The call center industry continues to geographically evolve as offshore, nearshore and onshore location strategies change and global labor markets mature. What is amazing is the fact minimal data exists on the actual size of the industry from a headcount perspective. To help evaluate the industry’s size by geography, Site Selection Group analyzed its proprietary database U.S. call center operations to compare the number of call center jobs estimated to be in leading nearshore and offshore destinations of India, Latin America and the Philippines. This should help you develop a global site selection strategy on where to locate your next call center or back office location.   

U.S. is the largest global call center market

To no surprise, the U.S. call center market has the largest number of call center workers. The U.S. industry continues to grow due to the strong economy and popularity of corporate reshoring and onshoring initiatives. Over 7,400 call centers in the U.S. employ 50 or more workers, according to Site Selection Group’s proprietary data.  These call centers employ an estimated 2,343,990 workers. However, this estimate does not include small call centers of less than 50 employees or work-at-home call center agents.

A logical estimate for the smaller call centers that are often embedded within a company’s headquarter facilities would be to add another 500,000 workers. Similar estimations would assume the work-at-home market is an additional 500,000 workers.  With these workers added to Site Selection Group’s calculations, the total estimated call center workforce in the U.S. is approximately 3.3 to 3.4 million workers.

As we analyzed the U.S. call center industry, we identified the states with the largest amount of call center workers employed in call center facilities with more than 50 employees. Texas and Florida are the clear market leaders. Arizona and Georgia are next, with roughly half as many employees. The following table provides a summary of the top 10 states:  

Top 10 States Based on Call Center Employment

Rank State # of Call Centers # of Employees
1 Texas 710 288,253
2 Florida 637 236,686
3 Arizona 348 129,955
4 Georgia 352 129,573
5 Virginia 207 116,897
6 North Carolina 271 107,586
7 Ohio 321 95,603
8 Pennsylvania 380 85,208
9 New York 216 73,593
10 Maryland 125 64,746

The Philippines emerges as largest offshore location for call centers

Our team at Site Selection Group set up some of the first call centers in the Philippines back in 2000 for companies like RMH Teleservices (now Alorica) and Infonxx (now KGB). The growth of the Filipino call center market has been phenomenal ever since. Today, the Philippines has overtaken India as the largest offshore market for voice-related call center work based on generally reliable industry organizations.

There is now an estimated 1.3 to 1.5 million call center workers in the Philippines, according to the Contact Center Association of the Philippines. With over 1,000 business process outsourcing (BPO) companies operating in the Philippines doing all types of call center and back office work, the call center industry has become approximately 10% of the country’s GDP.

As the market rapidly matured, it attracted name brand companies like Amazon, Google, Wells Fargo and others who have set up captive, in-house operations. Many companies are now expanding into tertiary markets like Cebu, Davao, Dumaguete, Clarke and Baguio as the labor market in Metro Manila becomes more saturated.

India is the 2nd largest offshore market as growth shifts to IT services

American Express and General Electric were the first companies to set up shop in India during the ’90s.  The market rapidly matured but ran into quality challenges for voice-related activities as consumer outcries demanded higher quality voice-related support. As a result, the market shifted into many non-voice back office activities such as IT development, shared service and transaction processing activities. The overall back office sector, inclusive of IT services, is now approximately 8% of India’s GDP and employs an estimated 3.1 million workers. However, voice-related call center operations have an estimated employment of 1.1 to 1.3 million call center workers which puts India in second place behind the Philippines.

Latin America quietly emerges as a premium low-cost, nearshore solution

European companies were the first to tap into the nearshore Latin America markets as they entered into places like Brazil and Colombia. It has only been over the last 10 years or so that U.S. companies began to see the unique benefits of the region as India and Philippines became more saturated and bilingual needs were in high demand. From a site selection perspective, it is an entirely different game in Latin America since there are roughly 33 countries spread through the region as compared to a single country like the U.S., India or the Philippines. A recent Frost and Sullivan report estimated the total headcount in excess of 800,000 call center workers in the region today. This technically would make the region fall into 3rd place behind the Philippines and India.   

Market disruptors could impact site selection in these call center markets

In a global economy, there are so many factors that can disrupt growth within a region especially when considering nearshore and offshore markets. The following are market disruptors to look for as you evaluate these geographies for expansion during the site selection process:

  • Political instability – Politics are extremely cyclical and often unpredictable. Locations that are currently facing or recently faced challenges include the Philippines, Nicaragua and Honduras.
  • Government legislation – Government policies can create unique challenges. The U.S. is trying to pass anti-outsourcing provisions while the Philippines is making it much more difficult to get tax holidays on revenue from their PEZA program.
  • Currency fluctuations – Most countries’ currencies are not as stable as the U.S., which can create risk with determining the true value proposition of a location over time. Canada, Argentina, Brazil and the Philippines have all been challenged by fluctuating currency valuations.
  • Unionization – Unions can create havoc on call center operations and cause significant increases in labor costs. Unions will often emerge in countries or regions where call center industry growth is getting a lot of exposure.
  • Emerging industries – Look out for emerging industries like online gaming which can disrupt a labor market. A great example is online gaming which has created some unique challenges in the Philippines and Costa Rica.
  • Wage inflation – Most people are unaware that wage inflation of 10% per year can be normal in nearshore and offshore locations. This inflation can erode the value proposition of a location quickly if you didn’t budget for it.
  • Technology – Technology is changing at such as rapid pace that it will disrupt the industry over time. Robotic process automation, business process automation and artificial intelligence will all impact call volume. Nearshore and offshore markets will be at the greatest risk as they are typically the simplest transactions or more back office activity might be eliminated.

Conclusions

The call center industry has become an important part of the labor market in the U.S., India, Latin America and the Philippines. The migration of call center jobs onshore and offshore will continue with the economic cycles of the global economy and the fickleness of corporate America. Companies will continue to battle with finding qualified call center workers at a reasonable cost as the industry grows unless it is disrupted by other factors.

 

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