Tuesday, May 29 2018
By King R. White, CEO, Site Selection Group, LLC
The domestic call center industry has gone through many cycles over the last couple of decades but continues to find its place within the U.S. economy as a critical part of a balanced workforce in communities across the country. Site selection strategies continue to evolve as companies seek to find the optimal location for their call centers. Similarly, call centers have expanded into omni-channel environments doing far more than what they did when the industry first gained a foothold in the 1990s. As a result, companies need to understand the latest trends and challenges faced by call centers and related back office operations within the United States.
The Evolution of the Call Center Industry
The first challenger to the domestic call center market was the emergence of India as an offshore, low-cost option, which was pioneered by companies like American Express and General Electric. Then came the Philippines after the dotcom bubble burst, and companies quickly moved jobs offshore to a geography with better English dialect than India. Shortly thereafter, nearshore locations gained a lot of momentum as places like Costa Rica, the Dominican Republic and Guatemala became staples for expansion. To be sure, more challenges will face the domestic call center industry in the future. They will come from other geographies like Africa as well as from artificial intelligence technological advances.
At the same time as the above changes were happening, call centers began evolving in their contact types and functions. They evolved from doing simple inbound and outbound calls to more advanced functions such as shared service activities (finance, human resources, procurement, etc.), technical support, clinical healthcare activities and a variety of other knowledge-based functions that could be performed in a back office type environment. Today, you find a broad range of these activities being performed inside the modern-day call center through calls, email, chat and social media channels.
The United States Has the Greatest Market Share of Job Creation
Note: Site Selection Group data was gathered from press releases and government agencies. Data is representative of market trends and in-depth country due diligence for all activity.
Southeast and Southwest Regions of U.S. Created the Most Jobs
Changing Labor Conditions Impact Call Center Location Strategies
1. Avoid cities and states with recent or planned minimum wage hikes. Who would have ever thought that Arizona, one of the most call center friendly states in the U.S., would implement labor laws that will increase the minimum wage to $12 per hour? With Phoenix as one of the most saturated call center labor markets with over 100,000 call center workers, the wage hike could cause a major shake-up in the labor market as lower paying call centers may have to exit the market. We anticipate similar challenges in other states that are increasing their minimum wages. Those states include California, Maine, Oregon, Colorado, New York, Hawaii, Maryland, Vermont and Michigan. This doesn’t even include many cities, which are also increasing their minimum wages.
2. Avoid metro areas with extremely low unemployment. The national unemployment rate dipped to 4.1 percent at the end of 2017, which is basically the lowest it has been in over a decade. This low rate is considered full employment. At these lower unemployment rates, you are typically going to see higher employee attrition and wage inflation as employers fight for workers. As a result, you may want to consider eliminating metro areas where the unemployment is less than four percent.
3. Target larger labor markets. One safe way to buffer yourself against the tightening labor conditions is to locate in larger metro areas. The days of opening call centers in smaller rural towns is a thing of the past. Many of those call centers found themselves working through the labor market in less than five years. The current trend is to focus on labor markets with 100,000 and greater population. We have even seen many clients increase that to 250,000 for call centers that are larger or seeking a high skillset of employee. These larger labor markets provide a deeper pool of talent to maintain a healthy applicant-to-hire ratio to keep seats full if you incur high attrition, need to ramp up quickly, or need these higher skillsets.
5. Raise the maximum threshold on the call center saturation rate. If current reshoring initiatives are further propelled by political and economic policies, we could see a significant amount of growth ahead for the U.S. call center industry. These jobs are going to land in many of the targeted markets outlined herein, which means these labor markets will get saturated very quickly. The industry standard cut-off point has typically been three percent; however, companies are going to need to raise that threshold to four percent to avoid eliminating labor markets in the site selection process that might still be capable of accommodating more call center jobs.
One thing is for sure, there is a shortage of quality call center real estate left on the market right now. The reality is that many of the quality options have all been picked over and the remaining call center buildings in good labor markets may not provide enough capacity to handle future growth. We are advising our clients now to be ready to convert traditional office, retail and industrial space to get into the best labor markets. This is going to require companies to spend a lot more capital to build out the facilities. Bottom-line, be prepared to spend more capital and have it allocated in your budget before embarking on a site selection exercise.
King’s intense focus on driving innovation has enabled him to develop industry-leading products including GeoCision®, LaborCast® and IncenTrak®. He is continually cited by numerous global publications as a thought leader, written over 100 blogs on global location trends and received numerous awards from a variety of organizations.
Prior to the formation of Site Selection Group, King was a principal and founder of the Corporate Site Selection and Economic Incentives Division of Trammell Crow Company. This division was responsible for providing global site selection and economic incentive services to Trammell Crow’s corporate customers. During his ten year tenure at Trammell Crow Company, King developed his long term vision of what has become Site Selection Group.
Professional Involvement & Awards