Nearshore Americas
As CX Vendors Push Rates Higher, Buyers Find Themselves Against the Wall

Aggressive Rate Increases Put a Major Squeeze on CX Customers

Buyers of customer experience (CX) services find their backs inching closer to the wall. After the storm of the COVID-19 pandemic, they now face the pressures of increasing demand for customer support, rising inflation and the tough waters of a job market that was already difficult to navigate.

As if the landscape wasn’t rocky enough, another complication has fallen into the mix: rate increases by CX vendors. 

Nearly three-fourths of CX buyers have reported rate hikes solicited by their service suppliers, with average price increase hovering around 7.2%, according to survey data compiled by research and consulting firm Everest Group

There’s no hard numbers at the moment on how buyers are reacting to solicited price increases. For now, it seems like customers are still taking a sharper look at their business strategies and evaluating what their next move will be in relation to CX. 

That move will have to come fast, though. Inflation is giving no signs of easing its grip on the global economy, increasing costs of living in offshore/nearshore locations and pushing wages further upward. Besides, demand for customer care is giving no signs of slowdown, making the access to CX services a key factor to keep business operations running. 

How We Got Here

In spite of the slew of economic troubles unleashed by the pandemic, CX vendors kept prices mostly the same during the period. 

It might seem counterintuitive, but industry observers assure that most vendors opted for not rocking the boat when it came to pricing. Under extraordinary circumstances, they bet on taking a financial hit in order to keep customers around and maintain their business afloat.

“Clients are trying to understand where they sit in comparison to the rest of the market [in relation to CX rates]”— David Rickard, VP at Everest Group

With COVID receding and the economy moving back into a more normal –though still very challenging– cycle, vendors are trying to catch up with the rising operational costs and recoup investments.

Everest Group estimates that, over the past 12 months, customer support operations suffered 7%-11% inflation onshore and 4%-6.5% offshore. The firm expects those numbers to decrease over the next 12-month period to 3%-6% for onshore operations and 3%-5% for offshore ones. Nevertheless, operators will still fill the hit. 

Chasing the Workforce

As mentioned above, there’s little data at the moment on how CX buyers are reacting to price hikes solicitations. The closest thing to a trend observed by industry experts is a “pause and think” approach, where access to talent is weighing heavier than pricing.

“We got examples of buyers saying no [to price increases] but then realizing that, to secure the talent they need to meet the service levels that they have, they are actually going to have to give,” said David Rickard, VP at Everest Group.

David Rickard, VP at Everest Group

The hunt for talent now dominates the minds of CX buyers and vendors. The industry –infamous for its alarmingly high churn numbers– has for years tried to keep agents around long enough to cultivate their experience. 

As demand for customer care services keeps climbing, vendors are pushing for higher wages to increase retention, which translates into higher rates. Some of the top players in the business process outsourcing (BPO) and IT outsourcing ecosystem recently announced wage increases, with some of them promising to pay up to 10% more. 

Customers are already dealing with their own inflation woes beyond CX. Rate hikes solicited by vendors will put them in an even tighter spot, giving them little choice but to yield. Industry experts expect customers to become less price-sensitive in order to catch up with the rising demand. 

Not everyone will give in, though. Some buyers are opting for evaluating their stance on the market through price benchmarking.

“What we’re seeing is that clients are trying to understand where they sit in comparison to the rest of the market and then building negotiation strategies to align with that,” said Rickard.

Isn’t Remote Work Cheaper?

Tensions are yet to be solved between employers and employees over returning to a traditional office setup or migrating definitely to a hybrid or even completely remote work model. Though less visible, an adjacent tug-o-war is taking place between CX buyers and vendors.

As vendors solicit rate hikes, their customers wonder about the justifications behind those hikes, especially when their delivery model is either hybrid or remote. 

Nearshore BPO operators told NSAM that customers seem to be underestimating the costs of a remote working setup. They assume that having agents working from home is cheaper, though costs can be similar or even higher in some cases, assured industry players: from equipment acquisition and maintenance, to the use of software licenses, the costs pile up fast

Besides, some Nearshore countries are pondering the implementation of remote work laws that would force employers to pay for a remote employee’s Internet and electricity bills.

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Given the double threat of inflation and high churn, experts have recommended the acceleration of digital solutions in operations and HR workflows. The use of data analytics and automation, they argue, will garner benefits beyond lower costs and higher employee satisfaction. 

Digital transformation in CX is expected to increase productivity, better performance and, ultimately, provide a more satisfactory service to customers.

Cesar Cantu

Cesar is the Managing Editor of Nearshore Americas. He's a journalist based in Mexico City, with experience covering foreign trade policy, agribusiness and the food industry in Mexico and Latin America.

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