Call Center Outsourcing Industry In Search of Global Accent

The call center outsourcing industry is shifting from native English accent to neutral or global accent as its market becomes more globalized. The accent is an important aspect of effective telephone conversation that many American firms require their offshore employees to change their identity over the phone and pretend to be a native American. As globalization continues to bridge the gap between the East and West, many call center outsourcing companies are rethinking their accent policy. Not only does Americanized accent is impractical to teach to foreigners, but it also has decreasing significance amid the changing cultural demographics of the industry’s clientele.

What are the advantages of neutral over American or British accent? The advantages of a global accent can be seen in many call center firms with multilingual accounts. The tremendous success of the English-speaking call center firms in third world countries opens up opportunities for outsourced multilingual services. Many call center outsourcing firms in the Philippines are expanding their operations by targeting the Hispanic population as well as the Japanese and European population. These groups are likely to understand neutral accent more than the American accent. Multilingual agents with a neutral accent are deemed more productive if they can neutralize their accent when speaking to these ethnic groups who are also not a native English speaker.

Filipinos have more neutral accent than Indians. The Philippines also enjoys closer cultural affinity with the West than India does. These advantages explain why the Philippines already surpassed India as the world’s call center hub. According to IBM’s Global Locations Trend, the Philippines outranked India in the shared services and BPO categories.

The Philippine call center industry is poised to grow its market share. Philippine call center revenues are projected to reach $5.7 billion this year, compared with $5.5 billion for India. The country’s BPO revenues are projected to reach $9.5 billion, catching up with India’s $12.4 billion sales. Benedict Hernandez, president of the Contact Center Association of the Philippines (CCAP), attributed the success of the Philippine call center outsourcing industry to the effectiveness of the English-speaking workforce of the country. Jojo Uligan, executive director and corporate secretary of the CCAP, emphasizes Filipinos’ neutral accent and penchant for Western culture.  The linguistic edge of the Filipinos compensates for cost differences between the two countries (the Philippines has a higher cost of operations to some extent). In fact, many Indian call center outsourcing firms have set up foreign branches in the Philippines.

The multilingual skills of  the Filipinos add to the country’s competitive edge over India. Multinational companies are now capitalizing on the multilingual workforce of the Philippines to serve ethnic groups like English-speaking Chinese, Japanese and Hispanics.

Philippine Call Center Outsourcing Industry Fights Attrition Rate

Although the Philippine call center outsourcing industry has a high attrition rate, the stability of the call center workforce is more or less on par with the international playing field. The attrition rate among call centers in the Asia Pacific is 19.1%, according to a survey conducted by Frost and Sullivan. In 2006, the attrition rate was 18% for full-time Filipino call center representatives and 24% for part-time agents, whereas India had 38% and 32% attrition rates for full-time and part-time agents, respectively.  In 2008, full-time agents stayed with their employers for 22 months, while part-time employees stayed for ten months on average. Tenure was longer for those who held managerial positions – more than three years for team leaders and six years for managers.

In 2010, a study conducted by the Call Center Association of the Philippines (CCAP) estimated attrition rate and employee acceptance rate at 19% and 5%, respectively. Strategies like adopting flexible work environment, incentives and providing opportunities for career growth, are helping bring down attrition rate.

What prompt call centers to quit jobs easily? A study conducted by Datacraft Asia in 2009 suggested that Asian call center agents are aware of the large demand for their service, so they are confident that they can easily land a new job after they resign. Better salary offer from other call center outsourcing firms, tight and shifting schedules, stress from dealing with difficult customers and lack of holiday breaks are also causing many agents to leave their job. Also, allegations of labor code violations in small call centers are on the rise. Some agents who did not receive incentives or bonuses as promised during recruitment are likely to terminate their contract.

On the bright side, high turnover rate may be helpful in keeping the workforce motivated.

According to market analyst Catriona Wallace, increasing turn-over rate is a deliberate strategy architected by call center outsourcing firms to keep their cost low. Ben Teenhankee, industry analyst and chairman of the Human Resource Management Department of La Salle School of Business, shares the same view. Keeping a pool of contractual employees instead of regular workers can save businesses on fringe benefits and other government-mandated compensation.

The high turnover rate has an immediate impact on costs and customer confidence, which a competitive call center wouldn’t want to experience. The Philippine call center outsourcing industry is addressing this dilemma by rethinking their training strategies and incentive schemes. Some are now realizing that they are unknowingly contributing to high turnover rate by pressuring agents to meet high-performance standards despite lack of proper training. According to Jon Kaplan, president of TeleDevelopment Services, BPO companies are now prompted to invest in training to keep their new employees.

