the call of the wild: call centers and economic development in rural areas

The Call of the Wild: Call Centers andEconomic Development in Rural Areas

RANALD RICHARDSON AND ANDREW GILLESPIE

ABSTRACT This paper attempts to reflect critically on the role which telephone call centers

might play in the economic development of rural places in the ‘information age’, drawing mainly

on a case study of the Highlands and Islands of Scotland. It argues that although call center

employment tends mainly to be urban-based, the growth of this form of work does present oppor-

tunities for some rural areas. The paper considers the locational factors rural areas would have

to possess or develop in order to attract such work. It suggests call centers can make a valuable,

though limited, contribution towards rural economic development, principally through the creation

of additional employment opportunities and the stimulation of new skills and competencies. It

also suggests that call centers do not represent a panacea for rural areas and that, indeed, it would

be dangerous for rural areas to become over-reliant on employment in this sector.

Introduction

O ver the past decade or so, increasing interest has been expressed in the potential forthe development of rural areas associated with the emergence of an information-

intensive service economy (see, for example, Glasmeier and Borchard 1989; Hansen et al.1990; Hudson and Parker 1990; Grimes and Lyons 1994; Parker and Hudson 1995; Ilberyet al. 1995; Richardson and Gillespie 1996 and 2000a). Some have emphasized the possibilities of utilizing ‘distance-shrinking’ information and communications technolo-gies (ICTs) to enable rural enterprises to gain access to distant metropolitan markets, whileothers have stressed rather the technology-aided re-organization of service activities, andthe scope for rural areas to attract mobile service investment.

This paper is concerned with one particular type of mobile service investment, that ofthe telephone call center and the extent to which rural areas are likely to be able benefitfrom the rapid increase in call center activities. Whereas previous forms of service re-organization enabled only the mobility of ‘back office’ activities, call centers permit the‘back-officing’ of customer-focused, ‘front-office’ activities, and as a result are leading tomuch greater degrees of service mobility. The factors explaining the location of telephonecall centers are examined, and the extent to which rural areas are likely to have the right

Growth and ChangeVol. 34 No. 1 (Winter 2003), pp. 87-108

Submitted Nov. 2000, revised June, Aug. 2002.© 2003 Gatton College of Business and Economics, University of Kentucky.Published by Blackwell Publishing, 350 Main Street, Malden MA 02148 US and 9600 Garsington Road, Oxford OX4 2DQ, UK.

Ranald Richardon is an associate professor of geography at Newcastle upon Tyne, UK, and Andrew

Gillespie is an assistant professor at Newcastle upon Tyne.

kind of ‘offer’ in order to attract call centers is considered. We then provide a case studyof one region, the Highlands and Islands of Scotland, which has been particularly activein pursuing a telecommunications-led strategy for attracting mobile call center projects.Finally explored is the extent to which the relative success of the Highlands of Scotlandin call center attraction is likely to be generalizable to other peripheral and rural regions,and weighing up the issues for other such regions wishing to embark upon a call centerattraction strategy concludes the paper.

ICTs and the Restructuring of Service ActivitiesThe role of information and communications technologies in the spatial reshaping of

the service economy is now reasonably well documented and it is apparent that a complexset of spatial outcomes are emerging (Hepworth 1989; Gillespie 1993; Graham and Marvin1996). In the case of ‘command activities’ and those activities requiring face-to-face inter-action between decision-makers, further spatial concentration appears to be underway (see,for example, Zuboff 1988; Sassen 1991; Boden and Molotch 1994). On the other hand,some activities appear to be becoming increasingly mobile as firms realize that new tech-nologies provide immense opportunities for reducing costs through the exploitation of thefactor cost differentials—notably labor and real estate—which exist between regions, andbetween central cities and suburbs.

The best documented mobile service activity is ‘back office’ work, requiring little face-to-face contact with either customers or other parts of the organization. This has mainlybeen associated in the literature with low skilled and repetitive data processing work, suchas payroll, accounting, billing, claims processing, etc. The main motivating factor behindthe separation of front office (i.e., customer serving) and back office activities has beenthe desire to achieve significant cost savings by moving the latter activities out of high costcity centers to suburban locations (Nelson 1986), to more remote locations within nationalterritories (Castells 1989; Warf 1989), and even offshore (Wilson 1995; Pearson and Mitter1993; Howland 1996; Breathnach 2000). Recently, multinational corporations have beenrelocating some more highly skilled back office activities, such as treasury and computerprogramming, in order to achieve economies of scale and other efficiency savings. Thiswork is also becoming increasingly mobile and cities such as Dublin are adopting policiesaimed at attracting such work (Murphy 1998).

