A few thougths on Convergys

One of the largest American call centre outsourcers announced last week it was closing its Truro facility – just about the time the company’s payroll rebate scheme ran out prompting some – including a Minister in the government to suggest the payroll rebate program may have run its course.

First, I am amazed there hasn’t been more of this – particularly among the outsourcers.  Given the breadth and depth of the recession, I had expected more consolidation and downsizing.  It hasn’t been as bad as it could have been. 

It is possible we are entering a phase where some of the call centres with shallow business models will be slowly retreating out of this market (Atlantic Canada).  It will start with the outsourcers and could go into the company customer contact centres/back offices.    More and more folks are using the Web to interact with companies, there is higher U.S. unemployment prompting many firms to take a second look at onshoring this type of activity and the India factor continues to be a real issue in this industry.

I have been saying (and many others) that we should be trying up move up the value chain within these firms.  The Royal Bank call centre in Moncton has 70 computer support people doing remote support for RBC nationally.   The ExxonMobil business service centre is doing a variety of higher value stuff as well.

There are somewhere between 18,000 to 25,000 people working in customer contact centres in the Maritimes – maybe a little more – and I would expect that number to shrink by a few thousand over the next 5-6 years.  Even the most optimistic view would not see major growth like we have witnessed in the past 15 years.

As for the payroll rebate here are my thoughts.  I am not a huge fan of grants and loans and loan guarantees and forgiveable loans, etc.  anyway.  I think that when economic development becomes exclusively about being a bank – we are missing the point.  Economic development is about public policy, cluster facilitation, tax-based incentives, etc. that combine to create the environment where certain industries can have a strategic advantage by locating in your jurisdiction.  Think about BC’s massive effort to grow its computer animation/digital media cluster.  That is economic development.  The ‘bank’ part should be one small part of economic development.

As far as incentives go, the payroll rebate is one of the best tools with no risk to the taxpayer.  The payroll rebate (by definition) is only given out after the payroll is paid and, in my understanding, it is only a fraction of the amount the company generating in personal taxes, HST payments, etc. to government.  Therefore, it is not risky at all to the taxpayer.

And you have to remember that just about every jurisdiction in North America offers incentives for specific industries to expand.    From BC to Georgia to Texas to PEI, there are programs.   Alberta is one of the top providers of subsidies according to Fraser Institute research each year.  So if the NS government is to cut, it needs to consider the competitive landscape.

In the end, the Nova Scotia government would be wise to work with NSBI to determine the best growth opportunities then craft the strategies and policies needed to attract investment into those sectors.