Call Centers and Economic Development in Less Developed Regions in Turkey

Transcription

1 48th Congress of the European Regional Science Association Culture, Cohesion and Competitiveness: Regional Perspectives August 2008 Liverpool, UK Call Centers and Economic Development in Less Developed Regions in Turkey Ebru Seckin, Research Assistant, Yildiz Technical University, Department of Urban and Regional Planning, Istanbul, Turkey Abstract In recent years, it has been noted that the development of information and communication technology (ICT) has a discernible effect on the location patterns of business activities. Back office activities such as call centers are moved to less developed region where has a cheap and skilled labor. Such types of work don t need have face to face relationship within the firm. Call centers have grown rapidly in recent years, creating a significant number of new jobs. Call centers provide only poor employment opportunities, with mostly low-skilled, high constrained jobs with few opportunities for advancement. Furthermore, with little capital investment and high sensivity to cost factors, call centers are vulnerable to being relocated to even lower cost locations, thus making it a tenouous basis for a long term economic development strategy. Local and regional economic developmet agencies have sought to attract call centers because they are a source of new jobs. Call centers are characterized by narroe range of occupations and skills. The majority of the jobs are taken by women. The aim of this paper is identify the locational attributes of call centers will be illustrated with the case of Erzurum and the effects of call centers to the labor market will be examined. Although there has been a strong tendency for call centers to concentrate in large metropolitan areas (Istanbul), a rapid growth of call centers can also be observed recently in Erzurum, located in Turkey s less developed regions. This paper addresses the concentrations of call centers as an example illustrating the location of information-related industries in less developed region in Turkey. 1. Introduction At the end of the economic reconstruction process (deindustrialization, information age) experienced since 1980s, social scientists have discovered new industry areas, concepts such as flexible production, spatial division of labor and started focusing increasingly on services. During this era, many professions in production and service sector are wiped out owing to automation. Flexible specialization produced the center-periphery division in construction of employment. Labor markets are divided into segments geographically or based on region. Segmentation is formed by 1

2 differences in skill, sex, race, ethnic origin and age. Qualified employees who are employed permanently are called as center while unqualified and temporary work force is called as periphery. Such employees do not need to be specialized in a particular area and they have less career expectations and job securities. Typically, less qualified ethnic minority and employees who are old and have less know-how tend to concentrate in secondary labor market. Primary, key or central employees enjoy more employment security and take more vocational training, have better career opportunities and work under better conditions. On the contrary to that, secondary or periphery workforce consists of people with whom an agreement is made for a certain period as contracted. With double labor market, employers balance the high cost of protecting primary employees with employees who work under less appropriate conditions. 1 With services sector getting out of being dependent on basic economic activities, particularly producer services have started to occupy an important place in existing strategies of economic development. The most important factor in the growth of producer services has been the use of outsource which is on expanding demand. Firms think that running such operations internally not only increase the cost but also lower the efficiency. There is a shift from large-scale firms towards small-scale firms. As a conclusion, producer services grow with the development of new firms arising as a result of changes in internal body of the firms and form the economic geography. New economy points out the importance of concentrations while generating the move of works automated with the use of technology into distant areas. Ultimately, establishments have started to be complex, distant from center and network-centered. In the context of these changes experienced, periphery is proving more attractive for producer services concentrating in metropolises (Coffey ve Polese 1989; Daniels 1985; Ebert ve Randall, 1998). Running work processes in different places change the traditional dimensions of time and place and provide opportunity for geographical activity. Since the 1960s, there has been growing tendency towards the spatial seperation of routine and non-routine office activities in advanced economies. The former include not only traditional back office work mainly involving data prossing (e.g. payroll, accounting, subcriptions, billing, credit card services, claims processing and word prosessing) but also those elements of front office work (i.e. involving direct contact with customers and clients) that can be effectively conducted by telephone from remote locations (e.g. information, sales and reservations, and techical support) (Breatnach, 2000: 321). The spatial separation of back office and front office aktivities is shown to involve in long-distance movement, culminating in the emergence of global spatial division of labour (Coffey ve Bailly, 1992:860; Breatnach, 2000: 321) in offive work comparable in some respects to the earlier new international division of labour in manufacturing industry. The movement of routine back office activities out of the central business districts of metropolitan areas has been facilitated by two key technological developments. The first of these has been the reorganization of office work. The second has been the development of new information technology that allows both a high degree of automation of information processing and the integration of remotely-located back 1 [Scottish Center for employment Research, Understanding the Labour Market, SCER Report 1, A Guidance Note for Future Skills Scotland, 2001, Department of Human Resource Management, University of Strathclyde, Glasgow, s:

