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Delta says goodbye to Indian Call Centers

WSJ: Delta Air Ends Use of India Call Centers

Delta Air Lines Inc. said Friday it has stopped using India-based call centers to handle sales and reservations, making it the latest U.S. company to decide the cost benefits of directing calls offshore are outweighed by the backlash from customers.

Delta said it stopped routing calls to India-based call centers over the first three months of the year. Customers had complained they had trouble communicating with Indian agents, the airline said. Last month, Chrysler LLC said it would move its customer-service center back from India.

“It is fundamentally cheaper to do it in India, but there’s also the question of whether it’s better to do it cheaper or better to do it better in terms of the relationship with your customers,” said Ben Trowbridge, chief executive of Alsbridge Inc., a Dallas-based company that advises on outsourcing.

Call-center representatives in India earn roughly $500 a month, or about one-sixth the salary of their U.S.-based counterparts, he added.

Delta’s move also reflects the need for airlines to streamline their sales and reservation operations as customer-call volume dwindles amid the ongoing recession. And, as layoffs mount in the U.S., it could be a smart public-relations move for companies to cut their outsourced business before eliminating payroll positions.

Last week, SLM Corp., the student lender known as Sallie Mae, said it would return to the U.S. 2,000 jobs it outsources in India, the Philippines and Mexico. The jobs, mostly call-center and information-technology positions, were recently moved overseas as part of a plan to trim 4,000 jobs from the company’s overall U.S. payroll of 12,000 employees.

And United said earlier this year it is also moving some India-based phone work back to the U.S.

In the 2000 bust, companies scrambled to outsource work to India; the cost saving was enormous. Lessons from this: In a recession, cost-arbitrage matters. In a depression [okay, a “deep recession”], it doesn’t. All the accent issues etc. are just fronts for the public distaste for outsourcing, and it fosters protectionism. Which, eventually, is loser-ism. (this goes for India too, remember the Chinese toys ban)

I look at it as a fantastic thing. First, these outsourcers paid no local taxes. That gets me pissed off. Then, by their lower tax structure, their glory ensured that development for the local market just died – software development for India remains pathetic and urban focussed. And finally, by dwelling on cost-arb they refused to innovate in ways that would truly change the world.

The more jobs lost in outsourcing, the better. We need to get out of our comfort zone. America doesn’t seem to want to stop buying BMWs or Toyotas; the products do better, and can cost more than their competition. We gotta get up there, not down at the call-center operator level.

  • Anonymous says:

    >Deepak,

    X’lnt take, more to hear from your point of view.
    More of complex and unpublicised outsourcing issues

    Cheers,
    Arkad

    Happy Investing !!!

  • Boundlessdreamz says:

    >No taxes? HUH ? What about all the taxes paid by the employees ? If the call centres close which company is going to absorb them ?
    It is easy enough for you to say that “The more jobs lost in outsourcing”, the better! That is insensitive and being extremely short sighted. You don’t move up the value chain by suddenly abandoning the low hanging fruit. And it is extremely naive to think that if there are less jobs being outsourced product companies will emerge out of India.

  • aangtce says:

    >Oh Don’t be optimistic yet… atleast keep your guard up…… these are just the losers… they would cut the outsourcing jobs and save money…. alright…. and in terms of customer relationship what about the in country employee’s attitude at being paid low??
    Anyway from indian viewpoint… watch out for the big shots….They would still try to find a clever way of doing something worse than that.
    You never know when to expect a spanish inquistion… 😛

  • Deepak Shenoy says:

    >Boundless – on the taxes front, let me do a full post – I calced and found that if Infy was taxed on Net Profits, it would pay more taxes than all its employees combined. A significant amount more. That applies to all the outsourcers too.

    Call centers close – people go start businesses or work for those that don’t only make money outsourcing.

    Low hanging fruit – dude, my problem isn’t that we do this stuff. My problem is that we seem to ONLY do this stuff. I don’t mind the low hanging fruit but we can’t disincetivise investing into getting the tastier higher fruit. That’s what zero taxes do. That’s what the glorification of outsourcing does. Eventually we may do everything – but we need to go beyond this stuff.

  • GG says:

    >Right on Deepak! I look at outsourcing as a form of modern day slavery.

  • Kiran says:

    >Good post! Exactly what needs to be propagated. I believe all the “growth” in software services has come at a cost of us not developing a much needed innovation culture (yes there is some innovation on the process side of things). We need to be getting some good products out – moving to the high end of things.

  • Siddharth says:

    >Good work. Indeed you have talked about the big picture.
    cheers