Understanding Consumer Reactions to Offshore Outsourcing of Customer Services

Background

Outsourcing is a fast-growing aspect of the world economy with worldwide spending on outsourcing estimated to cross $6 trillion by the end of 2005 (Corbett, 2002). Forrester Research estimates that by 2015, 3.3 million jobs accounting for $136 billion in wages will move offshore to countries such as India, China and Russia (McCartney, 2003). According to latest estimates by Gartner, IT outsourcing global revenue alone was predicted to grow from $184 billion in 2003 to over $256 billion in 2008 (Blackmore et al., 2005) and IDC estimates business process outsourcing (BPO) in Europe to grow from $43 to $72 billion Euros between 2002 and 2005. Clearly these are very large numbers and companies around the world seem to be relentlessly pursuing outsourcing to benefit the end customers by reducing cost and improving productivity.

However, existing research on offshore outsourcing is primarily focused on the labor and ethical issues of outsourcing and effects of strategic outsourcing decisions on organizations with hardly any attention on how it may influence individual customers (Clott, 2004). Similarly, critics of outsourcing have so far focused on the changing employment patterns, globalization of the labor force, and its effects on individual employees and organizations with little consideration to the end-customers. On the other hand, based on their experience in recent years organizations have already become more cautious about outsourcing and conscious of the need to protect their reputation, brand image, core skills and property rights (Reilly, 1997). Some of the emerging potential downsides of outsourcing include dilution of company’s image, lower customer satisfaction, reduced brand loyalty and an increase in customer complaints due to real or perceived concerns about cultural differences, lower service standards and loss of privacy (Cornell, 2004; Data-Monitor, 2004; Economist, 2001; Kennedy, 2002; Roy, 2003).