Cutting Costs without Cutting Corners: The Real Cost of Offshoring Customer Service

Offshoring customer service can significantly reduce costs, but what are the real expenses involved? Discover key factors, pricing strategies, and cost-effective tips for outsourcing customer support.

In the rapidly evolving business landscape, many companies opt to offshore their customer service operations as a strategic move to reduce costs while maintaining service quality. This approach can offer significant savings, but it’s important to understand the nuances and real costs involved.

This article dives deep into the factors that determine the cost of offshoring customer service, various pricing models, and why it might be a cost-effective solution for your business.

Factors that impact cost

Level of Service Needed

The level of service you require directly affects the cost. Do you need basic query handling, or are you looking for service that includes up-selling and technical support? Higher levels of service require more skilled representatives, which can influence the cost.

Service Duration

Service duration refers to the total number of hours your offshore customer service representatives will be engaged in handling customer inquiries. Whether you require round-the-clock service or just coverage during basic hours and weekends, planning your hourly requirements is essential for cost estimation.

Call Volume

The volume of customer interactions your offshore team handles is a crucial cost factor. Higher volumes typically lead to increased costs but can also drive economies of scale that reduce the per-interaction cost. By spreading their costs across numerous customers, businesses effectively lower the per-unit cost per call.

Location

The location where you outsource your customer service plays a significant role in determining costs. Offshoring to countries like the Philippines, known for their highly skilled, English-proficient workforce and lower cost of living, can help you achieve cost savings without sacrificing quality.

The Philippines stands out not only for its talented workforce but also for its advantageous tax regulations. In a bid to entice more businesses, the Philippine government implemented the Special Economic Zone Act, offering foreign companies a host of tax incentives, including:

A four-year corporate income tax holiday
Exemptions from local taxes and permits
Duty-free importation of essential assets such as equipment, raw materials, and supplies
Provision of permanent visas for foreign investors

Why it’s Cheaper.

1. No Infrastructure or Software Cost

Offshoring eliminates the need for physical infrastructure and software investments in your home country, as the offshore partner manages these aspects.

2. Save on Training Costs and Time

Training costs are often lower in offshore locations due to lower educational and labor costs, plus many offshore companies have pre-established employee training programs from onboarding to technical skills training.

3. Lower Cost of Living

The lower cost of living in many offshore locations means lower wages are acceptable for the same quality of work, stretching your budget further to allocate to core business function and other revenue generating expenses.

4. Liability Protection

Offshoring can reduce legal and financial liabilities associated with direct employment, as these are managed by the offshore partner.

Key Takeaway

Offshoring customer service is an attractive option for businesses looking to cut costs. By understanding the factors affecting costs and choosing the right pricing model, companies can enjoy significant savings without compromising on service quality. If you’re considering offshoring your customer service, it’s crucial to partner with a reliable provider that aligns with your service quality expectations and business values.