Call Center Outsourcing – An Irreversible Trend

So far, deliberate attempts to stall the growth of the call center outsourcing industry have failed. US Senator Charles Schumer sponsored a billthat would penalize American companies for offshoring their call center operations. Called “Creating American Jobs and Ending Offshoring,” the bill was dismissed by Republicans by a 53-45 vote margin. The bill would curtail tax breaks and impose a new tax to firms that outsource their operations overseas.

The bill is mainly intended to spur job growth in the US by discouraging offshoring. It seeks to give a two-year tax exemption to US firms that hire domestic employees to replace an outsourced staff working abroad. The bill will also deprive companies of certain tax incentives if they offshore their domestic jobs. Under the bill, American firms must inform their customers where their calls will be routed. Companies have also to pay $.25 in tax for every call routed to a  foreign call center.

The bill spurred protests from both domestic firms and economic policymakers. Democrats themselves reportedly confined to CNN that anti-offshoring legislation did not make much sense. American firms said that the proposed incentives were not enough to bring as much savings as call center outsourcing does, while the U.S. Chamber of Commerce worried that the bill would just worsen job losses.

Offshoring is hitting major industries in the U.S. In 2010, Hewlett-Packard Co., CKE Restaurants Inc. and Hilton Worldwide outsourced their domestic operations overseas. Hilton said it outsourced its reservation jobs to the Philippines to save money. Other U.S. companies that become increasingly reliant to offshore contact center workforce were JPMorgan Chase and Dell.

Call center outsourcing is just a part of a large picture. The manufacturing sector is also tapping into the offshore labor force. The number of applications for federal Trade Adjustment Assistance increased last year, suggesting that many American factory workers lost their jobs partly due to outsourcing.

The filibustered bill sponsored by Schumer taught industry opponents a very important lesson. Call center outsourcing is an inevitable outcome of globalization. Using protectionist policy will not save American contact center agents from cheap workers in India, Philippines and other third world countries. Protectionism will merely incite retaliatory measures from these trading partners.  For many years, the Philippines has enjoyed bilateral trade agreements with the US. The country’s strong economic ties with the US and low cost of labor in the Philippines will make it hard for anti-outsourcing advocates to kill this industry.

Call Center Outsourcing in the Philippines: Trends and Outlook

The call center outsourcing industry of the Philippines has surpassed India in terms of revenues and size of the workforce. The Contact Center Association of the Philippines (CCAP) estimates that the country’s call center revenues exceeded India’s by almost $200 million as of 2010. Moreover, 350,000 Filipinos are working in the call center outsourcing industry, compared with 330,000 in India.

Close cultural ties between the Philippines and the West add to the country’s reputation as a call center hub in Asia. The Philippines embraces Western music, Hollywood movies and pop culture. Even the political system and religious makeup of the country have Western origins.

College graduates generally hold a favorable view of the BPO careers in terms of career growth opportunities and monetary rewards. Due to the high unemployment rate in the country, most graduates or entry-level applicants consider call center jobs as a career-enhancing step, unlike many Americans who see call center positions as a temporary job rather than a career.


The number of experienced managers cannot catch up with the rapid growth of the call center outsourcing industry. Since 2009, around 170,000 additional workers entered the BPO industry, and some of them were first-time mentors, supervisors and managers. The local government is working closely with the call center outsourcing industry to close the skill gap in operational and managerial levels.

The demand for live call center support could be affected by demographic changes in the long run. Young consumers in the twenty-something age group are reportedly favoring IVR above human customer service representatives. This preference is increasingly being seen in higher age brackets.

The call center workforce has a large attrition rate, which could be attributed to several reasons. Due to the growing demand for skilled call center agents, some operators are pirating tenured call center agents from competitors by offering a larger salary. The psychological burden of the job is also a major factor. And since call center outsourcing firms operate on a 24×7 basis, their employees have to adjust to shifting schedules. CCAP estimates annualized attrition rate at 58% as of 2010. Nevertheless, the association claims that it is lower by the international benchmark, citing the higher attrition rates in India and the U.S.


CCAP projects a 20% growth rate over the next two years but warns that recruitment, training, inflation and attrition would continue to pose challenges in the next ten years.

Low wages will remain the competitive edge of the call center outsourcing industry of the Philippines. A recent study by Piton-Global Consulting showed that call center firms in the country could bring 60% labor-cost savings, inclusive of the common expenses entailed by offshoring. The average annual salary of Filipino call center workers is lower than that of India and far cheaper than US salary. The country’s annual BPO salary is estimated at $3,600, compared with $30,000 in the US and $4,500 in India.

