The Zomcast cable TV company is considering outsourcing its call center to the Philippines. The cost of hiring operators and staff in the Philippines is 60 percent of the salary and benefits paid in the U.S. The operators are slightly less efficient at handling calls. They frequently read from scripts and are not experienced in handling calls. The efficiency is estimated to be 80 percent of the U.S. in terms of staffing operators. Currently, the U.S. has an average of 83 operators handling calls paid at $15.00 per hour and 5 managers. The call center is staffed around the clock and throughout the year, but each operator works 2000 hours in a year. The Philippines will need the same number of managers. It will cost $100,000 to train the Philippines operators. It will cost an additional $110,000 per year to administrate the contract and supervise the operation from the U.S headquarters.
a. What are the total costs of outsourcing this call center to the Philippines compared to the U.S.?
b. What are the risks associated with the outsourced service?
c. Should the call center be outsourced to the Philippines?