Considerations for call center development: A case history

Call Center CRM Solutions, Jan 2000 by Copito, Rob

Three years ago, wireless communications provider Nextel Communications was a $300 million business. Today, its annual revenue is nearly $2 billion. In the telecommunications business, this kind of growth leads to increased pressure on corporate infrastructures, particularly customer care centers.

According to Katrina Menzigan, an analyst at International Data Corporation, call centers are becoming the center of all customer activity, so infrastructures must handle an increased workload.

"Billing services and sales functions are increasingly being transitioned into the domain of the call center," said Menzigan. "This is because it is difficult for companies to establish salespeople in new areas at a pace quick enough to support their expansion efforts."

Nextel anticipated this trend and took steps to ensure that its customer care centers supported the company's growth strategy.

"We realized that in order to keep our reputation for providing the bestpossible service to customers, we need to make continual investments in call center infrastructures as our business grows," said Albert Shotwell, vice president of real estate at Nextel.

The McLean, Virginia-based firm had a digital subscriber base of 2.96 million at the end of 1998. Its call center facilities were no longer adequate to serve the increasing number of customers and volume of calls. Expansion of call center operations would be necessary to sustain Nextel's growth and promote shareholder value.

In fact, Menzigan reported that the telecommunications industry is one of the top consumers of call center services.

"As the wireless communications industry becomes more competitive, firms are turning to customer service centers with 24-hour customer service to differentiate themselves from the competition," said Menzigan.

A Strategic Approach

First and foremost, call center development that maximizes value and opportunities requires enough time for research and due diligence.

Many firms are eager to have their new call centers up and running quickly due to the importance of such a critical, around-the-clock function that interfaces directly with the customer. However, many companies later sorely regret jumping at the first option available when they discover operation costs are extremely high, labor is difficult to find, or they are unable to eventually expand the facility.

The three factors discussed below map out the key areas of the methodology to consider for call center location decisions.

Labor Pool

Labor drives the decision as to where to locate a call center, and Nextel's labor research shows why. The company compiled data on labor availability in different regions, labor competition (some call centers actively target competitors' employees), educational level and wage rates. Geographical factors, such as cost of living, quality of schools and transportation, are also included since they impact the suitability and quality of the labor pool. These data were formatted into a matrix and ranked according to each location.

"We wanted to ensure that we made an informed decision and that we weren't jumping into the selection process blind," said Shotwell. Understanding the potential for both success and failure of a call center, Nextel partnered with a commercial real estate strategy and consulting firm.

Nextel's labor studies enabled it to narrow 40 possibilities down to only 10, and eventually to two: Winchester, Virginia and the Hampton/Norfolk, Virginia area.

Together with the consulting firm, Nextel tested the labor market in each city by running advertisements for call center jobs in the local newspapers. In Hampton, Virginia, one response mechanism generated 500 replies via e-mail, indicating an abundant labor pool with a propensity toward technology.

Even though call center development has exploded in the last five years because companies across the board want to provide customer service in this fashion, there are only a handful of call center clusters. Currently, the greatest concentrations are in the Southeast and Midwest, where the climate is not too harsh and there is less chance that weather can knock out power. Nextel considered both areas, but focused on the Southeast because of the positive results of the labor research.

Own Or Lease?

Once the short list of cities is determined, the next decision is whether to lease or own call center space. In the case of Nextel, its management team and the consulting firm determined that leasing was the best option since Nextel did not want its capital tied up in real estate.

"We want our money available to make investments that will allow us to continue to grow," said Shotwell. "The leasing option provides much more inherent flexibility."

However, some firms don't know if they want to lease call center space or purchase land for development. If this is the case, it is suggested that they first look for available space in their target cities to ensure they are not limiting their options.

Regardless of a fmn's preference for leasing or owning, a conversion opportunity can be a sensible choice. Former retail buildings or semi-industrial facilities, such as discount stores or supermarkets, can possess features, including infrastructure, building design and parking, that make them attractive for a call center conversion.