”Home-Sourcing” vs. Offshoring

It's not all about price; allowing people to work at home ''leads to a virtuous cycle of productivity.''
John P. Mello Jr.January 26, 2005

As many U.S. companies prepare to export jobs overseas, other companies are working to keep them at home — literally — as a substitute for call centers. According to a recent study by consultancy Booz Allen Hamilton, not only is such “home-sourcing” cheaper than traditional outsourcing, but home agents are 25 percent more productive than employees who handle calls in-house.

The New York-based firm also pointed out that 80 percent of companies that use home agents are satisfied with the model, and that 22 percent of companies that haven’t tried home-sourcing yet plan to do so within two years.

Nor surprisingly, companies that specialize in providing home-sourcing services have been doing well for themselves lately, according to Steven Loynd, a senior analyst with Framingham, Massachusetts-based research firm IDC. As an example Loynd cited Alpine Access, headquartered in Golden, Colorado, which had revenues of $2.2 million in 2000, grew to $10 million in 2003, and is expected to have reached $17 million in 2004.

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Firms like Alpine — and like Portland, Maine-based Intellicare — help their clients cut expenses by removing the cost of operating a bricks-and-mortar call center and by paying their agents less than in-house employees would command. That may not always seem intuitive; as Intellicare chief financial officer Richard Lester observes, “there’s a huge shortage of nurses in America,” and his company’s customers — doctors, hospitals, and health management companies — want to keep their pricing down. Adds Lester, “we had to figure out a way of keeping nurses happy while not paying them as much money as the ‘market’ would demand.”

Letting those nurses handle telephone inquiries from home turned out to be the solution. For home-sourced work, Lester explains, Intellicare looked especially to female nurses, ages 35 to 55, who are married with children or who are single heads of household. “Those folks will trade money for convenience and lifestyle so they can spend more time with their families,” he says.

It’s Not All about the Money

The benefits to companies aren’t limited to lower costs; allowing people to work at home “makes for happier, more productive agents on the phone,” adds Loynd, “and that leads to a virtuous cycle of productivity.” And when those workers are sales agents — not the case with Intellicare, of course — “if they’re better on the phone, then they can do more complex selling.”

Judging by turnover, home agents appear to very happy with their situations. According to the Booz Allen study, the annual turnover rate for operations that use home workers is around 10 percent, compared with 50 percent or more for the call-center industry as a whole. Inconvenient schedules and dull work account for much of the difference, says John Bowden, chief operating officer of Willow, a Miramar, Florida-based company that provides what it calls “virtual contact center services.” Explains Bowden, “Our agents choose their own hours and who they work for, so I don’t have two of the biggest dissatisfiers for agents.”

Vendors that offer home-sourcing services recognize that they can’t compete on a pure cost basis with many overseas operations that have a glut of willing workers. According to IDC, for example, India has 115,000 call-center workers today, compared with 3,000 only five years ago. But having calls fielded on the subcontinent would be an alternative only for companies “interested in price and not the quality of conversation,” maintains Bowden. “If you’re a triple-A customer stuck on the side of the road in the snow, you don’t want to talk to somebody in India.”

Todd Burke, a spokesman for New York-based JetBlue, which uses home-based agents for some of its call-center functions, acknowledges that some air carriers are moving their reservation operations to India. “The way we do it is more expensive,” says Burke, but “it’s very important for us to offer what we call ‘The Experience,’ and it’s as important for us to maintain control over that.”

Some companies might try a little bit of both, says Loynd. “If companies can put home-based agents on more-complex calls where cultural affinity might be a factor, but do offshore for other types of calls, you might be able to have a more balanced solution to the problem,” he says.