Customer service is still treated as a cost-only activity, with offshore outsourcing of support services increasing to its highest ever level over the next few years.

A report by analyst Nelson Hall predicts that the BPO (Business Process Outsourcing) market will be worth $450 billion by 2012, a figure which includes activities such as HR, finance and recruitment as well as customer service operations.

The predictable explanation for the explosion in outsourcing deals is the current economic depression, which is forcing cost cutting by businesses staving off the effects of falling revenues.

From a service perspective, the concern is that by placing customer service in the same category as back-office activities such as accounts handling, businesses are proving that attempts to modernise attitudes to customers have largely failed.  Call centres grew out of a requirement to offer service as cheaply as possible, resulting in customer dissatisfaction and churn that was hugely expensive in terms of lost business and customers.

More progressive businesses have forgone the immediate savings of budget service, and enjoyed the long term gains of a loyal customer base that buys multiple products and encourages new customers to join through word of mouth.

Yet the trend to outsource more customer service activity that ever before suggests that this dynamic is not yet understood and businesses will suffer greatly in the medium to long term, especially when the costs to reacquire customers lost during the period of penny pinching are considered.