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Datamonitor Report: Convergys the First, But Unlikely the Last, to Pull its Call Centers Out of Canada

February 19, 2008

A new report from market research firm Datamonitor shows what many of us already know: Companies are starting to pack up and relocate their Canada-based call center operations due to the increasing value of the U.S. dollar and the increasingly unfavorable exchange rate. Even call center outsourcing behemoth Convergys (News - Alert) has announced that it will be closing some of its facilities in Canada in the coming months – this news coming directly from the mouth of Convergys CEO David Dougherty.

“Convergys’ announcement of a scale-back on Canadian operations could be the first of many by outsourcers,” warned Peter Ryan, head of contact center outsourcing analysis at Datamonitor, in a press release. He said the decline of the U.S. dollar “has badly eroded the profitability of U.S. outsourcers based in Canada,” and that “Canadian contact center labor is becoming difficult to recruit and retain, further adding to outsourcers’ costs.” In addition there is not enough supply of Spanish-speaking contact center labor in Canada to meet U.S. demand, Ryan said.

If things don’t change soon -- and right now there’s no reason to expect that they will --Datamonitor predicts that companies will be pulling their call centers out of Canada in droves, crippling what has become one of the country’s largest and most profitable industries. They will go out and find new regions for setting up their call centers -- in India, in the Philippines, and in Latin America -- Datamonitor suggests, and some will no doubt want to bring their centers back home to the U.S. too.

Datamonitor says the increasingly unfavorable exchange in Canada “has been a nightmare for American contact center investors.”

“Indeed, since 2004, the CDN has appreciated over 30 percent, which has effectively eroded profit margins and operating cost savings that many U.S. outsourcers had come to rely upon from their Canadian operations,” a press release touting the new Datamonitor report states. “This had been a major selling point for luring American investment north of the border.”

According to the report, a diminished pool of qualified applicants for contact center jobs – which now demand both good technical and interaction skills – is also hurting the contact center industry in Canada. Recruiting good agents has become a serious challenge, particularly when considering recent trends such as the migration of prospective agents from across the country to the burgeoning Alberta oil sands, where firms are paying higher salaries – salaries which contact center industry in Canada simply cannot match. This in turn has led to an increase in overall wages and benefits paid to existing agents in order to keep attrition low – however, outsourcing firms are going to have difficulty bearing these higher wages over the long term and for that reason many of them will begin to pull out.

Another factor resulting in diminished interest in Canada as a location for contact centers is the fact that the country offers so few Spanish-speaking agents. With roughly one third of all U.S. consumers now Spanish-speaking, it is little wonder that so many organizations see multilingual capabilities, in particularly English-Spanish, as being critical to their future success. As such, many of the U.S. organizations pulling out of Canada will likely be looking at other “near-shore” options, such as those offered in the Caribbean and Latin America (CALA).

Datamonitor is a leading provider of online data, analytic and forecasting platforms for key vertical sectors. For more information, visit www.datamonitor.com.

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Patrick Barnard is Assignment Editor for TMCnet and Associate Editor for Customer Interaction Solutions magazine. To see more of his articles, please visit Patrick Barnard’s columnist page.

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