Is the Call Center Outsourcing Industry Losing to Onshore Staff?

Onshoring is a new term coined by anti-offshoring critics in the U.S. who think that call center outsourcing should only be limited to countries where English is the mother tongue. Onshoring advocates went as far as the U.S. Congress to discourage American companies from offshoring their customer service by imposing new taxes. Some consumer advocates think that offshore call center agents do not provide the same quality of service expected from their American counterparts. With the unemployment rate remaining high despite economic reforms, anti-offshoring sentiments are growing. Will onshoring gain momentum to the extent of reversing the growth of the call center outsourcing industry?

Some critics of offshore call centers claim that there were US companies that already brought their call center operations back to the US. However, it is not clear whether such a move was caused by customer dissatisfaction or business reasons. Cultural differences and language barriers are the most common reasons why some Americans get dissatisfied with offshore call centers. Based on a study conducted by CFI Group in 2010, the satisfaction index for US-based call centers was 79, compared with 58 for offshore contact centers. Consumers cited miscommunication as the major reason for dissatisfaction.

Nevertheless, foreign call center outsourcing firms only lag slightly behind their American counterparts in empathy and courtesy categories.  Lately, the CFI survey has been cited by offshoring critics to justify onshoring. They argue that customer dissatisfaction translates into the loss of customers and a decline in business revenues.

Despite all of these criticisms, the call center outsourcing industry keeps on growing at a phenomenal rate,  a proof that the benefits of offshoring outweigh its drawbacks. The Philippines remains the preferred BPO destination for most American companies even though English is just the second language there. Amid the growing movement to discredit offshore call centers, how can the Philippines and other offshore BPO destinations justify call center outsourcing?

Consumer dissatisfaction is not as serious as what critics want us to believe. Many American companies have managed to grow their customer base even if they outsource their contact center operations abroad. Take the case of Verizon. The company has offshore call center operations in the Philippines but still managed to grow its customer base. Although miscommunication between Americans and non-native English speakers is inevitable, it is not the decisive factor in customer retention. In fact, some customers feel more thankful when their issues were resolved by foreign call center agents than when they get assisted by fellow Americans, according to a study entitled “How call center location impacts expectations of service from reputable versus lesser known firms.”

The Philippine Call Center Outsourcing Industry in Numbers

Much has been said on the advantages of outsourcing call center operations to the Philippines – low cost of labor, skilled workforce, high literacy rate, tax breaks, solid ICT infrastructures and the list goes on. But what do the statistics say about the viability and benefits of outsourcing call centeroperations to the Philippines?

Robust Growth Rate

As the US economy recovers,  the contact center industry is expected to keep on growing. As of 2010, there are 191 call centers in the Philippines, most of which are subsidiaries of American companies. In 2004, the Philippines enjoyed a 20% share in the global contact center market. In 2005, the industry grew by 70%, according to the Information and Communications Technology division of BOI. The call center outsourcing market grows so rapidly that it pulls up the gross national product by 12%. It is also the biggest employer of fresh college graduates in the country. In 2006, the offshore staffing industry earned $2.1 billion, ranking third in the global list of top offshore service providers, lagging behind India and China. That’s almost a 62% increase from $1.3 billion in sales it earned in 2004. As of December 2010, the Philippine call center outsourcing market employed more than 350,000 workers, exceeding the Indian call center workforce by 20,000.  Last year, contact center revenue exceeded industry forecast, reaching $6.3 billion. This places the Philippine call center industry ahead of India. The Contact Center Association of the Philippines (CCAP) projected growth rate at 15%-20% by the end of 2011.

Top Five Services

The top five services offered by the industry are dispute resolution, account inquiries, technical support, order processing and sales confirmation, and collections.

Multilingual Capability

Around 23% of the firms surveyed by CCAP said that they were serving the Spanish-speaking market, while 15% and 12% had French and Chinese accounts, respectively.

Economy of Scale

Mergers improve the economy of scale of several operators in the country. Consolidation in the call center sector also increases the competitiveness of local call centers from foreign clients’ perspective.

Educated Working Class

In 2008, the country had 490,000 college graduates, 67% of whom met the basic skill requirements for a BPO job. The number of college graduates is estimated to grow by 3.8% annually.

Proficiency in English

The Philippines is the largest English-speaking country in Asia. More than 70% of the local population can communicate in English.

Stable Price Levels for Telecommunication Infrastructures

The cost of bandwidth decreased by 85% since 2005, making international calls very affordable.

Room for Expansion

Makati CBD, one of the country’s call center hub, had a 7.3% real estate vacancy rate in 2009, up from 3% in 2008. There’s 300,000 sq. m. of new office space under construction in other cities, available for occupancy by 2010 and 2011.