3 offices with either head offices or the outside world trough high-speed and highvolume telecommunications network (Breatnach, 2000: 321). There is a parallelism between the process defined as new international division of labor in services sector and seperation of production process. In both, labor-intensive routine works (back office works) demand flexible labor, the youngs and women are preferred more often and move into places where costs are low. Despite this, the important difference in the process of shifting back office works and production into different geographies is that back office works in services require high skill level (educational level, computer skill and foreign language). In spite of this, payment level for back office work is not high. Today s low-skilled, cheap labor suppliers are high-skilled, cheap labor supplier of the future comes into the picture with realization of back office works. Call centers are offices established by organizations to deliver services remotely over phone, replacing the need for face to face interaction with customers. Staff or agents spend their working hours seated at their desks in constant contact with customers, making or receiving telephone calls and processing information using computer terminals. Examples of some of the most common types of services provided via call centers include telephone banking, computer helpdesks, travel booking and information lines. A number of call centers combine such service function with selling, or telesales (Richardson, 2000). This paper considers the implications of call center work for economic development in regions facing relative economic disadvantage. Call centers have been one of the latgest employment generators in western Europe over past few years. Call centers have been subject to considerable criticism by both the media anc academics, particularly in regard to the Tayloristic and routinized nature of work, to the levels of control and surveillance developed by management, and to lack of trade union representation and scope, or otherwise, for alternative forms of worker resistance (Bain and Taylor, 1999, 2000; Baldry et. Al., 1999; Fernie and Metcalf, 1997; Kinnie et al., 1998; Knights and McCabe, 1998; Lammont, 1999; Taylor and Bain, 1999). Despite this criticism call centers are increasingly being targeted by economic development agencies in their attempts to attract information service-based jobs. As a result, in some less favoured regions call centers have been the most important single source of new employment over the past few years (Richardson & Belt, 2007). This paper aims to identify the locational attributes of call centers will be illustrated and the effects of call centers to the labor market will be examined. Although there has been a strong tendency for call centers to concentrate in large metropolitan areas (Đstanbul), a rapid growth of call centers can also be observed recently in Turkey s less developed regions (Erzurum, Erzincan, Gümüşhane). This paper addresses the concentrations of call centers as an example illustrating the location of informationrelated industries in less developed region in Turkey. The study has been carried out in two mutually feeding stages as the following Determining the quantitative and spatial distribution of call centers in Istanbul Determining work organization, workforce composition, location factors of call centers operating in Istanbul and their effect to environment. The research involved 11 face to face interview with call center managers in call centers in Istanbul. The interviews focused on workforce composition, work 3

