Onshoring vs. Offshoring: Service/Support Businesses Are Coming Back Home
Word has been spreading in the last few months that offshoring may no longer be the best option and that the United States is increasingly becoming more competitive for everything from manufacturing to IT to customer service. How should a CEO decide whether offshoring or onshoring is best for his or her firm?
May 16 2014 by John A. Meyer
The pitfalls of offshoring include miscommunication, political instability, and security risks. Offshoring location costs have grown by the double digits on an annualized basis, while the cost of foreign labor is also on the rise, according to the International Labour Organization. In addition, customers’ dissatisfaction with the language barrier has been repeatedly vocalized, and more CEOs are realizing that the cost of losing a customer or providing a sub-optimal experience is expensive and impacts the brand.
Conversely, onshoring offers more control and a higher standard of service from agents who are part of the domestic fabric, share an affinity for a company’s products, and can humanize interactions, where customers say, “I like dealing with XYZ company because they understand me.”
In addition, onshoring has become more affordable and attractive. Deloitte finds that IT is leading the way back to onshore, with the airline, software and retail industries closely following. General Motors, for example, is onshoring all of its IT today, while Collaborative Consulting reports that Forrester has measured a 100%, year-over-year growth in domestic sourcing for IT.
In addition to IT, customer service is also returning fast. With the labor gap narrowing, companies can afford to give customers the quality service they are demanding. As businesses try to distinguish their brands in a challenging U.S. economy, they are seeking the best customer experience possible, and that means bringing customer service back home.
The reality of the current marketplace is that the customer experience is the brand. The Internet has commoditized products and services to the point where the only way to compete is via customer service. Similar to the pre-Internet days, call center agents are the front line again, and emotional ties are created or severed through them.
Meanwhile, today’s customer service model is also taking advantage of all that digital technology has to offer. For instance, it’s easy to imagine matching the caller to the account rep based on profile or skill set. It is already happening with geographic location, e.g. calls from California area codes are routed to customer service reps in California. As the growth of cloud-based call center systems fosters an increase in agent telecommuting, targeting and matching will become a more common, and less expensive, strategy.
Today, offshore remains viable for tasks without client interaction, but when a person-to-person interface is key, companies like Zappos, Amazon and Overstock.com invest in the front lines, which means weighing the benefits of onshore.
The bottom line is that offshore is not the most cost-effective alternative or brand-focused decision when considering the entire value proposition. As a result, a growing number of companies are bringing service and support back home and are maintaining tighter control of their brand reputations, rather than risk losing them.
John A. Meyer is CEO of Arise Virtual Solutions Inc. a work-at-home crowdsourcing and business process outsourcing company.