One of the nation's fastest-growing industries is still battling
the demons of public perception.
Call centers have seen remarkable growth throughout the country
and in the Ninth District in the last decade. Mark Hardy, president
of Advantage Line Call Solutions, has "been in the business for
12 years," and watched his small company start out in Wolf Point,
Mont., move in 1993 to Williston, N.D., and later branch out to
the Montana cities of Billings, Glendive and Havre. Today, Hardy
employs 600 people.
Still, when he talks to people about his call center business,
"everybody's first thought is, 'You're the one that called me during
dinner last night.'" In fact, he wasn't. Hardy's firm is an inbound
center, which means that his employees are answering your calls
for catalogue orders, reservations and subscription renewals. And
considering the 4 million calls Advantage takes every year, it's
more likely that Hardy and his employees are the ones who don't
get to eat in peace.
Many people still see the call center industry as outbound telemarketingdinnertime
phone calls hawking various products. But Hardy will tell anyone listening
that telemarketing and call centers are "quite a bit broader than that."
Call centers today handle a wide range of tasks, including service dispatching,
order taking, call routing, complaint resolution, information retrieval,
technical support and, yes, telemarketing sales.
Although industry tracking is spotty, available evidence shows
the industry has been on a tear that is likely to continue in the
near future. Technological advance and an attractive labor pool
have encouraged significant growth of the industry in Ninth District
states and citiesincluding some very small cities, which have
earned the moniker "modem cowboys."
"Your district is a prime call center region in the nation, without
a doubt," said John Boyd, president of the Boyd Co., a location
consultant firm in Princeton, N.J.
On a roll call
Industry analysts estimate recent and future annual growth of the
call center industry at between 10 percent and 20 percent. A report
by the Boyd Co. claims call centers will be "the fastest growing
industry in the U.S. in terms of job creation and corporate investment
in new office facilities and equipment."
Last year, North Dakota saw 11 announcements for new or expanded
call centers in the state, which proposed to add as many as 1,000
new jobs in the near future. South Dakota had three firms announce
proposals to add 1,400 new jobs.
There are many reasons behind the growth, but one underlies them
all. "Many national companies have thought of customer service as
the way to distinguish their product in the marketplace," Boyd said.
Companies like Sony or GE make a lot of "pretty homogenous products"
that see heavy competition, he said, and such companies are turning
to customer service to improve customer brand loyalty. "There's
not a product they [Sony or GE] make that doesn't have an 800 number
attached to it."
And somebody has to be on the other end when the calls come, giving
rise to an industry "that came out of nowhere 10 years ago," said
Andy Shapiro, senior manager with location consultant Deloitte &
Touche Fantus. Although cities or states in the district don't show
up much in national industry rankings for new sites or employment
growthsouthern cities from Florida to Texas and Arizona generally
dominateindustry growth has nonetheless been strong, particularly
considering the district's small population.
South Dakota is home to about 60 telemarketing and customer service
centers, according to an official with the Governor's Office of
Economic Development. In 1998 alone, South Dakota added more than
2,300 call center jobs, and about 90 percent were in Sioux Falls,
according to an annual Deloitte & Touche Fantus report.
The kick-start came 20 years ago, when Citibank relocated its
world headquarters and call center operations to Sioux Falls, to
the surprise of the entire financial sector. That move "brought
a different kind of sophistication" to the city, and "brought a
global awareness of an industry," according to Mary Medema, workforce
development director for the Sioux Falls Development Foundation.
The city is now home to more than 20 such firms, about 65 percent
of which are in financial services, Medema said, adding that it
would be "hard to find someone whose neighbor hasn't worked" in
Call it fuzzy math
Estimating the size and growth of the call center industry is calculated
guesswork. The Boyd Co., for example, estimated there were 70,000
call centers employing 2.5 million in 1999; by 2003, those numbers
will grow to 105,000 centers and 4 million employees.
But one would be hard pressed to identify those call centers and
plot them on a map, for a couple of reasons. Call centers come in
one of two basic forms. One is an in-house center, where a firm
like IBM hosts its own toll-free customer service. Such operations
can spring up as a matter of business course when a product or service
generates phone or Internet-based customer service demand. A Minnesota
state report last year found a total of 37 different broad-based
industries likely to have call center operations.
The second is a service bureau, like Advantage Line, which contracts
with businesses to handle their customer service and other needs.
