It's an annoyance familiar to all of us.
We pick up the phone to complain to our internet provider about a fault, or to an insurance company to inquire about making a claim, and there's a slight hum on the line and perhaps a small delay before someone greets us in a foreign accent.
For many people, the offshoring of services has negative connotations and they fear they will get a lower level of service.
To some extent this is about the country the service has been offshored to and its reputation for providing quality service or otherwise.
The so-called country of origin effect is a well-documented and thoroughly researched phenomenon, but Gary Gregory, a lecturer in the school of marketing at UNSW Business School wondered if there was more at play.
Gregory and his school of marketing colleagues, Tony Lu and Liem Viet Ngo, have looked more closely at customer perceptions of services offshoring and asked if it is possible to go to another country and have a good experience – and on what conditions it may be acceptable to offshore.
They applied the concept of perceived fit, which relates to how the values and reputation of a company match up to the actual goods or services it supplies.
'The whole concept of fit is based on: I purchase it at this price. I expect this level of service in return'
– GARY GREGORY
"Wherever you're buying, you're expecting an equal level across the board and any function you get from that company – both in the product you bought as well as the ongoing service that you get from them," says Gregory.
"And so, what we tend to do in our minds is say, '[The] company is at a certain level. It's now offshoring to a country that may not be as good – and most likely is not as good – therefore, my expectations are I'm going to receive subpar service.'
"There's an inconsistency there. The whole concept of fit is based on, 'I purchase it at this price. I expect this level of service in return'."
Why go offshore?
In many cases, as education has improved and economies have modernised, foreign countries are providing good offshore service.
"All of a sudden, they're able to speak very good English, they're able to solve your problems, they're able to do it efficiently; they're able to provide the service level that you're expecting if you were to call from down the block," Gregory says.
There are three factors that determine perceived fit when it comes to services offshoring: the cultural similarity between the home country and the host country; the reputation of the offshoring partners; and the partner's possession of advanced technology or facilities.
While country of origin may be expected to be more influential in perceived fit, the three factors actually have equal weight.
In a separate study, the researchers looked at how companies communicated their reasons for offshoring services in an attempt to mitigate negative customer reactions.
Those companies that communicated their reasons from a company perspective – "we are doing this to cut costs and save money" – were, unsurprisingly, not perceived well.
However, those that conveyed their decision from a consumer perspective or a societal perspective were perceived more favourably. From a societal point of view, the company could, for instance, say it can now create more jobs or take the money it has saved and reinvest it into infrastructure.
To customers, the company could say they are passing on the cost savings.
"Interestingly, we found that both of those were equal. Consumers were very pleased with either a customer or a societal [perspective]," says Gregory.
'Companies didn’t have the deep appreciation of just how important that cultural alignment was ... We saw a lot of disasters'
– COLLEEN GORDON
The researchers took things further and looked at the different communications strategies in relation to how well an offshored service fitted with the company.
Under high-fit conditions, where people received the same level of service they would expect from the company, nothing had really changed.
"We found that a company does not have to communicate anything at all. In fact, communications would be completely wasted because you're simply reiterating what's already fact to them," Gregory says.
Surprisingly, in low-fit conditions, where the service level differed from those expected by customers, communications actually worked to customers' detriment.
"Customers now all of a sudden were saying, 'We don't believe a single word you're saying. We're receiving services below expectations (low-fit condition), and you're going to now communicate the benefits of your offshoring decision? We're not believing it'."
It was with mid-level fit conditions where communications had the highest impact. Gregory says this was because there was a small degree of uncertainty among customers about the service they were receiving and communications about the benefits of offshoring services helped alleviate those concerns – helped reduced the perceived risk.
Services occupy an increasingly large portion of the Australian economy, estimated to have reached around 70% of GDP. This increase has been accompanied by a rise in the offshoring of services.
According to data from Chartered Accountants, business services offshoring, including legal, accounting, management consulting and public relations, grew at an annual rate of 13% between 2000 and 2014, while architectural, engineering and other technical services grew 20% annually during those years.
Consumers are most familiar with call centres and the rising trend of shifting them overseas is expected to continue.
In his role as a partner in assurance and advisory, and national real estate and construction leader at Deloitte, Alex Collinson advises on finance function outsourcing. He says companies are increasingly outsourcing as they focus on their core business and decide they don't need to develop expertise in other domains when they can access it through partnering or alliances.
Collinson's colleague, Colleen Gordon, national lead technology sourcing and procurement at Deloitte, believes Australians are becoming more comfortable with offshored services.
"There is a demographic that is particularly still challenged by the offshoring of customer service, but millennials that have grown up with it and adapted to it [are] more comfortable with it," she says.
Another factor is that companies have got better at ensuring offshored services are of high quality – something that was over-looked in the initial rush.
"Some offshoring providers didn't have the levels of quality that were needed. Companies didn't have the deep appreciation of just how important that cultural alignment was. We saw a lot of disasters," Gordon says.
Now they have started to put controls in place to ensure service is of a high standard. Collinson also says the level of sophistication is higher.
"Rather than just throwing it over the fence to an outsource or an offshore provider and expecting a magical outcome, companies are working hard on that relationship and spending time to understand the nuances, the culture and the service levels, and so dealing with their chosen offshore provider as they would another division or another part of their business."
Gregory says the primary motive for companies to offshore is to save money, but adds that in the past many companies had rushed to secure the cost savings without considering what the other costs might be.
In manufacturing offshoring, this is less of a concern because quality is easily and objectively measured. For services offshoring, quality of service is much more subjective.
"To measure customers' feedback on their call centres or any service is something that's essential, and to weigh that against the cost savings because there's going to be a detriment," Gregory says.