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The State of the Call Center Industry with Corey Kotlarz

The State of the Call Center Industry with Corey KotlarzAs we enter a new year, Outsource Consultants Founder & President Corey Kotlarz shares his thoughts on the state of the call center industry.

Looking back on 2021, what surprised you the most about the state of the call center outsourcing industry?

I continue to be amazed at how resilient the industry has been as it has faced many significant challenges over the past two years. We continued to see strong demand for outsourced services, and BPOs were able to step up and provide adequate supply and fantastic CX. The call center industry continues to evolve to meet current needs, and is thriving.

The rate of wage escalation in the United States was certainly a surprise. Both internal and external call centers needed to dramatically increase pay and benefits to retain and attract talent. While we always expect to see steady increases, the pay hikes of 10% – 20% were beyond what many anticipated. This caused a run on nearshore and offshore vendors who were able to pick up the business efficiently, leading to very strong nearshore demand and growth.

Besides remote work, what industry changes that arose from the pandemic are likely to become standard practice in the future?

Pandemic-induced operational changes sped up the adoption of new contact center technology. As inquiries rose and it became more difficult to keep call centers fully staffed due to the logistical challenges of pivoting to remote work, many organizations took strides to minimize the need for live agents through digital tools. Deflection and self-service options, like improved knowledge bases and AI-driven chatbots, that had previously been “nice to haves” on a roadmap were suddenly a top priority for organizations. These features may have been implemented out of necessity, but the efficiency and cost savings they produce have made them permanent staples in a modern CX platform.
Many companies were also forced to update their security technology to maintain compliance while their employees were working at home, but the improvements they offer apply regardless of where the agent is working. Remote work made top-notch security and compliance a priority, and it will continue to be a primary focus.

What are the biggest unknowns facing the industry right now?

The ongoing impact of COVID-19 is a giant question mark for everybody, and the call center industry is no exception. There is a very real possibility that a new variant could send regions into another lockdown. While most BPOs have contingency plans in place now, it would still be a major disruption.

It’s also unclear how vaccine mandates may impact call centers. Some governments have attempted to implement legislation requiring vaccine compliance for employees, but appeals and litigation have stalled any meaningful enforcement. But larger BPOs, in particular, may face additional staffing challenges if these mandates are upheld.

International travel is a cornerstone of most outsourcing programs. It has been difficult, or even impossible, to perform in-person due diligence for potential vendors, or to meet with existing partners face to face for training or performance optimization. BPOs have attempted to fill the void with impressive virtual site visits and virtual training, but they’re not as optimal as an in-person visit.

Where do you feel organizations are most unprepared as they head into 2022?

The rapid rise of labor costs in the US has had a devastating impact on domestic call centers, all but evaporating margins that were often slim to begin with. As a result, many BPOs now find themselves in the precarious, but necessary, position of having to renegotiate rates with existing clients. With little to no warning preceding these conversations, clients are forced to choose between paying higher rates or scrambling to find another provider to shift contact volume to a lower-cost location.

This speaks to a larger problem that we’re continuing to see within the industry. Even after all of the disruption and uncertainty brought on by the pandemic, a surprising number of organizations lack adequate diversification and redundancy in their outsourcing strategy. They continue to put all of their eggs into one geographical basket. Organizations that don’t have support dispersed contact volume allocation to several geos could face some considerable challenges in the coming year.

Which outsourcing regions do you believe are poised to thrive in the coming year?

Rising costs in the United States are going to benefit foreign markets due to increased demand for their services. Established markets like Latin America and the Philippines are in a great position to take on new business and scale over the coming months.

We’re also seeing demand for African markets begin to take off. In areas where the industry is relatively young, outsource call centers have an almost endless pipeline of talented, motivated, affordable agents. We’re also seeing major strides in infrastructure improvement in emerging markets. As traditional markets begin to feel a greater strain on labor capacity, African BPOs will have an opportunity to shine as a low-cost option with a deep labor pool.

What are your thoughts on the current state of the call center industry?

I’m bullish as we enter 2022. The demand for call center outsourcing is stronger than ever, and BPOs continue to embrace leading-edge technology and exceptional training.

Certainly, the landscape is changing. Many of the large publicly traded BPO providers are raising rates considerably to maintain margins and shareholder value. Middle market BPOs are raising their rates as well, but not at the magnitude of larger organizations. This has led to companies shuffling providers more frequently as costs and capacity shift within markets.

The outdated idea that this shuffle inevitably comes with a quality reduction is quickly becoming a myth. There are exceptional BPO providers in every market, often producing better results than their more expensive counterparts. We’re seeing a mindset change, where BPO partner selection is no longer driven primarily by geographic location, but by performance and specialization. As call centers around the world continue to improve, the possibilities become limitless. I am excited to see what 2022 brings to our industry.