Offshore call centres are damaging reputations and customer relationships while failing to deliver the expected cost savings, financial services firms have been warned.
But it isn't just poor customer service that makes offshoring a false economy. A report by Compass Management Consulting has found that with wage costs spiralling by up to 15 per cent annually, the economic benefits of offshoring to locations such as India are also eroding rapidly.
Compass analysed 50 onshore and offshore call centres and found that any cost benefits of offshoring decreased substantially over a three-year period, compared to onshore environments where an improvements had been implemented.
In particular, language barriers were leading to lower offshore productivity, extended call times as well as being a prime cause of customer frustration. Problems with comprehension occurred in an average of 18 per cent of offshore call centres the report found, compared to four per cent of calls in onshore call centres.
Each one of these problems could extend the duration of a call by between 39 to 105 per cent.
Simon Scarrott, head of business development and marketing at Compass, said: "It is not enough to simply offload problem operations and inefficient processes to other countries in the hope they will improve.
"The key issue is to what extent savings are real, sustainable and continue to enhance the consumer experience. In too many cases, service quality is being compromised by an offshoring decision that fails to deliver the level of savings anticipated."
Scarrott added that in many cases, the business model around business process outsourcing was flawed, with too many financial services companies still labouring under the misconception that offshoring is the swiftest route to cost savings.
Contributing to this, Compass found earlier this year that outsourcing providers were winning business by pricing contracts in such a way that they produced savings of up 18 per cent in the first year compared to the cost of doing the work in house.
But costs quickly began to climb in subsequent years, reaching 36 per cent above comparable top quartile internal operations by year three.
The report also said that firms could improve their reputations with consumers if they followed the lead of Lloyds TSB, one of the UK's biggest banks, and moved their call centres back onshore.
"It's on the agenda but few people know how to do it and are cognisant of how to mitigate the risks," Scarrott said.