It’s very interesting to see that Santander is bringing back 500 contact centre agents from India to the UK.  This is good news for the UK economy, and is also part of a much wider trend in customer service that Santander is following. I’ve blogged on this before and good examples of firms brining service back to the UK include HSBC (see “HSBC creates 250 UK call centre jobs as offshore declines”) and Axa (see: “Axa to create 600 new UK contact centre jobs”).

I’ve long argued that managing customer service purely as a cost centre is a serious mistake for financial services companies. The option of outsourcing to India was pitched as a price-play, simply that shipping service to a lower cost of labour market would cut costs.

Superficially, this seems attractive, as labour costs in Indian contact centres can be up to 90% cheaper than in the UK and technology permits contact centre agents to be anywhere.  The trouble was, that while customer service might seem an expensive stand-alone cost, the management consultants who pushed off-shore contact centres forgot that customer service is also about customer perception and brand.

Put in those terms, then running large and expensive advertising campaigns to re-build brands tarnished by poor customer service starts to highlight that off-shoring is rather less of a cost saving.  

More fundamentally many of these companies viewed off-shoring as a panacea for their customer service problems. The result was that forklifting customer service problems to cheaper market simply meant that the firm now had customer service problems at a lower cost per agent. This did not mean that any underlying customer service problem had been fixed!

It also had two unintended consequences, as radical change driven by the wrong reasons often does. The first was that customer tolerance of poor service declined. Customers perceived that if they were to be treated with contempt by their bank by a lower standard of service, then they would complain more aggressively and to outside organization. Consumer hostility to off-shoring is high, and whether this is valid or based on facts is somewhat irrelevant - if consumers don’t like it some of them will act. The second part of this is that off-shore organizations often lost a lot of flexibility and corporate knowledge when they sent work off-shore, especially if they sent it to third parties.  Before off-shoring, a combination of experience, cultural understanding, and pragmatism at bridging the gaps between bank IT systems often enabled agents to manage the softer side of customer perceptions. These tended to be lost in the moves off-shore the loss of these qualities has probably outweighed many of the cost savings.

The final concern with offshoring is security and risk. This is not just a news scare story but a concern of the FSA that I’ve previously blogged on (see: “FSA determines offshore call centres a risk - finally!”). Security has an inherent cost, and while there are security issues and customer service issues with UK, onshore contact centres, these are potentially easier to manage onshore than offshore.

My conclusion?  Outsourcing to gain specialist customer service skills still has huge potential in financial services, but in the UK and especially if outsourcers are allowed to engage witht he customer service processes. By contrast, offshoring BAU ("Business As Usual") customer facing work represents significant risks that potentially outweigh any cost benefits.