Nearshore Americas
CX Contract Negotiations Heating Up Over WFH Costs

Contract Negotiations Heat Up Over Burdens of WFH on Agents

Though hybrid and work-from-home (WFH) delivery models are seen increasingly as the “new normal” of the CX industry, they are driving a wedge between buyers and providers.

Both sides of the negotiating table are clashing over the actual costs of remote delivery models, a symptom of the newness of such models and also of the tensions brought by rising inflation and a landscape of high economic uncertainty worldwide.

Miro Batista, CEO at Iterum Connections

“Clients ignore them [WFH costs]. They believe that working from home means paying nothing for telcos,” said Miro Batista, CEO of Iterum Connections. “It’s difficult [contract negotiations], because clients always argue those costs; they expect them to be lower.” 

Remote work has been pushed as the logical step for CX following the storm unleashed by the COVID-19 pandemic. It allowed the industry to continue operating during lockdowns, and now it is being heralded as an optimal option to deal with climbing operating costs. 

Though cheaper –at least in theory–, remote work in CX came with unique costs. Pressured by a context of high inflation and the lingering hit of lockdowns, vendors have been pushed to increase their rates considerably, rising tensions in the negotiating table.

“When it comes to technology and remote work, clients have this perception of it being cheaper. You don’t have to pay rent or electricity, but there are other costs. It’s not cheaper; it’s as expensive [than a traditional model], or more costly sometimes,” commented Fabio Herrera, Senior Manager at DashBPO

Costs Pile Up

The list of costs for a remote CX setup is not short. From cybersecurity to remote training and even potential legal fees, they pile up fast. 

Cybersecurity management has grown into one of the most worrisome aspects of a WFH setup. A survey done by cybersec provider Tenable shows that 80% of security and business leaders consider that remote work has exposed them further to cybersecurity risks. In the same survey, 74% said that the implementation of too many new technologies during lockdown increased the impact of cyberattacks. 

Though costly, cybersec for a remote setup is not an expense that businesses can ignore. IBM has described the fight against data breaches in companies as a “million-dollar race to detect and respond”. A study done by the IT giant puts the average cost of a data breach in 2021 around US$4.35 million for companies worldwide. For entities in the US, the cost jumps to US$9.44 million.

“When it comes to technology and remote work, clients have this perception of it being cheaper […] It’s not cheaper; it’s as expensive [than a traditional model], or more costly sometimes”—Fabio Herrera, Senior Manager at DashBPO

Workforce management in a WFH setup also results in extra costs. Training has still to be done, even remotely. Supervision is still required too, and it can gobble more resources when done remotely. Industry players estimate that supervision in a traditional office setup can be done in a ratio of 1:15. In a remote delivery model, the ratio goes down to 1:10. 

There’s also the question of providing specialized equipment and software licenses for employees working from home. Though not a universal must, the question keeps making its way into discussions in boardrooms and even government. Several US states require employees to pay for worker expenses even in a remote setup, and some Nearshore territories are giving thought to laws that would force bosses to pay at least for home-office Internet and electricity bills.

This might result in legal headaches for employers unwilling to fork out the cash. Amazon, for example, is currently involved in a lawsuit over reimbursement of expenses for one of its remote employees in California, an issue that experts see potentially exploding down the line.

Although companies could avoid the trouble by returning to a traditional office setup –and some have been trying–, the cat is already out of the bag. A study done by SQM predicts that CX vendors will end up betting for a 60/40 or even 80/20 delivery model, with remote workers representing the bigger portion of the workforce. 

Also, survey after survey shows that agents prefer a WFH or hybrid setup. Given CX’s alarmingly high rotation numbers and the increasing demand for customer service, employers find themselves practically forced into a remote delivery model if they want to keep talent around and catch up with demand. 

Tech Isn’t Disruptive Enough

Several experts have put automation, cloud-based solutions and other tech tools as the best path to follow in a remote work delivery model, arguing that it will allow for smoother and cheaper operations.

Fabián Saavedra, VP of Customer Care at DirecTv LATAM

Nevertheless, industry operators consulted by NSAM see little evidence of technology being a clear-cut solution for cost reduction.

Although technology could be of great help for a WFH setup, making it more cost effective, the fact is that other costs pile up, with wages being the main driver. 

“Some costs are offset by others that didn’t exist before. Nevertheless, the trade-off is still positive in the bottom line. They’re not disruptive, though, because salaries are still the basis for costs,” said Fabián Saavedra, VP of Customer Care at DirecTv LATAM. 

“You can only automate so much. There’s inflation. In our latest RFP, a couple weeks ago, we were within the top three proposals for costs. Even then, every provider had to push costs upward,” added Miro Batista. 

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Although the costs behind a WFH model have led to friction in the negotiating table, experts don’t see them necessarily leading to impasses. It’ll all come down to how providers justify their prices, the nature of the relationship with their clients and their willingness to be clear and transparent in their pricing.

“I guess it depends on whether providers are presenting cost information in a clear and transparent way. If there’s a good relationship, it’s something that can be sorted out with no issues,” said Saavedra.

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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