Call Center Outsourcing to India Not Sustainable

India was once the call center outsourcing hub of the world. In 2010, the title went to the Philippines following the release of official data on call center manpower and revenues. The Indian call center industry employed 330,000 people and earned $5.9 billion in revenues last year, whereas the Philippineshad 350,000 call center workers, with industry revenues reaching $6.3 billion.

Why Indian call centers cannot keep up with the demand? Blame it to the scarcity of workers with good English conversational skills. The local government always promotes the country as the nation of engineers, mathematicians and call center agents. But many call centers are now finding it difficult to cope with high attrition. The labor market for call center agents is breaching its saturation point, forcing some call center outsourcing firms to offshore somewhere else, like the Philippines and Nicaragua.

Passing rate among call center applicants is appalling, according to 24/7 Customer Pvt. Ltd. Only 3 out of 100 applicants get accepted in the company.  Most high school and even college graduates failed to meet the company’s conversational English standard. 24/7 Customer founder S. Nagarajan laments over the shortage of qualified call center agents despite India’s 1.2 billion population, more than ten times the number of Filipinos. The company is likely to fill most of its 3000 vacancies for phone and email support agents abroad. So far, 24/7 has 8,000 employees based in other countries.

The poor educational system of India is a big concern for the call center outsourcing industry. Most teachers are underpaid while college curricula do not address the needs of modern workers. Although there is a huge supply of engineering graduates and students (1.5 million are currently enrolled in engineering schools), 75% of technical degree holders and more than 85% of all college graduates are not fit to work in call centers and BPO firms.

Even the quality of education in primary level is dismal. Pratham, a non-governmental organization advocating educational improvement, surveyed 13,000 local schools and found out that 50% of fifth graders couldn’t read at the level expected of a second grader.

Compared to India, the Philippines has a more sustainable growth rate. The country has a more trainable workforce as seen in the large percentage of the general population who work in the call center outsourcing industry. Indian call center firms are increasingly tapping on Philippine labor force to keep up with the demand of their clients.

Outsourcing Call Centers to the Philippines: A Risk Analysis

Why are call center outsourcing investors putting their money in the Philippines? Cost and benefits analyses always conclude with positive recommendations for the country as a call center destination. Risk reviews for the Philippines are good enough to leverage its position as a call center outsourcing hub despite political instability and economic challenges. How does the Philippines fare among its neighbors in terms of country risk profile?

Despite its recurrent political turmoil and security issues, the Philippines is hard to ignore from investors’ perspective. Corruption and political bickering weaken political stability, but the current administration of President Benigno Aquino is expected to bring drastic political reforms that can boost investor confidence. Diplomatic tie with the U.S. remains strong, which helps a lot in keeping Manila’s risk rating within the satisfactory level.

Although the country is unpopular for red tape and burdensome commercial policy, it has embraced pro-outsourcing regulations like tax exemptions and tax discounts for imported equipment, giving call center operators much confidence to invest in Manila. Outsourcing providers, 70% of which are call centers, account for 6% of the GDP. Of course, the government is making sure that the country can maximize its competitive advantages.

The Philippines has made a great leap in terms of political stability. Two decades after being marginalized from foreign investments due to its risky political climate, the country is now considered more politically stable than Thailand which experienced social unrest during recent years. The Philippines is an attractive alternative for manufacturing firms that want to protect themselves from the rising labor movements in China.

Anti-offshoring legislation is unlikely to materialize in Manila. Alleged labor rights violations prompted a Filipino lawmaker to propose a bill that would regulate the average workload of call center agents and attendance policy. Rep. Raymond V. Palatino, the sponsor of the bill, criticizes call centers for their rigid attendance policy despite the health risks associated with the profession. But the country has little incentive to gain from curbing the growth of this multi-billion dollar industry.

Outsourcing call centers are unlikely to be forestalled by unionization. Only a few call centers have labor unions. The Philippine call center workforce does not have much incentive to unionize, although the prospect of industry-wide unionization cannot be ruled out completely.

The Philippines is not the safest country to invest in, but it is definitely not the riskiest place either. Being Asia’s call center hub, the country has proved that its risk profile is tolerable enough for many foreign companies.

Call Center Outsourcing Industry Can Sustain Cost Advantage

The Philippine call center outsourcing industry owes its success to the low cost of local manpower. Had it not been for the large difference between the salaries of Western and Filipino contact support agents, there would be little incentives for foreign companies to outsource their customer service to the Philippines. But is this cost advantage sustainable in the long run? Can foreign clients maintain the same level of savings for the next two decades? Industry advocates worry that the big salary inflation in the Philippine call center outsourcing industry will cut the lifespan of this rapidly growing sector. However, this is a very unlikely prospect considering the macroeconomic fundamentals of the Philippines.

