Choosing An Offshore Call Center Location


Call centers in the US are facing margin pressures on account of high operating and labor costs. While India is currently the preferred outsourcing destination for offshore call center operations, several other countries, such as Canada, Ireland, Singapore, the Philippines, Mexico and South Africa, are rapidly building capacity and capability.

In this article, we analyze seven countries including India on the basis of:

  • Cost saving potential for outsourcing
  • Labor cost attractiveness
  • Telecom cost index
  • Utilities and infrastructure cost index
  • Composite economic attractiveness

Why These Countries?

Our research indicates that while India is the obvious choice, the Philippines with its high literacy rate, familiarity with English language, Americanized accents and low labor cost has emerged as a very competitive destination. Canada and Mexico are nearshore destinations offering low labor cost and multilingual skills along with geographical and cultural affinity to the US. South Africa and Ireland share cultural history and the same time zone with Europe. Singapore is the most developed Asian country and a newly recognized call center destination.

Offshore Call Center Destinations

The Philippines

  • Good English speaking skills.
  • Mushrooming call centers are putting pressure on labor supply.
  • Call centers located only primarily in Manila and nearby Makati.
  • High infrastructure costs.
  • People are completely in tune with US culture.


  • India has a huge reservoir of educated workforce comfortable with English language.
  • It has a 12-hour time difference with US and 6 to 7 hours with Europe.
  • Low labor cost but high attrition rate.
  • Low infrastructure cost.

South Africa

  • It is in the same time zone as the European region.
  • Shares cultural and historical affinity with Europe.
  • People proficient in European and African languages.


  • Shares the same time zone as EU countries.
  • Highly developed infrastructure.
  • Well educated workforce.
  • Language advantage.


  • Has a free trade agreement with US.
  • Global Information Technology Report 2005-2006 ranks Singapore second in IT readiness after US.
  • The country has a good and efficient regulatory environment.
  • Politically stable.

Nearshore Call Center Destinations


  • Is in the same time zone as US.
  • NAFTA membership provides easier market access.
  • US conducts more trade with Canada than the EU.
  • Global Information Technology Report 2005-2006 ranks Canada sixth in IT readiness.
  • Low attrition rate as call center jobs are considered good careers.


  • Agents proficient in English and Spanish to cater to the large Hispanic community in US.
  • NAFTA membership provides easier market access.
  • Familiar with American culture.

The Philippines Catches Up With India’s Cost Advantage

As you might expect, cost is the most important factor for companies that decide to outsource call center work. By offshoring to India and the Philippines the companies can save as much as 50% to 60% of the cost compared to the US.

India narrowly edges out the Philippines in terms of costs. To tackle the sharply rising wage costs in India, some players are moving to smaller towns to lower costs. Among the others, Singapore is the most expensive, followed by Canada.

Call Center Outsourcing Cost Savings Potential

India Does The Balancing Act

Labor costs form a major portion of the total operating expenses in call center economics. Low labor costs in India and the Philippines (almost 12%-15% of US levels) make them attractive call center destinations. In Canada and Mexico, labor costs are much higher when compared to the costs in India and the Philippines though still low vis-ˆ-vis the US. Ireland is a good nearshore destination for the UK and EU countries, but the labor cost is high compared to offshore locations. Singapore ranks way below the Philippines and India in terms of labor cost attractiveness.

From a labor cost perspective India scores 4.6 points on a scale of 5, which makes it a desirable location for call center outsourcing followed by the Philippines.

Call Center Outsourcing Labor Cost Attractiveness

Prevailing attrition levels and the surge in call center numbers in India are adversely affecting the labor cost advantage. Second-tier cities have now emerged as an option.

Labor cost in the Philippines remains unaffected as most of the call center activities are located in Manila and the surrounding areas.

Operational costs in South Africa, Canada, Ireland, Singapore and Mexico have escalated primarily due to high salaries.

Indian Telecom Buoys Call Centers

Telecommunication forms a significant component of total call center operating costs, unlike in the US — due to higher tariffs in most overseas locations. Telecommunication expenses are between 11% and 23% of operating expenses for call centers in the countries included in the research. Rapid advances in telecommunications technology and the reforms underway in several countries are driving this sector. As a result, connectivity rates have fallen substantially in countries such as India and the Philippines.

The overall telecom cost is based on:

  • International calling rates.
  • Cost of lease line connectivity.
  • Anticipated decline in telecom charges.

Call Center Outsourcing Telecom Cost Index

India scores the highest when it comes to telecom cost attractiveness. International long distance rates in India fell by more than 50% for several years up to 2004 and have continued falling since then.

The Philippines Scores on Infrastructure

The utilities and infrastructure cost attractiveness is based on:

  • Cost of power.
  • Power price trend.
  • Office space rentals.

Call Center Outsourcing Utilities and Infrastructure Cost Index

The Philippines has the lowest power and real estate rates among all other countries followed by South Africa and India. However, power and utility infrastructure don’t contribute significantly to the total operating cost. The high price will only have marginal impact in deciding call center attractiveness.

Call Center: All Roads Lead To India

Call Center Outsourcing Composite Cost Attractiveness Index

On all parameters India is still the most attractive call center location — with the Philippines following closely. Both the countries have scored over the others primarily because of low labor costs and availability of an educated workforce.

Canada and Ireland can be attractive nearshore destinations but operating costs are high. However quality of work force and geographical and cultural affinities may play a big role in making them useful nearshore destinations.

South Africa has a multilingual work force, low cost of labor and one of the best telecom/utilities infrastructures in the world, making it a good outsourcing destination. Mexico is the least attractive nearshore destination we analyzed. Singapore has a superior infrastructure and is a westernized country but can’t compete with India or the Philippines on the composite economic attractiveness index. India is slightly ahead of the Philippines and still the most attractive call center destination scoring on all counts.

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