Although of significance, the scope for relocating back office work is limited by therelatively narrow range of service activities which are sufficiently self-contained to be sep-arated from other head office activities or from customers and clients. Around a decadeago (longer ago in North America, more recently in Europe), however, a radical innova-tion occurred which is transforming the organization of services production and delivery,and leading to marked increases in the volume of mobile service work. This innovation isthe telephone call center.

Call centers are not easy to define. Kinnie et al. (1998: p.2) suggest that call centerspossess three distinctive characteristics:

88 GROWTH AND CHANGE, WINTER 2003

(a) employees are engaged in specialist operations which integrate telecommunicationsand information systems technologies;

(b) their work is controlled by automatic systems which virtually simultaneously distrib-ute work, control the pace of that work and monitor their performance;

(c) employees are in direct telephone contact with the customer through dealing with in-bound calls, making out-bound calls or a combination of the two.

It is this latter aspect of call center operation which opens up new locational possibil-ities, due to the severing of the requirement for co-location of service producers with theconsumers of these services. For those services which can be mediated or delivered overthe telephone, the separation of production from consumption allows the complete re-organization, and re-location, of service production in order to reap both economies ofscale and cost savings through the exploitation of factor cost differentials.

Although there is a dearth of official statistics on call centers, there is general agree-ment that they represented one of the most significant areas of employment growth in the UK and Europe in the 1990s and that this growth is likely to continue for some years, albeit at a less rapid pace (Datamonitor 1998; Mitial 1998; Bain and Taylor 1999;Richardson 1999). It is also clear that a number of countries, cities and regions in Europeare targeting call center employment as an area of employment growth, particularlythrough inward investment (Breathnach 2000; Corporate Location 1996a and 1996b;Richardson 1999).

The concern in this paper is with the extent to which rural areas are likely to benefitfrom this employment growth potential. We begin by examining the location factors whichattract call center inward investment.

Call Center Location FactorsIn some senses, call centers represent a service sector parallel to earlier changes in pro-

duction organization attendant upon automation, which made such activities much lessdependent upon the skilled, craft labor reserves built up in particular places. Such automa-tion permitted the exploitation of scale economies, and, due to the less specialized laborrequirements, enabled a much wider range of locations to become viable for productionactivities. In a similar fashion, call centers involve the automation of the customer servicefunction, which opens up the possibility of utilizing less skilled labor reserves. The locational implications of this automation process are much more profound for customerservice functions than for production activities, however, due to tele-mediated customercontact replacing the need for physical co-location with customers.

Call centers involve then the separation of particular customer-service activities fromother activities and their spatial concentration into specialized offices dedicated (gener-ally) solely to the customer-service function; in financial services, for example, workinvolving serving customers can be removed from a network of bank branches and relo-cated to a smaller number of specialist telebanking offices, thereby reaping economies of

CALL CENTERS IN RURAL AREAS 89

scale and permitting both the standardization of work processes and the much enhancedapplication of technology to the customer service function. At the same time, the removalof the need for face-to-face interaction with the customer, together with advances innetwork technologies and services—for example, the advent of toll-free telephone numbers and so-called ‘intelligent networks’ which enable automatic switching betweensites—greatly increases the geographical mobility of this form of work. A company can, as result, choose to locate its customer service work away from its consumer marketsin order to exploit reserves of lower cost labor or to lower its costs by other means, suchas through the public subsidies which can be available for firms locating in particularregions.

Research suggests that a number of key factors are taken into account by organizationsseeking a location for their call center (Corporate Location 1996a and 1996b; Grimley1997; Arup/CURDS 1999; Mitial 1998 and 1999; Bristow et al. 2000; Richardson et al.2000). These can be summarized as:

• A plentiful pool of (predominantly female) labor, sufficiently skilled to carry out theparticular tasks required in the locating firm’s call center, bearing in mind that the callcenter may have to be staffed 24 hours a day and thus require a supply of labor suffi-ciently plentiful to operate different shifts. Skills will, of course, vary depending on acall center’s activities and markets; for example, some centers will require multi-lingualstaff. Labor costs will, naturally, be a key factor, but firms may have to trade off laborcosts for the availability of necessary skills.

