Offshore outsourcing of customer services –
boon or bane?
Department of Management and Marketing, Hong Kong Polytechnic University, Kowloon, Hong Kong
Purpose – Offshore outsourcing of customer services is growing rapidly but there is little known about its impact on customer perceptions and
behavior. This paper aims to combine the learnings from the country-of-origin and service research to address this gap.
Design/methodology/approach – An online survey was conducted by contacting a sample of 5,000 customers randomly chosen out of a database of
over 100,000 customers provided by a large American retail ﬁnancial services company, immediately after they had an interaction with an offshore
service representative, resulting in 548 complete and usable questionnaires.
Findings – Consumer ethnocentrism has a negative inﬂuence on the attitude towards offshore outsourcing and the perceived service quality and
customer satisfaction with offshore call centers. Customer satisfaction also mediates the inﬂuence of perceived service quality on customer complaint
behavior, brand image, brand loyalty, and repeat purchase intentions.
Research limitations/implications – This paper focuses on the effects of consumer ethnocentrism and attitudes towards offshore outsourcing on
several perceptual and behavioral variables in a B2C context with American customers and Indian customer service executives. Hence, its ﬁndings may
not apply to the B2B context and other country settings.
Practical implications – The ﬁndings highlight the need for greater employee training as well as customer education for ﬁrms using offshore
customer service centers, to minimize customer complaints and protect their brand image, loyalty, and repeat purchase intentions.
Originality/value – The study offers new insights on the impact of consumer ethnocentrism and attitude towards offshore outsourcing on customer
perceptions and behavioral intentions, mediated by customer satisfaction and perceived service quality.
Keywords Brand image, Loyalty, Complaint behavior, Consumer ethnocentrism, Customer satisfaction, Offshore outsourcing,
Perceived service quality, Repeat purchase
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Offshore outsourcing of services continues to grow rapidly
despite all the controversy it generates, as evident in the size of
global services outsourcing market estimated at US$930
billion in 2006 and expected to grow to US$1.43 trillion by
the end of 2009 (Frost & Sullivan, 2007). One of the main
reasons for this trend towards offshore outsourcing is that it
beneﬁts the companies as well as customers by reducing costs
and improving productivity. However, based on their
experience in recent years, organizations are becoming more
cautious about offshore outsourcing of customer services
(OOCS) because of its “invisible” costs (Stringfellow et al.,
2008); which include threats to the ﬁrm’s reputation, brand
image, core skills and intellectual property (Reilly, 1997;
Swartz, 2004a, b). Offshore outsourcing may also lead to
lower customer satisfaction, reduced brand loyalty, increase in
customer complaints, and lower service standards (Cornell,
2004; Data-Monitor, 2004; The Economist, 2001; Kennedy,
2002; Roy, 2003).
A customer survey by American Banker/Gallup (2004)
ﬁnds that two-thirds (71 per cent) of the respondents were
aware of offshore outsourcing to lower-cost countries. Among
those aware, 78 per cent held an unfavorable opinion about
offshore outsourcing and only about half would feel better
even if it made US companies more competitive in global
marketplace (51 per cent) or if it improved US companies’
proﬁts (46 per cent). Studies conducted in the UK show
similar ﬁndings, with a vast majority of customers genuinely
worried about dealing with overseas call center agents because
of poor perceived quality (ContactBabel, 2004; Mintel,
2007). However, besides these industry surveys there is little
research on the impact of OOCS on individual customers,
their perceptions, attitudes, and behavior. Hence, it is still not
clear if OOCS is a boon (win-win) for the service companies
and their consumers, or a bane (lose-lose) for both of them.
A review of the scant literature in this area reveals many
research gaps. First, some studies cover offshoring and not
outsourcing per se (e.g. Roggeveen et al., 2007), and others
cover only the B2B context (e.g. Bharadwaj and Roggeveen,
2008). For example, Bharadwaj and Roggeveen (2008) show
differences in the perceptions of SME customers about a
computer manufacturer based on its call center location.
However, the characteristics and motivations of individual
and institutional customers may be quite different from each
other, hence it is not clear if these ﬁndings may apply to the
context of offshore outsourcing of ‘customer services’ as well.
This paper addresses this gap by showing a signiﬁcant impact
The current issue and full text archive of this journal is available at
Journal of Services Marketing
26/5 (2012) 352 –364
q Emerald Group Publishing Limited [ISSN 0887-6045]