher. The Indian agents were no less helpful or friendly, but were behind both in their understanding of callers' concerns and their ability to make calls "relevant and interesting".

Lack of experience

These shortcomings are confirmed by recent research. ContactBabel, a specialist research firm, carried out an independent study looking into how UK contact centres can withstand foreign competition. It found Indian agents take significantly longer than those in the UK to resolve customer service issues, suggesting they suffer from a relative lack of experience and empowerment to make decisions.

The criticisms have been welcomed by outsourcing providers in the UK, which are highly vulnerable to Indian competition. "Perhaps companies will finally be convinced that offshore outsourcing is not a panacea, and that safeguarding clients' brand integrity must be a higher priority than cost-cutting," says David Jermyn, general manager at Telecom Express.

British agencies also question the wisdom of a brand entrusting its customer services to an outsourcer of limited experience in a far-flung location. Jeff Smith, chief executive of contact centre provider MM Group, points out that separation is one of the biggest barriers to a company deciding to outsource.

To win contracts, agencies have to work hard to convince clients the work will be done at least as well as it would be in-house. "The knowledge that the contact centre is a short journey away, and can be visited daily or weekly, is a major element in a business' calculations," says Smith.

"It is hard to imagine that confidence being established at a distance of 5000 miles."

But some argue that the disadvantages of outsourcing to India have been exaggerated. While there may be constraints on what agents there can comfortably handle, there is no reason why companies should not profit from their use where appropriate.

ContactBabel's principal analyst, Steve Morrell, says the negative aspects revealed in his recent survey of Indian centres have been seized upon by the media at the expense of some obvious attractions. "Considering the potential benefits it would be negligent not to consider it, especially for large organisations," he says.

Facilities in India are often superior in terms of premises and equipment, benefiting from state-of-the-art systems that compare well with older ones used by UK centres. And India produces 2.3 million graduates a year, which means there is an abundance of highly-skilled labour.

Overseas expansion

Several large UK agencies have been quick to head off a potential loss of business by setting up their own offshore operations. This means they can offer clients cost savings for high-volume, relatively low-level activities, while keeping the more sensitive work close to home.

Vertex and Ventura have strength in India, as does Sitel, which also has centres in Jamaica and Panama, and plans to provide capability from the Philippines, while Merchants has announced it is to open for business in South Africa.

Some brands have chosen to set up their own purpose-built operations to avoid having to entrust their brand to a third party.

Prudential has been running a centre in Mumbai for a year and has 800 workers there. About a third are in telephone jobs and deal with customer calls relating to pensions and insurance. In contrast to some of its more nervous rivals, the company has been striving, with some success, to convince a largely hostile press that its service is in no way impaired.

Service development director Steve Ferrari argues that the savings will be to the long-term benefit of Prudential customers, as they will be ploughed back into product development. He also insists that in terms of compliance and accuracy, standards are comparable with its UK operations.

But he acknowledges there is still some way to go before Indian agents' conversational skills are up to the standard consumers expect. "Indians are quite formal and we have to encourage them to open up a bit," he says.

Ebookers also has a flourishing multi-channel contact centre in New Delhi, named Tecnovate, which handles part of the online travel firm's customer service and business processing. The operation delivered savings of £1.4m in the second quarter of 2003 alone, and forms an essential part of the company's strategy to grow sales. Agents handle booking support, customer care and telesales.

Their success in selling to British and European consumers contradicts claims that this is something with which Indians should not be entrusted.

The rate of sales conversions in 2002 rose from 9% to 29% compared with Ebookers' British counterpart, which grew more modestly by 17% to 22%.

Results such as these, argues Tecnovate chief executive Prashant Sahni, should encourage companies to think of Indian centres as a way to achieve growth as well as savings. He now plans to expand the operation to handle other clients.

Facing the facts

Consultants with an interest in the Indian market say the closer one looks, the more the myth seems at odds with reality. "Companies first become interested in it for price reasons, but when they start talking to Indian service providers they come away impressed by other things," says Penny Bousfield, director of outsourcing at CM Insight. "One aspect is the tremendous enthusiasm of Indian staff. Clients who visit say they wish they could bottle it for use in their own call centres in the UK."

Some of the widely-publicised limitations of agents exist, but these are as likely in the UK. Bousfield insists complaints about Indian accents are nonsense, considering the range of British accents that exist, many of which can be incomprehensible to those calling from just 100 miles away.

The culture gap which, it is alleged, leads to a lack of empathy between agent and caller, can be a problem - but it is not unique to India. In one offshore call centre, agents had difficulty understanding why being a single parent should lead to difficulties paying a utility bill, having little experience of divorce. But British agents can be just as baffled if they are young and have never had to pay a bill themselves.

Training can help solve language difficulties; agents are coached in vocabulary and pronunciation to the point where British monitors can distinguish the caller from the agent only by the context. Staff can also be made as familiar with callers' likely concerns and the products and services they deal with, as workers in the UK.

Indian staff have also proved they are able to master challenging tasks quickly. One US company handed its Indian call centre some of its worst debtor cases as a last resort and found the results were excellent.

British companies must avoid moving centres offshore merely as a way to slash costs, and must weigh up any move against possible damage to their brand's reputation. They also need to make decisions strictly based on the merits of each business case, rather than generalised assumptions.

But in the longer term, there is little doubt the practice will continue and that, properly handled, it can benefit everyone involved. In addition, it is likely that British consumers and the reactionary national press will soon get used to it. Sitel's Hollamby says: "Frankly, in certain activities I don't believe consumers will care too much where their call is handled, as long as they get a fair level of service."

FENDING OFF FOREIGN COMPETITION

Call centre providers in the UK face a tough challenge in competing with cheaper Indian alternatives. Secretary of state for trade and industry Patricia Hewitt says the way to respond is to "keep raising our game, ensuring companies and people are continually upgrading their skills and technologies. We cannot compete on low wages, nor should we try to."

In December 2003, ContactBabel, a specialist research firm, surveyed 290 UK call centre operations, including some outsourcing agencies. It found a number of areas for improvement.

One advantage UK call centres enjoy is the effort they put into evaluation.

ContactBabel says 75% of respondents measure financial indicators, such as customer lifetime value, and it expects this trend to grow. "Clients want to know the returns they are getting ," says Stephanie Rouse, director of contact centres at CPM. "If it costs half as much to do the work in India, but takes twice as long, the net payback is non-existent."

But almost half of respondents who provide e-mail as a contact channel do not have service-level targets, compared with just 15% for telephony.

One key measure is the speed with which calls are answered. In offshore agencies this is about ten seconds - above the UK average. But call resolution is becoming increasingly important. About a quarter of customer issues fail to be resolved on the first call, according to ContactBabel. So there is room for improvement in processes, training and the authority given to individual agents.

Technology is also important. Interactive voice response is widely available in the UK, and agencies argue this is a simpler way of cutting costs for high-volume tasks than outsourcing to India. But it is questionable whether consumers would prefer to talk to a computer.

One possibility is to upgrade to full voice recognition systems, which provide a superior service and are preferred for simple functions such as cinema ticket sales. However, they are used in fewer than 10% of UK contact centres.

ContactBabel also urges the use of workforce management systems, which can optimise quality and ensure the right staff are available at the right times.