Could offshore cost advantages be reducing as Burnley becomes as cheap as Mumbai?

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A UK company has moved its call centre from Mumbai to Burnley in Lancashire to save money.

According to The Daily Mail, New Call Telecom which provides telephone services and broadband is leaving Mumbai and setting up a datacentre in Burnley because rental and Labour costs are lower. Although the Daily Mail is not best known for promoting the benefits of offshore services, the story does bring home the challenges facing businesses when considering offshoring.

As developing economies grow they create more wealth which is more widely shared. Things become more expensive and exporting cost advantages disappear.

This could either mean lots of offshored work is brought back onshore or businesses might start looking for new locations that are cheaper than established offshore destinations such as India. China for example.

This also raises questions over the claims that businesses only offshore to cut costs. India is not cheaper according to many when you take into account the cost of travel, relocating key workers and communications bills for example. So why is so much work offshored to India then?

According to a consultant I spoke to last week there are more and more businesses offshoring for the first time at the moment. He said many businesses doing so are those that have outsourced in the past but never gone offshore.

5 Comments

The industrial revolution began in this (my) area, is this the start of a second revolution ?

For some time now we have seen a gradual move to relocate offshore call and contact centre operations away from India, and either to the Philippines, to Europe or back home. As all your readers know, outbound call centre operations have given offshore customer services a bad name. There are several reasons for this, but just one of them is that UK customers generally prefer to be dealt with by local call centres. There are hard and soft "political" angles to this, which is why several big UK financial services firms have tried to make a point about telling customers that their calls would be taken in the UK. Quality of offshore v onshore call centres? Difficult one. And depends on whether the call centre is third party or a captive owned by the UK company. Anyone try BT phone fault customer service? Indian captive (or JV, more likely) quality superb. Let down badly by...local engineers not logging appointments and then not helping. Finally, it is true that India - especially Mumbai and other so-called tier 1 cities - are expensive. Mumbai's real estate values are now higher than than London's. Infrastructure costs are relatively high, too. And then there is wage inflation that goes hand in hand with high annual GDP growth. (Though less so in the BPO industry than in IT/software engineering.)

All said, not a surprising move, and one that we have seen several times before.

To paraphrase the often-quoted Times headline: "Small Earthquake in Peru. No One Hurt".

Anything in the Daily Mail needs to be checked very carefully but then again so do offshoring cost savings. There tends to be lots of hidden costs where people workaround issues with the offshored service.

The company involved (New Call Telecom) is actually moving into the business park where I am currently employed, it is more in the Padiham / Simonstone area (Time Technology Park, BB12 7TW).
My company, Tpad Ltd is providing them their business telephone system and predictive auto-dialler (SIP based), infact the main reason I think they are moving back is the ultra cheap calling rates (using SIP trunking technology) that can be used if your bandwidth is sufficient. I dont think the bandwidth in India would be able to cope with 50 concurrent calls but on the Time Technology Business Park they can get a 100MB leased line. There is currently a large banner on our site advertising upto 50 jobs with New Call Telecom, so I recommended a few friends to signup.

The difference between Customer Service call centres and IT work of course is that the former is relatively low skilled. Therefore, companies can quite quickly bring call centre operations back onshore and train up a UK based team from scratch.

The same can’t be said for IT development which is complex and takes years for workers to build up a useful and diverse skill base. Recently, many companies have offshored their junior IT positions instead of training up UK graduates. Therefore, they are going to struggle to bring work back when offshoring to Indian clearly becomes too expensive.

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This page contains a single entry by Karl Flinders published on July 4, 2011 11:37 AM.

Is offshoring still making students of Computer Science the largest unemployed group of graduates? was the previous entry in this blog.

Agency Worker Regulations could boost IT outsourcing is the next entry in this blog.

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