• The availability of advanced telecommunications suitable for data and voice transmis-sion and capable of hosting intelligent network services. Telecommunications costs willalso be considered, particularly when the call center can be located in several countries.A competitive telecommunications environment, with the potential to source servicesfrom more than one provider is also preferred;

• The timely availability of property, together with low occupancy costs (rents, rates, serv-icing, parking costs etc.). In many cases firms also require room for expansion. In theUK the tendency is towards out-of-town or edge-of-town business parks, though somecities such as Birmingham and Glasgow have had considerable success in promotingcall centers in city center locations. The requirement for rapid expansion also tends tofavor out of town locations;

• Fiscal and grant incentives—in terms of real estate, tax breaks on capital investment andin respect of payment of local taxes, jobs created and training—are undoubtedly impor-tant. It is difficult to weigh the impact of financial incentives on call center location withany precision, however, as both business and public authority respondents invariably playdown the role of such incentives. In the UK, regions that offer incentives tend to havea disproportionately large share of call center employment, but such areas also offerplentiful supplies of relatively low cost labor. In respect of real-estate incentives in theUK’s less favored regions, it is almost impossible to disentangle the relative importanceof subsidy and the simple availability of suitable property. In old industrial regions such


as North East England, large scale industrial and commercial property simply does notget built without subsidy; thus nearly all inward investment, including call centers,locates on sites which have been subsidized in some way.

• Access to good local public transport is a factor for some firms, particularly thosewishing to employ students and others groups of workers with low rates of car owner-ship. Many call centers in the UK, however, appear to locate with little regard for publictransport provision, assuming workers will drive to work notwithstanding the relativelylow wages that the work attracts. In these circumstances plentiful parking becomes moreimportant (Arup/CURDS 1998).

Of these locational factors, the availability of advanced tele-communications tends tooperate more as a limiting factor than as an attraction in its own right, in that call centerswill simply not consider locating in an area lacking in telecommunications infrastructure;it is in essence integral to the business. In terms of attraction factors, there is little doubtthat the prime factor is the availability of suitable supplies of labor at a relatively low cost.The importance of this factor is explained by the labor intensity of call center operations:

“Labor costs comprise the great majority of call center operating expenses and canrange between 60-80 percent, depending on the type of center. Therefore the quantity,quality and most importantly, cost of labor in any given location will play a significantrole in the firm’s location decisions” (Buchanan and Koch-Schulte 2000, p.5).

In the UK context, it is not entirely clear how significant are variations in the cost oflabor in influencing locational outcomes, given the possible trade-off between the cost oflabor and access to a sufficiently large labor pool. Although there are variations betweenregions in the salary rates for call centers agents—Wales has the lowest average midpointsalaries, London the highest (£11,100 and £14,050 respectively; Income Data Services,2000)—these in part reflect differences in the nature of the call center business profile inthe different regions, with London having a disproportionately large number of multi-lingual call centers, for which higher rates of pay apply. Industry surveys show that manyof the largest call center operators, particularly which are embedded in organizations suchas major banks which have nationally negotiated wage agreements, in fact pay the samerates in different regions (Income Data Services 2000). Even here cost savings can still besignificant due to variations in rates of labor turnover, as a result of the attendant costs ofrecruitment and training. In the case of British Airways, for example, savings of between£3000 and £4000 per employee were attained through operating in Newcastle as opposedto the South East of England (Richardson and Marshall 1996).

Call Centers as an Opportunity for Rural Areas?On the face of it, call centers must represent an opportunity of sorts for rural areas and

peripheral regions, in that the previous impossibility of such ‘front office’ work beingundertaken in such areas, due to their distance from urban consumer markets, is overrid-den in the case of customer services which are delivered entirely over telecommunicationsnetworks, which is the essence of the telephone call center. Unsurprisingly, however, given


the attraction of large labor pools from which to recruit, and the requirement for advancedtelecommunications infrastructure, research suggests that, to date, call centers have mainlybeen an urban phenomenon in Europe. This has certainly been the case in the UK, Irelandand the Netherlands (Arup/CURDS 1999; Richardson 1999; Breathnach 2000; Mitial1998; Bain and Taylor 1999; Bristow et al. 2000).

In the UK, for example, new purpose-built call centers have tended to gravitate towardsprovincial cities in regions (and nations) such as the North West, North East England, Scotland and Wales (Income Data Services 2000). At the county level, the highest levels of relative concentration of call center employment are found in South Glamorgan(Cardiff), Lothian (Edinburgh), Strathclyde (Glasgow) and Tyne and Wear (Newcastle andSunderland), while the lowest levels of representation “tend to be in rural, more sparselypopulated areas” (Bristow et al. 2000, p. 527).

