Can "Homesourcing" Compete with "Outsourcing" in the US Economy?

"Outsourcing" is the practice of shipping jobs overseas where overhead costs are lower. In this article the term specifically refers to outsourced call center and customer service representative positions. The companies involved still serve US customers, but the customer service agents are based overseas in nations like India with significantly lower employee costs for operating customer service call centers. "Homesourcing" refers to a counter trend some companies have used to reduce the call center cost while keeping customer service operations in the United States.

Can "homesourcing" compete with "outsourcing" In the US economy? That's a good question. Here are some facts to help you understand the situation and draw your own conclusions.

Here are some basic "call center economics". To operate a US call center where rows of customer service representatives answer technical support or other customer service function calls costs approximately $30 per representative per hour or more. Those costs include the employee's wages, benefits, payroll taxes, and the cost of overhead for operating the call center such as computers, phone lines, and real estate. A call center in India providing the same service may cost as little as $10 per rep per hour. Between these two extremes are customer service reps based in the US who either work at home or in parts of the country with significantly lower overhead. Those "homesourced" or "home shored" jobs may cost about $20 per hour per rep.

There are a number of reasons that profit driven companies would choose to use representatives based in the United States even if the cost is higher than an offshore call center. The may reasons include one or a combination of the following

- end user preference, i.e. the company's customers want to speak to an American who may understand the customers' concerns better.

- contractual and/or legal limitations which for reasons of data security, customer privacy (particularly with personal medical information), or both require the information not to leave the country. For example, some medical transcription firms do not send U.S. government contract transcription overseas for such reasons. Some other medical practices will not ship transcription overseas for fear of violating the privacy standards of the Health Insurance Privacy and Portability Act. Other items in this category include situations where call center representatives are required to have specific licensing by individual states to transact business, such as life or property/casualty insurance sales.

- avoidance of negative publicity in the public eye and/or "targeting" by politicians seeking to promote themselves by punishing firms trying to reduce their costs by moving operations overseas.

The major driving force in closing US call centers are the costs associated with employee payroll, payroll taxes, real estate, and related overhead.

If by "homesourcing" or "homeshoring" call center operations reduces costs to an acceptable level for the company they will frequently choose to "home shore" call center customer service positions whenever possible. It makes for good public relations, lowers the potential for political retaliation, and tends to improve US customer satisfaction.

Companies lower these costs using the following techniques.

1. Outsourcing customer service to another company with lower hourly payroll costs in states with lower payroll taxes OR companies that even pass any payroll tax burden to the customer service rep by requiring the representative to function as an LLC or S Corporation.

2. Outsourcing customer service to another company that does not provide expensive additional benefits like medical insurance or defined benefit pension plans, though cost sharing for health insurance and 401k retirement plans may be offered.

3. Housing the call center either in a location with comparatively "cheap" costs for real estate or having home based call center representatives who often pay for their own high speed internet connection and computer.

If these techniques can be shown to reduce costs sufficiently while maintaining productivity, often a job that was once headed off shore can be saved.