Competition and market segmentation of the call center service supply chain

Abstract

We construct a theoretical model to study the competition of call centers in the call center service supply chain. The market we study consists of multiple competing call centers and many clients searching for outsourcing partners to answer their customers’ phone calls. Through the perspective of operational efficiency, we create a single index that aggregates several contract parameters. The index can be used to segment the call center market as well as to estimate the contract prices at equilibrium. The results can help the call centers to locate and focus on their market niches. Clients can use the results to estimate the cost of their contracts and negotiate with the call centers for better deals. The results can also be used to explain the observed reshoring phenomenon in recent years from the perspective of operations management. In particular, our results suggest that call centers in low-wage locations have a competitive advantage on large contracts with very strict waiting time requirements. On the other hand, call centers in high-wage locations may still be attractive for contracts that have lower call volumes, shorter contract lengths, and/or less strict waiting time requirements. Finally, we present field studies from an international service provider with call centers in multiple locations. The results of the field studies suggest a strong match between our theoretical results and the empirical evidence.