As a focused, stand-alone enterprise, such businesses are hypothetically
easier to identify, but the government's tracking system for industryknown
as Standard Industry Classification (SIC) codeshas no category
for call centers. A newer tracking system, called the North American
Industry Classification System (NAICS), includes a call center category,
but the most recent data is from the five-year 1997 Business Census,
and significant growth has occurred in this industry since then.
Comparative Annual Operating Cost
|Total Annual Labor
|Heating and Air Conditioning
|Total Annual Geographically Variable Operating Costs
|* Costs are based on a corporate call center facility employing 150 workers, occupying approximately 30,000 sq. ft. of office space, and having an annual inbound customer service call volume of 15 million.
Source: The Boyd Co. Inc.
District well positioned
Many social, technological and geographic factors are driving new
demand for call centers. For example, changing lifestyles and business
practices have reduced face-to-face contact and consequently generated
demand for remote electronic contact for all different types of
service, said Shapiro of Deloitte.
Rapidly expanding computing power and sophisticated software have
made it possible to provide more real-time informationlike
order trackingto consumers and business clients, and such
features have proven popular. At the same time, the infusion of
personal computers into everyday life has fueled strong demand for
software and hardware technical support. Said Shapiro, "The more
technology that's involved, the more they need their hand held."
The supply end has been racing to keep pace with demand for the
last decade. As the industry matures, it's looking for cost efficiencies,
which Boyd said is one of the main reasons that district cities
"tend to be on the short list of corporate selection seekers." The
Boyd Co. recently completed a cost survey of 40 metro areas across
the United States, and Sioux Falls found itself on top of the rankings,
with Duluth and St. Cloud fifth and 11th, respectively.
Particularly where expansion is concerned, the most critical issue
for call centers is laborfinding it, retaining it and not
paying too much for it because labor costs typically make up 60
percent or more of a call center's annual budget. "Labor is the
name of the game," said Hardy of Advantage Line.
And that has helped pull business to the district. "Companies
are being driven to rural areas for cost and workforce quality [reasons],"
said Quinn Ness, business recruitment officer with the Montana Department
of Commerce. The state has seen roughly 3,000 new call center jobs
in just the last two years. Companies interested in expanding "are
looking at their cost structure," and finding Montana to their liking
because the state "has the reputation of having some of the lowest
wages in the country," Ness said.
The explosion of telecommunications bandwidth has also opened
up entire new labor markets. Previously, limited telecomm capacity
meant call centers located in high-capacity metro areas. That's
changed. "The [bandwidth] pipe is ubiquitous now. It doesn't provide
a leg up [in attracting call centers], but it helps" communities
remain in contention for new or expanded facilities, according to
Hardy said the price of telecommunications "has dropped so substantially"
that very small communitiesif wiredare now viable locations
for small call centers. A 20-seat center, which could employ 30
or more people, needs only 1,000 square feet of open office space.
"Old retail stores work great." High labor costs and low unemployment
in metro areas, new technology and expanded bandwidth in rural areas
have motivated companies to "export that labor back to the farm,"
And they are. North Dakota alone has at least 10 cities under 2,000
in population with call centers, according to the state Department of
Economic Development and Finance (see map). South Dakota has at least
eight cities under 5,000 with telemarketing or customer service centers,
according to the Governor's Office of Economic Development. "The reason
for it is there is labor there ... and it's good labor," Hardy said.
Call and Shared-Service Centers*
100 or More Employees per Company
*Number of centers per location in parenthesis.
Source: North Dakota Department of Economic Development and Finance
Contact America, for example, has a 35-employee shop in Flasher,
N.D., population 300. "It's been a good call center," said Kathleen
Staley, company vice president. In small cities, "you get people
that stay with you for years and years ... and are very dependable."
Telecommunication rates also have been roughly halved from five
years ago, which translated into a 10 percent drop in the company's
total expenses, Staley said. "When costs drop 10 percent, it makes
it a lot more profitable to be there."
Other seemingly mundane factors also make the Dakotas, Montana
and rural areas of Minnesota an attractive location. For example,
the neutral accent of Upper Midwesterners "is preferred by the profession,"
Doreen West, general manager of Midco Call Center Services in
Sioux Falls, said growth of call centers in Upper Midwest states
"is due to the strong Midwest work ethic, clear speech and our favorable
[time] location" that allows for better customer contact during
business hours on both East and West coasts.