4 organizations, locational decision making and effect to environment of call centers Six of these firms are outsource call centers that serve as call centers and five of these firms serve as in-house call centers. The most important limitation in the study is the lack of statistical information regarding the call center firms. Since call center business is mostly carried out in Turkey as in-house and it is not regarded as a sector, there is no likelihood of finding statistical information. On the other hand, records of Istanbul Chamber of Commerce do not make any special classification for outsource call center firms. Thus, within the scope of this study, qualitative and spatial analysis of sectors are mainly based on database obtained from surveys conducted by several firms and data acquired from in-depth interviews and face-to-face talks. 2. Call Center Industry With the development of Internet, many job categories (call centers, computer programming, medical data reading; roentgen, MRI.. etc., medical reporting, preparing income tax, human resources) emerged in foreign countries. For example, airline sector carries out its ticket sale actions through offshore. It is possible to see the same trend in insurance sector (Dicken, 1998:391). Accordingly, expert vital points in different subjects in different geographies in economic structure have emerged. Since 1990s, growth in virtual business firstly started in America and then expanded globally. Remote customer services (call centers and technological support centers) grew at annual rate of 20% in America in 1990 and, 4 percent (nearly ) of total employment in 2004 was carried out remotely. Growth in call center business increased three-fold between 2000 and Growth of computer and these phone integrated centers reached two-digit numbers with India, Philippines and Jamaica (Breathnach, P, 2000). Globalization, circle of product and increase in competition triggered the emergence of call centers. Call centers are the ones in which customer services converge. Growth of call centers points out that geography is still important despite advances in information and communication technologies. Besides virtual environment in which operations are carried out, a territorial place is also required in order to run these operations. An investigation into call centers will enable us to understand better the economic geography of Internet era. Call centers are organizations and parts of the organizations that have a task to hold non-physical consumer relations (for example telephone, fax, etc.) It is divided into two in a firm as in-house and one that is carried out by subcontractor firms. In-house call centers are part of a firm and distributed among many sectors (for example, retail trading, media and tourism and financial services, communication, commercial services, information technology, public sector..etc.). Subcontractor call centers, on the other hand, provide connection of services for other firms and corporations (Grip, A., et. al. 2006: 1). Call centers may determine the location in any place where low costs and developed telecommunication infrastructure exist. The most important factor in locational determination decisions of call centers is cheap and high quality labor (Richardson, 1994; Breathnach, 2000). Today, call center market has become a large and international sector. Growth of call center sector in UK started with finance sector. Call center sector has been growing fast with sectors including such as transportation, travel, computer, marketing, 4

5 distribution, logistic, hotel, telecommunication and sales. Call center sector is not a sector in traditional sense but part of the activities in sector. Therefore, determining the growth and employment of call centers remains difficult. Since call centers are not considered as a sector on its own, there exist no recorded statistics. According to a survey conducted in 2003, call center industry reached a value of over 58 billion dollar. Researches indicate that the number of call centers in USA was in 2003 and the number of employees reached 4 million. This figure which corresponds to more than 3 percent of working population in USA is expected to increase at a rate between 10 and 20 percent annually. Similarly, the number of call centers in Europe is estimated to experience a 100 percent increase within seven years. According to latest researches, the number of call centers in the world varies between and In Turkey, on the other hand, there are nearly 200 call centers according to a survey conducted by Sistema, 21 percent of the existing call centers operate in banking sector while the remaining 79 percent in other sectors. The number of employees, on the other hand, is nearly percent of this figure works in banks, 22 percent of it in mobile telephone providers. 2 Table 1 Call Center Sector in Different Country Country Year Call Center Number Seat Number Employee Number World USA (Deloitte an Touche) USA (Data Monitor) USA (Telemanagement Search) UK (Data Monitor) Germany (Data Monitor) Latin America (Pacific Call Center News) Latin America Canada (Call Center Week) Canada 2004 France (CESMO - Data Monitor) Paris India (NASSCOM) Avustralia Turkey * ( * hhp:// 3. The General Characteristics of Call Centers in Istanbul Almost 45 percent of call centers in Turkey concentrate in Istanbul. There are 87 call centers in Turkey. 23 percent of this figure is in banking sector, 15 percent as outsource firms, 22 percent in health, 10 percent in insurance, 7 percent in logistics, 7 percent in IT, 5 percent in finance, 5 percent in telecommunication, 4 percent in manufacturing and 13 percent in other sectors. Totally 9836 people work in these call centers. When attempted to analyze the distribution of sectors by the number of employee, we see that 28 percent work in banking sector, 50 percent in outsourcing, 3 percent in IT, 1 percent in finance, 2 percent in health, 3 percent in insurance, 8 percent in logistic, 1 percent in telecommunication, 1 percent in manufacturing, 3 percent in other sectors. Therefore, it is possible to regard in-house call centers as an unit in a firm where as small number of people work. Average number of employee in in-house call centers is 70 while this figure is nearly 370 in outsource firms. 2 [27 May 2007] 5

