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The shift of call centers offshore was supposed to offer significant cost savings in many respects. The largest savings were in the transfer of labor costs associated with laden benefit packages to an outsourced, offshore source without those heritage costs built in. Technology provided the low-cost tools to make absolutely no difference if that call center was located in Toledo, Ohio or Toledo, Spain.
The same model has been applied to software programming and development. But there is trouble brewing in cost-cutting paradise. It seems that customer service, due to many different factors, has taken a hit, and that in turn is showing up on the bottom line. Result: many companies are in triage mode, creating hybrid domestic/foreign call centers or programming teams to regain the magic.
How many horror stories have you heard about reverse auctions? How many successes? How many times have companies gone to a reverse auction only to call their former strong 'partner' distributor to bail them out of a bad situation?
The history so far, at least in what we hear, is the negatives far outweigh the positives for this price-reduction tool. The price pendulum clearly has swung back hard from when Ignacio Lopez cut his swath ten years ago. Some customers used the bad economy as leverage to really twist the pricing screws down. As we start to see significant price increases (or surcharges) from raw materials on down, this form of online procurement has to come under more intense review.