Offshoring is Coming Home, and First Party ARM Firms Need to Pay Attention

Mike Ginsberg

In case you missed it, the headline article in the business section of the Sunday Washington Post titled “As Indian companies grow in the U.S., outsourcing comes home” is a must read for anyone providing first party collection services.  The article features Aegis, a 50,000 person call center operation that purchased Indian debt collection operation Global Vantage a few years back.

The article dives into the growing trend among large call center operations based outside the U.S. to expand their U.S.-based call centers.  While this trend is much more prevalent today outside the ARM space — in the technology sector, for example – U.S. collection agencies that provide first party ARM services should pay close attention.

By offering onshore and offshore resources, large established call centers can be competitive on rates and cover their bases on compliance.  Some are already providing first party collection services and others will follow.  We’re seeing this mostly among financial institutions, but it also exists across all ARM sectors.

Top reasons to expand onshore resources include:

1. Rate increases. Faced with rising wages in India, the Philippines and other saturated offshore hotspots, some large call centers have been expanding their U.S. centers.  As the national unemployment rate hovers around 9 percent, individuals without jobs are lured to call centers with competitive hourly rates, bonus potential and the possibility of one day training call center workers overseas.
2. Regulatory Challenges.  With U.S. regulators challenging visas for visiting Indian workers, the threat of offshore taxes looming, and the strong preference among some large clients (including government agencies) to handle customer service for sensitive data in the U.S., some CRM companies are proactively responding by giving the client what they want, which is a U.S. company servicing their needs.
3. Good business.  Moving resources back onshore is based upon an old fashioned and highly successful sales strategy of being closer to your customer.

In September of 2004, we completed the first M&A transaction between an Indian based call center and a US collection agency when ICICI OneSource (now FirstSource) acquired Buffalo based Account Solutions Group.  At that time, the common thought was that U.S. jobs would be lost to cheaper, plentiful offshore labor in India.  This notion not only existed among competitive agencies but among investors, creditors and the companies themselves.  Quite the opposite actually occurred.  Not only were U.S. jobs maintained, ACG has actually expanded their U.S. call centers since the initial acquisition.

What are you seeing in the markets that you service? Please comment below or send me a confidential email.

Mike Ginsberg is President and CEO of ARM advisory firm Kaulkin Ginsberg, and can be reached by email. The firm is celebrating its 20-year anniversary in the ARM market.