6 Totally 11 in-depth interviews have been carried out with call center managers in order to understand the structure of call center sector in Istanbul. The interviews focused on workforce composition, work organizations, locational decision making and effect to environment of call centers Workforce composition: In call centers, there exist both a model which reflects Taylorist, routinized and mass production, and high quality, professional service model. Profile of employees both in in-house and outsource call centers in Istanbul have been analyzed in terms of men-women ratio, wage levels, age average and educational level. According to this analysis, it has been observed that 65 percent of the employees are women and age average is 23. Customer representatives receive the minimum wage ( YTL ) in a firm. When analyzed in terms of educational level, it has been seen that customer representatives are mainly graduate student but people with a high school diploma are also preferred in outsource call centers (Figure 1). % University High School Outsource CC In-house CC Education Level Figure 1: Education Level by Agent in Call Centers Realization of projects in outsource firms for certain periods of time and requiring no specialization causes the educational levels and professions of the employees to be of secondary importance. However, in call centers which provide services such as finance, IT, technical support, the employees are required to be at least graduate student. When we analyze the working pattern and time of customer representatives in call centers, it has been observed that there are part-time and contract employees. Especially since outsource call centers serve as project-based, they prefer part-time and contract customer representatives. Therefore, it is possible to consider the labor in call centers as periphery labor. Work organization: Call centers are technology-using call centers where a relation between firm and customer is formed. They provide service to customers without face-to-face contact. 6

7 FIRM Call Centre People (Agent) Customer Custemer Technology Figure 2: Structure of Call Center Firms Working in call centers requires general and personal skills. Employees are not required to be specialized in a particular subject in professional sense. Despite the fact that call centers are technologically intensive working environment, most call center employers do not require their staff to possess in-depth technological knowledge or qualifications. Call center employers require communication skills, customer service skills and team working. The managers emphasized that call center agents should posses a spesific set of personel characteristics or qualities, including patience, tolerance, empathy, motivation, commitment and the ability to work wll under pressure. Information regarding the sector in which call centers operate are provided by firm at the beginning of profession. It is possible to name call centers as FACTORIES WHICH BRINGS IN EXPERIENCE, for employees in this business either shift sector or are transferred to other department of a firm after they have worked in call center for a little time. Average working time of an agent in a cell center varies between 1 and 2 years. The fact that the work carried out in call centers are stressful, employees are considered as temporary ones and employees regard this job as a temporary one cause turnover rate to be high. The lowest turnover rate in firms interviewed is 6 percent while the highest is 50 percent. Average turnover rate in 11 firms, on the other hand, is 20 percent. Locational decision determinant: Since call centers are labor-intense work type, the most important factor is the presence of qualified and cheap labor and the large labor market pool. The most important factor in finding employee easily is the largeness of labor market pool. Advanced telecommunication infrastructure and low costs of land are among the factors taken into account while determining a location. Strong local transportation connections, distance between house and workplace are also taken into account for determining location for call centers. In recent years, many firms in Istanbul move their call centers peripheral and less developed areas in Istanbul. New call center firms are founded in cities such as Erzurum, Erzincan, Gumushane and Yalova where telecommunication infrastructure is strong and universities are located. Factors which have an active role in shifting call centers from Istanbul to other cities in Turkey are government assistance, incentives and tax reduction, presence of universities and qualified labor. 7