Phoning a lifeline
While there are obvious drawbacks to locating in small and medium
marketsparticularly for an industry with high turnover ratesthere
are also unique advantages. The overall labor pool might be limited,
but several sources said workers also have fewer job opportunities
luring them away, making call centers an employer of choice.
Some call centers "like a captive labor market," Ness said. "It
costs a lot of money to recruit and train new employees." He added
that call center jobs are attractive to farmers' spouses because
they offer health and other benefits that can be difficult for farming
families to afford. New 1,000-person call centers in Kalispell and
Great Falls in Montana both inquired about the proximity to military
bases, according to Ness, hoping to tap underemployed spouses of
Wages for service agents are not high, typically starting at between
$6 and $8 an hour for new hires, and averaging about $1 to $4 an
hour more for those with company tenure, depending on the city and
the type of call center. Many communities are only too happy to
have them, and virtually no examples could be found of companies
experiencing a shortage of job applications. If anything, it's the
exact opposite. According to a 1999 state report, Mutual of Omaha
received 700 applications for 25 openings in Aberdeen, S.D.; First
Premier Bank received 1,300 applications for 116 jobs for a call
center in Watertown, S.D.
Average wages at Advantage Line are $7.50 an hour, Hardy said.
"Given the skill level of the people we require, these are very
good paying jobs," and are perceived as a step above retail and
other jobs. "We haven't had any trouble recruiting." Hardy said.
In North Dakota, it's been "fairly easy" to attract call centers
because it's a growing industry in need of labor, many North Dakotans
are underemployed, and cities typically offer a few incentives for
the company's bottom line, said Cory Finneman, research coordinator
for the North Dakota Department of Economic Development and Finance.
"There used to be a lot of companies benefiting from the incentive
game," Finneman said. "There are still pockets out there but it's
not as easy as it once was." Where communities "used to jump" at
companies offering average wages of $7 or $8 an hour, "now it has
to be $10 to $12 [an hour] unless you go to a very small community
that is hungry for those kinds of jobs," Finneman said.
Regardless of current pay, several sources argued that call center
jobs put workers on the so-called "skills ladder." Ness said that
call centers "are taking people away from big-box retailers ...
and exposing them to new economy-type jobs" that instill computer
and other skills that would hopefully lead to better-paying jobs
down the road.
North Dakota, according to Finneman, has had "a lot of success
in the lower levels" of the industry, like outbound telemarketing.
This has built a talent pool for other companies to tap, and the
state is slowly seeing more jobs in better-paying call sectors like
reservation services and technical support. "There definitely is
an evolution that has occurred. We're moving up the ladder."
Finneman compared this evolution to "the development of a minor
league baseball farm system. We have developed all the lower levels
of customer service professionals, and even have a few major league
companies, but we still need more major league companies to move
our workers up the skills and wage ladders."
No call for a slowdown
The current economic slowdown does not appear to bode ill for the
industry because, as Boyd puts it, call centers "are more function
than industry," and their involvement in a diverse range of industries
provides a hedge against recession. For example, where catalogue
orders might decline, credit card activity is predicted to increase
as consumers tap more debt. A dip in the publishing industry might
be offset by growth in financial services.
Boyd said service bureaus would likely feel any heat first, because
companies would pull back on third-party contracts. But others argued
that in-house centers would get the hook quicker so the company
can focus on core activities. Whatever the case, Boyd is optimistic.
"I think there's still great legs to this industry," he said. Despite
"a slight tick" in the national economy, "we're seeing no letdown
in numbers of call center projects. ... I think your district will
continue to do well, and South Dakota in particular is a location
The industry's biggest obstacle might be its public image. Federal
"no call" laws have existed since 1994 whereby a consumer can request
removal from call lists, punishable by a $10,000 fine for the first
violation. Some states, most recently Missouri and Kentucky, are
pushing their own no-call legislation.
Staley, of Contact America, said that despite all the new jobs
and local investment, call centers have a reputation as the thing
"everybody loves to hate." For that reason, Staley said, public
perception of the industry "is getting worse, because the politicians
know it's an easy [public relations] ride."
But the no-call legislation doesn't bother Staley. "We don't want
to call those people anyway." She said the industry is "very lucrative"
provided that companies remember a cardinal rule: good phone etiquette.
"We're very conscientious about being polite on the phone," Staley said.
"Most people are polite, and a lot of people buy."