Call center salaries are increasing at an annual rate of 10% since the industry began growing rapidly in 2004, said Benedict Hernandez, president of the Contact Center Association of the Philippines (CCAP). The double-digit growth rate creates price pressure, which is aggravated by the low yield rate of call center recruitment. Salary inflation is prompting industry leaders to reconsider their salary structures. Hernandez urged call centers to lower their salary offer and give performance-based incentives instead. Mar Roxas, former secretary of the Department of Trade Industry and advocate of the BPO industry, said that starting salary grew from 10,000-12,000 pesos to 15,000-20,000 pesos. Such increase may turn off potential clients if left unabated, Roxas said.

Drawing such industry forecast by looking at a single risk factor is unacceptable to professional market analysts. We must have a thorough look at various economic factors affecting the competitiveness of the call center outsourcing industry. A study conducted by the Everest Research Institute showed that salary differential between the offshoring countries and their BPO partners would ould remain significant for two decades or so. The study analyzed wage trends in five offshoring destinations including China, India and the Philippines, as well as the wage scale of 6 offshoring countries including the US and UK.

The study clarified several myths on outsourcing inflation. It turned out that several reports on wage inflation only cited the maximum rather than average rate. A number of call centers in the Philippines indeed offer more than P15,000 in basic pay, but there are also large BPO firms that pay far below this figure.

The study also factored in exchange rates. Researchers concluded that the currency of offshoring clients will remain higher than those of BPO countries, thus mitigating the impact of domestic inflation.

Another reason why salary inflation should not spell death for the call center industry is that skills and productivity will become as important as labor costs when choosing a BPO location. As the call center outsourcing industry of the Philippines gains more expertise and experience, productivity will definitely compensate for the reduced wage gap.

Call Center Outsourcing Improves IVR Effectiveness

Call center outsourcing can reduce over-reliance to interactive voice response system or IVR. Call centers have lost a lot of customers due to poorly designed IVR although these can be a great time-saving tool for both the customers and sellers, this system often fails to meet the standard of customer service expected from a live representative. For a customer seeking an urgent response to a difficult problem, there is nothing more assuring than talking to a live customer service representative.

Consumers find it annoying to wait for two minutes before knowing what number to press, only to start the whole process again when the wrong option is chosen. Most systems are not designed to make navigation easy and fast as possible. Quality of voice is another issue. Despite the advances in speech technology, many companies are using machine voice in their systems. Getting a robot-sounding voice to instruct customers over the phone has affected confidence among callers.

According to a survey conducted by Forrester, entitled “Driving Consumer Engagement with Automated Telephone Customer Service,” about 82% of online consumers in the U.S. used IVR to seek customer support. A higher percentage (93%) contacted live agents. But despite the 24/7 availability of IVR, overall consumer satisfaction remained low at 49%.

With the growing interest in proactive notifications, the advantages of call center outsourcing cannot be emphasized more. The Forrester survey revealed that 80%-93% of consumers in five different sectors (including cable, telecommunications and travel) welcomed proactive notifications. More than 88% wanted their financial services providers to give them such notifications.

Running an in-house call center increases reliance to IVR. Customer service comes with a price, and the high cost of providing live phone support 24 hours a day is prompting companies to push IVR to their clients even if it means dissatisfaction among consumers. Sixty-seven percent of Forrester respondents want a choice to opt out of the system to speak directly to a live agent.

Striving a balance between call center service and deployment of IVR entails cost-benefit analysis. Calls handled by live agents can cost $3 to $9, whereas an IVR transaction can cost 5 to 7 cents only.  Consumers prefer IVR for routine or simple transactions. Majority of the surveyed consumers prefer to use the systems in tasks like prescription refills (66%), checking flight schedules (61%), account balance inquiry (59%), store information request (55%) and tracking of shipments (53%). A balanced cost-benefit analysis should factor in the impact of decreasing reliance to IVR in favor of live agents. Insufficient IVR support may unnecessarily increase call center backlog, which in turn can frustrate callers who are worthy of getting live support. The cost advantages of call center outsourcing make it viable for companies to increase their live customer support operations to address the limitations of the system.

D'Vaughn Bell
D'Vaughn Marqui Bell is a millennial entrepreneur, author and businessman. As CEO of Marqui Management he is responsible for day to day operations, management and insight. He continues his leadership development and training for the millennial generation at his website: D'Vaughn Bell

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