Contacting some of the UK’s leading brands is increasingly likely to involve a telephone call to India. But the steady transfer of call-centre jobs to India is not without pain – not only to those in the UK who stand to lose their jobs, but also to the brands themselves.
There are few more emotive issues guaranteed to hit the headlines than an announcement of large-scale job losses. While companies stand to make considerable cost savings using cheaper labour in developing countries, critics are asking whether the brands in question are in danger of being punished by a backlash from UK consumers worried about the effect on their local communities, as well as service levels and financial security.
Last week, Norwich Union, the country’s largest insurer, announced that it is raising the number of call-centre and administrative staff employed in India to 3,700 by the end of next year. It says corresponding job losses in the UK will be minimised by redeployment, but it cannot rule out compulsory redundancies.
The unions, horrified by the scale of job losses as company after company elects to pack offshore part of their services, are planning to hit the companies where it hurts – their brand. A spokesman for the union Amicus says: “Brand value will be affected, and we will be putting this to the companies.” Part of its ammunition is research it commissioned which shows that 62 per cent of people would consider whether a company had outsourced its call-centre operation overseas when they came to buy an insurance product. Amicus says it is a long way from strike action over such job losses, but is looking at other avenues, including an ad campaign listing the companies that are “offshoring” their back-office functions.
Simon Quick, marketing director for Norwich Union Life, admits the announcement has repercussions for the brand, but adds that his first move has been to reassure his own staff about their jobs.
However, following Quick’s conversation with Marketing Week, the shutters of corporate fear came down, and Norwich Union, possibly stung by the negative coverage its announcement received in the national press, refuses to comment further.
Other companies looking at offshoring also display extreme sensitivity, refusing to comment other than in the studiously rehearsed one-liners of official spokesmen.
No Goa zone
If the pundits are correct, and call-centre, IT and administration roles follow manufacturing jobs out of the UK, the impact could be significant. There are 400,000 call-centre jobs in the UK, compared with 5,000 in India servicing the UK. A survey by the Communication Workers Union shows that as well as Aviva, Norwich Union’s parent company, other household financial brands moving jobs to India include Abbey, AXA, Barclays, Capital One, HSBC, Lloyds TSB and Prudential. Outside the financial services industry, AOL, British Airways, BT, National Rail Inquiries and Tesco are among the names following in their path.
There seems to be little likelihood of the Government stopping this trend. Last week, Prime Minister Tony Blair said: “Of course I feel desperately sorry for anyone whose job is at risk as a result of this change, but that is the way the world is today.” A few days later, the Department of Trade and Industry launched a review of “the global challenges faced by the UK call-centre industry”. But any hopes the unions may have had were quickly dashed when trade and industry secretary Patricia Hewitt said the review was to challenge the “myth” of terminal decline for UK call centres.
The trend of moving call centres, and other services such as IT, overseas seems unstoppable. “If a company isn’t already doing it, it will have a well-advanced project looking at doing so,” says Financial Technology Research Centre director Ian McKenna.
But he says there is a danger of a backlash, and that the companies could be scoring an own goal. “It has not been perceived as a danger to the brand, but that is a trend that is emerging very quickly,” says McKenna.
Lauren Henderson, director of Futurebrand’s brand analytics department, counters that inertia is the key factor driving consumer selection of financial services brands. She says: “Customers are a little bit upset, but only a handful will be upset enough to change company.”
Lloyds TSB, which is making 900 staff at its Newcastle call centre redundant and transferring the jobs to India, draws comfort from a MORI poll into attitudes to foreign call centres. Although only 21 per cent of consumers say they are happy for a company to have its call centre abroad, half of those who were not happy changed their minds if it meant they could speak to a person rather than an automated service.
Some financial services brands, however, have said that they will not take their call centres offshore, a fact Henderson believes could lead to a new distinction between companies. “It might well be a brand differentiator – positioning against the big, bad global players,” she says. Co-operative Financial Services and Standard Life, Norwich Union’s arch-rival, both say they have no plans to move operations offshore.
Alliance & Leicester chief executive Richard Pym has been one of the few in the industry to put his neck on the block and explicitly criticise off-shoring. He said: “The greater the geographic distance, the greater the risk. You can’t subcontract your relationships with customers. We want to be friendly and approachable, and the more you outsource, the more that is at risk.”
Not all companies have found the transfer of call centres to India to be a success. Last week, computing giant Dell decided to reverse the trend and to bring back some of its call centres to the US in response to consumer pressure. In the UK, children’s charity NSPCC decided to stop using a call centre in the US after callers complained of being put off by American accents.
Interbrand chief executive Jez Frampton takes a pragmatic view of offshoring. “It’s not what you do, but the way you do it,” he says. “I don’t think people expect everything from Norwich Union to come from Norwich. What they want is a good service.” A brand backlash, Frampton suggests, will usually be limited to the immediate area in which the job losses are taking place.
There are other cost-cutting measures that can impact on a brand. At the same time as the job losses at Norwich Union were being announced, Ryanair received widespread coverage for being sued by a disabled man who claims to have been charged extra for the use of a wheelchair. Sinead Finn, sales and marketing manager for Ryanair, dismisses any suggestion of consumer reaction. She says: “All press is good press. I don’t think negative publicity affects our brand. All people want is cheap fares and good service. Bookings are not affected.”
A matter of trust
Though in a slightly different category, revelations that MG Rover directors had put aside £13m into a trust fund for themselves at a time when the company’s employee pension fund was £73m in the red does, however, seem to have caused a backlash. The Rover brand has relied on patriotism and a sense among consumers that by buying one of their cars, they are safeguarding jobs in the UK. Last month its sales took a nosedive, falling by more than 30 per cent. Asked if the two were connected, a spokesman says: “It is too early to say.”
Raphael Gomez, lecturer in management at the London School of Economics, points to Nike as the classic example of the troubles a company can find itself in. It outsourced the manufacture of its trainers to factories in the Far East, and caused outrage when the conditions in which workers operated were revealed by critics. “Since then it has been in perpetual stalemate with the pressure groups, which have institutionalised themselves as unofficial watchdogs,” he says.
Gomez adds that the expected cost savings of moving manufacturing abroad have to be counter-balanced by the subsequent fallout. “They have had to spend more on advertising, on outside auditors and on public monitoring,” he points out. Gomez compares this with the “Stop Esso” campaign, which he believes has had minimal impact because so little of the company’s business is dependent on its consumer brand.
Merlin Stone, IBM professor at Bristol Business School, says: “The unions sound like King Canute.” The trend towards moving call centres outside the UK has become unstoppable after the telecoms companies put the networks in place for it to be cost effective, he says. But Stone thinks companies should be doing more to communicate the benefits of offshoring. “I am surprised that none of the companies are saying ‘we are doing work in India, we can’t do it all in the UK, and we want to bring employment to other countries.'”
Calling Norwich Union about travel insurance, you already get put through to an Indian call centre. This reporter spoke to an operative who said he was trained for 25 days about UK customs and accents before being put on the phones.
Orbys Consulting head of offshore outsourcing Alex Blues believes that some companies are too hasty in deciding to move offshore: “The danger is that people think India is the answer. There are very good reasons why some companies should do it, but good reasons why others shouldn’t.”