8 Effect to environment of call centers: Relations of call centers with the environment which they are physically located has been studied in the context of business partnerships with sectors and firms with which they are in a relation. Types of provider firms which provide goods and services to call centers are described below: Call center system integrator companies Companies providing goods (IT products, furniture) to call centers Companies providing software and hardware to call centers. Companies providing training, consultancy recruitment services to call centers. There are totally 48 call center provider firms in Istanbul. Total number of employees in these firms is Table 2: Types of provider firms and the number of employees Type of firm Number of the firm Number of employee Average of the firm size (person) Education-consultancy firms, human resources System integrators Companies providing goods Hardware - software In interviews carried out, it has been stated that there is no need for locational closeness regarding the relation between provider firms and call center firms and such firms tend to concentrate in Istanbul. Relation with provider firms can be carried on within the context of advances in communication technology. Firm managers have stated that they will liven up service sector in geographies in which call centers are located. New firms will be formed in especially catering, transporting, security, cleaning sectors. Hardware, software, system integrators, human resources, education-consultancy firms will continue to be located in developed regions of the country. 4. Discussion This paper assesed some of the implications of the growth of call centers for regional employment and skills, drawing on evidence from Turkey. The paper shows that call centers can create significant number of jobs. Call centers are present in a large number of sectors, and the skills developed in them are easily transferable between firms. Thus, the successful attraction of a few firms to the region creates a pool of labour that can, in turn, attract other firms. The emergence of call center firms is the result of the will to reduce the operating costs. Establishing new call center depends on the emergence new projects or the expansion of the current ones. Offering new products to the market and increasing the number of the consumers creates the need for more employees. Since the call 8

9 centers are the organizations growing horizontally, they open branch offices at new places in case of exceeding their capacity. Operating in virtual environment can provide the presentation of effective, fast, equal and qualified service. Instead of opening new branch offices at different places, as a consequence of reducing the costs through combining the consumer services under a single center, the number of the call centers has been increasing. Providing sercives via internet and telephone has become one of the must of our contemporary world. Some certain centers will come into the forefront and the services will be distributed from these points. Consequently, the vital points will be formed, specialized on certain areas in terms of spatial. Are the call centers an adventage economically for the disadventageous regions? In the context of this question, the benefits and the constraints of the call centers are given as follows. Benefits: Call centers have the potential of making a contribution for the unpopular regions. One of them is the employement it creates. Since it is a kind of labour-intensive work, it can provide employment for more people in a short time period. It has a positive role on strengthening the telecommunication infrustructure. For the operating areas of the call centers are defined as limited working type, so the skills of these centers are limited. Finally, the call centers create job opportunities for women and young. Constraints The most important constraint that the call centers brought on development is the low skilled labour force they create. The skills that the employees working at call centers had is perceived as general skills in information economy. Underdeveloped regions may face the risk of being the areas not exceeding to serve for the developed markets. Secondly, the low degree of the call center works at the periphery limits the career development potential. Since there exists the apartment management system, so the development opportunity is limited. The rate of the people starting and leaving a job is relatively high compared with other jobs. Besides, it is assessed that internet and the other technological developments will replace the conversations made by telephone and there will be the risk of decrease in employment at call centers. Consequently, the spatial distinction of labour force becomes explicit through carrying the call center employing cheap and low skilled workers to the distant places. Call Centers have the structure of black box organization. It is a job type independent from its environment where all the activities are carried inside the firm. Even though the underdeveloped regions get the opportunity of employment since this sector chooses these regions, it is not possible to mention a visible economic recovery in those regions because these type of organizations are closed to the outside world and are lacking a strong input-output relationships with other sectors. It is possible to echelon the services at call centers from simple to complex. There are two models according to the service type provided at call centers. The first one is the MASS CONSUMPTION MODEL. In this model, the works are routine and require no specilization on a certain area. The second is the PROFESSIONAL SERVICE MODEL. Here, it requires specilization and experience on a certain area. While the employees are defined as customer representative in the first model, they are the advisors in the second and they can make a face-to-face contact when 9

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