June 09, 2004
As U.S. Companies continue their global search for cheap labor and locations for call centers and other back-office operations, many find they need look no further than a place like Nacogdoches, Texas.
It’s the flipside of the outsourcing coin. As big companies start facing quality concerns and a political backlash from moving jobs overseas, America’s small towns are emerging as alternatives. A company can move a call center to, say, Nacogdoches (pop. 29,914) or Twin Falls, Idaho, (pop. 34,469) and instantly start offering some of the best jobs in town–even if they pay only $7 or $8 an hour.
“Our clients are starting to realize they can stay in the U.S. and go to small markets where the wages will have an impact,” says Jim Trobaugh, senior vice president at CB Richard Ellis, a Los Angeles commercial real-estate services firm.
By moving out of major cities to less-populous areas in the U.S., where real estate and labor are cheap, some companies find they can save millions of dollars. And productivity gains are often palpable.
Many small towns have lost a major manufacturing plant and are still home to an eager labor force. Call centers–where workers answer inbound sales calls, provide customer support or make outbound telemarketing calls, sometimes 24/7–offer jobs that are relatively easy to fill.
US Bank recently picked Coeur d’Alene, Idaho, (pop. 36,259) for a new call center for its growing credit-card services division. The city “has pretty serious unemployment,” says Scott Hanson, a vice president with US Bank, a unit of U.S. Bancorp, Minneapolis. “We can go in with 500 jobs and really make a difference in a community.”
Shipping jobs overseas, to take advantage of dirt-cheap wages in India, the Philippines and other countries, isn’t likely to stop anytime soon. International Business Machines Corp., of Armonk, N.Y., said in April that it plans to purchase Daksh eServices Ltd., an Indian call-center firm with about 6,000 employees.
But some big companies are discovering drawbacks to outsourcing jobs abroad. Dell Inc., of Round Rock, Texas, recently opened a call center in Twin Falls to serve corporate customers after closing a similar center in India following customer complains. Lehman Brothers Holdings Inc., New York, several months ago canceled an outsourcing contract in India for the company’s computer help desk after workers there weren’t meeting expectations. Spokesmen for Lehman and Dell declined to comment.
St. Louis pharmacy benefits manager Express Scripts Inc., meanwhile, is creating 650 customer-support jobs in St. Mary’s, Ga., (pop. 8,200). Teletech Holdings Inc., of Englewood, Colo., hired 600 new workers for a call center in Kalispell, Mont., (pop.14,223). Odessa, Texas; Meridian, Idaho; and Carrollton, Ga., also have recently landed call-center operations.
India doesn’t offer many bargains when it comes to real-estate development costs: Often the cost of upgrading infrastructure overseas is comparable to, if not more costly than, such costs in the U.S. Small towns often have vacant warehouses and supermarkets that are suited to call centers’ wide-open layouts.
And rural communities in the U.S. have been wired with high-bandwidth fiber-optic cable over the past decade, allowing for more traffic and cheaper calls. That isn’t the case in India. “When you go to India, usually your telecom cost higher than your labor cost,” Mr. Trobaugh says.
After falling for years, the number of call-center jobs in the U.S. is actually up a bit. Between April 1999 and April 2003, employment at call-center companies operating in the U.S. declined by 14%, or 56,500 jobs, to 358,300, according to the Bureau of Labor Statistics. But in the past year, employment at U.S. call centers is up 0.1%, or a few hundred jobs.
The call-center industry’s famously high turnover–up to 100% a year, by some estimates–is the result of low skill requirements, low wages and competition for workers in cities with numerous call-center operations. Researchers at Purdue University, West Lafayette, Ind., found that the smaller the city, the better the call-center performance, measured by number of calls completed, problems resolved or sales made. Cities with higher unemployment rates tend to have better-performing call centers because workers have fewer jobs to pick from, the researchers found.
In Coeur d’Alene, a lakeside resort town, mining and logging jobs are disappearing, but the population is growing. “Unemployment keeps creeping up, but people keep moving there because of the quality of life,” says US Bank’s Mr. Hanson. Residents have a good service ethic, he adds. “Talk with them on the phone and you can hear the smile in their voices.”
US Bank looked at India but decided against putting its call center there. One big reason: the public-relations fallout the company would have expected, given its name. “Having [the call center] right next door–that was far more important than the potential savings we could see by sending somebody over to India,” Mr. Hanson says.
Some third-arty call-center providers are beginning to view domestic business as a growth opportunity. Effective Teleservices Inc., based in Nacogdoches, opened a new center in nearby Lufkin, Texas, in mid-March, investing $1 million to renovate an old Safeway store and creating 400 jobs. A paper mill in Lufkin closed in March, laying off 580.
Effective Teleservices employs 900 in Nacogdoches; it also employs 100 people in Gandhinagar, India, largely to provide Web-chat customer support. “Our Indian agents have great command of the King’s language,” says the company’s president and chief operating officer. “They don’t speak it as well, but my goodness, they can type it fine.” Effective Teleservices clients include Fortune 100 companies within the telecommunications, health care and education industries.
Mr. Smith sees a “rush to rural America” in the call-center business. His company moved to Nacogdoches from Birmingham, Ala., in 1998 seeking lower wages and turnover. The city has a surplus of qualified workers. About 500 of Effective Teleservices’ employees work part-time and study at Stephen F. Austin State University. In addition, a community college in Lufkin helps train workers.
Effective Teleservices’ employee-turn-over rate now is 60%, below the industry average. In Nacogdoches, Mr. Smith says, “if you don’t work for us, you work in a poultry-processing plant. I don’t know if you’ve ever been around one of those, but if you have, you want to keep your job.”
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