Mid-Year 2022 Update on Call Center Industry Trends Impacting Site Selection Strategies

As we head into the second half of 2022, Site Selection Group wanted to keep companies with call center operations apprised of the latest global industry trends impacting call center site selection strategies. The call center industry continues to evolve and is desperately trying to find its future path in a post-pandemic world. There has been very little consistency in what certain sectors and companies are choosing as their long-term location strategies. It is evident that the battle continues between the work-from-home (WFH) and facilities-based call centers and between onshore versus nearshore and offshore geographies. Global labor shortages and lingering coronavirus factors only make it more complicated. To help assess the situation, Site Selection Group has summarized the call center location trends that may influence your location strategies.

U.S. call center market trends

• Labor conditions — Extremely tight labor market conditions continue to plague the domestic call center industry despite more flexible WFH offerings and increased wages.
• Employee attrition — Despite lower-than-normal attrition rates reported during the initial shift to WFH, we are now hearing reports of WFH attrition rates increasing which could create significant headwinds in maintaining quality levels.
• Wage rates – Wage inflation has leveled off and we believe it has peaked despite consumer inflation factors. $15-17 per hour has become the new entry wage for call centers versus $12-14 per hour pre-COVID-19. We believe these wages will remain relatively flat for the near future.
• Location strategies — Most companies are implementing the following location strategies:
  • Virtual WFH — Full conversion to WFH model with virtual recruitment and training.
  • Hub and Spoke — Partial WFH model with 25-75% of staff working within a reasonable drive-time to a centralized training facility with nesting and IT support.
  • Facilities-based — Bringing all or most employees back into their facilities.
• WFH savings — There has been minimal to no savings achieved by the shift to WFH due to increased costs related to increased IT, software, and supervisor/management expenses.
• Real estate — Most companies continue to hold on to their call center facilities in a wait-and-see strategy. However, we are seeing companies downsize and close sites as their leases are expiring although there really isn’t an oversupply of vacated call centers yet.
• Preferred labor markets — Most companies have focused recruiting and expansion efforts in Tier 1 (1 million population) and Tier 2 (500,000-1 million population) cities where there is much more depth in the labor markets as they battle for employees.

Nearshore trends

• Hyper-growth region — The Latin America and Caribbean Region, also known as “Nearshore,” is the hottest and fastest-growing region due to its proximity to the U.S., low wages, bilingual capabilities, and geographic diversification from the Philippines and India. The business process outsourcing (BPO) industry is the primary growth driver in the region.
• Potential market saturation — Many cities across the region are reaching a short-term market saturation point simply due to too many companies entering at generally the same time. Saturation should begin to diminish over time in markets with a larger college presence and training support from local governments.
• COVID-19 protocols — Some countries continue to have restrictions on occupancy levels due to COVID-19. We are seeing a 10-20% premium in wages paid to workers required to return to the office in some locations.
• WFH challenges — Quality control in the WFH model continues to be a challenge due to connectivity and home working environments.
• Wage rates — Bilingual agent wages have inflated by 20% over the last couple of years in most locations. Bilingual agent wages are $3-4 per hour in locations like Guatemala, the Dominican Republic, Colombia, Jamaica, Honduras, and Nicaragua. Bilingual agent wages are $4-$6 per hour in mature countries such as Mexico, Costa Rica, and Panama.
• Employee attrition — Attrition rates are reaching 3-6% per month now in most locations. Attrition can be much higher if not paying competitive wages.
• Real estate — The availability of quality real estate is very limited. There are very few vacated call center facilities so companies are forced to convert buildings. The alternative is seat leasing options which also have limited availability.

Offshore trends

• The Philippines — The Philippines continues to be the dominant offshore location with the following market trends:
  • The transition to WFH has finally come together despite taking much longer to implement than in other regions.
  • Growth has been stagnant as companies geographically diversified to other regions such as nearshore.
  • Wage rates remain relatively stable at $2.50-$3.50 per hour plus 50% benefits.
  • Call center workers are pushing for WFH despite efforts by governments and employers to get them back into offices.
  • Companies are now required to have a maximum of 30% of staff working from home to stay eligible for Philippine Economic Zone Authority (PEZA) tax benefits.
  • Concentrix, the largest call center employer in the Philippines, has opted not to utilize PEZA grants as it maintains more WFH workers.
  • The entrance of newly elected President Ferdinand Marcos Jr. should be interesting to follow to see if there are any political changes.
• India — India has been attracting more international BPOs and appears to be growing a lot with more call center work becoming nonvoice-type activities. For example, TaskUs recently entered the market with two large news sites. Wages are slightly lower than in the Philippines which makes it a compelling offshore solution.
• Sub-Saharan Africa — Sub-Saharan Africa has been the hottest offshore region that continues to gain momentum as companies seek the next Philippines. South Africa has been the most successful while Kenya, Uganda, and Nigeria have been gaining some attention. Wages are very low at $2-3 per hour. Some challenges include time zone, accessibility, and history of primarily servicing European countries.
• Northern Africa — Egypt and Morocco are two countries with growth. Egypt has been growing rapidly for the last several years with most major BPO companies servicing Europe with a presence in the country now. Wages are very low and there are multiple language skills available. Another option to consider is Morocco which has very low-cost French speakers and a labor force with other European languages.

Conclusions

The biggest challenge facing the call center industry is labor market instability caused by a combination of post-pandemic factors and global inflation. Market conditions will not completely stabilize until the U.S. labor conditions soften which will create a ripple effect across nearshore and offshore geographies. To help you determine the optimal location strategy for your call center operations, please contact Site Selection Group.