However, the potential for rural areas to attract call centers should not be dismissed.There is some evidence to suggest that the marked metropolitan bias in the location of callcenters in Europe reflects an early stage in the spatial evolution of such activity. Bristowet al. (2000), for example, in their analysis of the location of call centers in the UK, suggestthat the cost minimization strategies remain yet to be fully realized, with risk minimizationplaying an important role in the early development of call center organizational models,resulting in many call centers being located close to their corporate head office.

Certainly in the North American context, where call center developments are in advanceof those in Europe (and, it must be admitted, advanced telecommunications infrastructuresare more fully deployed), research suggests that rural areas have had some success inattracting call center employment. Glassmeier and Howland (1994) comment on the tendency of large organizations to disperse low-skilled, back-office jobs to locales remotefrom ‘control centers’. Parker and Hudson (1995) provide a number of examples of ruralcommunities attempting to lure telemarketing and other back office industries, citing Sitel’sdecision to locate an office in Breda, Iowa, after a local telephone company linked thetown to a fiber optic network of a long distance carrier.

Recent work in Canada (Jarman et al. 1998; Buchanan and Koch-Schulte 2000) suggestthat call centers are now becoming a key sector for rural and maritime areas of Canada,as companies seek to exploit more fully labor cost differentials within the context of cost-minimization strategies. Thus Jarman et al (1998) note that while the first applications oftelephone service provision occurred in the largest urban centers, adjacent to firms’ head-quarters, these are now being re-located to peripheral regions: “the work and profitabilityof call centers does not depend upon location in the largest urban centers. What a callcenter needs is a readily available labor pool of people with modest educational back-grounds but who will be stable employees, and a telecommunications infrastructurecapable of handling in the order of 100,000 telephone calls a week. This need can be moreeasily met in the small urban centers of the periphery of the North American continentthan in the large urban centers” (p.13-14).

Limited evidence is now emerging of call centers moving beyond the confines of largeurban areas in Europe as labor markets become tighter, although most are still located in


metropolitan areas and in urban settlements where industrial decline has freed up a poten-tially large labor force. Earlier work by the authors (Richardson and Gillespie, 1996;2000b) and by Breathnach (2000) suggests that there has been a limited movement towardsrural regions in the UK and Ireland. Research in Sweden by Lorentzon (1998) suggeststhat the tight labor market in Stockholm is forcing firms to consider locating in less pop-ulous areas including rural areas. The next section of this paper presents a case study of one peripheral and primarily rural region in the UK which has purposely set out to attract and promote call center employment as a key element in its economic developmentstrategy.

Case Study: The Highlands and Islands of ScotlandThis part of the paper draws on two rounds of empirical research in the Highlands and

Islands of Scotland, the first in 1995, the second in 1998. These studies involved face-to-face interviews with the policy community, telecommunications providers and large andsmall firms, postal surveys of employees and document analysis. A follow up study involv-ing telephone interviews and document analysis was undertaken in the summer of 2000to update the findings.

The Highlands and Islands Region of Scotland covers the northern-most part of theBritish Isles. Although an area of outstanding natural beauty, the economic developmentof the area has always been handicapped by the geographical realities of distance andterrain. The area comprises one sixth of the UK landmass but only 1 per cent of the pop-ulation, giving it one of the lowest population densities in the European Union. The eco-nomic development problems of the region were recognized by the granting of Objective1 status by the European Commission in the 1980s.1 The economy has become more robustin recent years and the region has reversed long term population decline to record a netpopulation gain since the 1960s. Unemployment is now below the national average andincome per head has grown sufficiently for the region no longer to qualify for Objective1 status. Nevertheless, the region still faces a number of problems—the remoteness ofmuch of its population, over-reliance on agriculture, fishing and extractive industries, andon seasonal industries such as tourism and on public sector employment. This combina-tion of factors led the EU to grant the region ‘transitional status’, effectively an extensionof Objective 1 status for a limited period until 2006.

The body responsible for economic development in the Highlands and Islands is Highland and Islands Enterprise (HIE). In the late 1980s, HIE began to develop a strat-egy based on the protection of existing businesses and the promotion of new businesses,both indigenous and exogenous, through the utilization of advanced telecommunications.By the mid-1990s it was becoming clear that telephone call centers would be one of theelements of this strategy most likely to yield employment growth.

The growth of a call center industry in the Highlands and Islands. The first callcenter in the Highlands and Islands region—a BT computer help-desk in Thurso—wasestablished in 1993, and by the end of that year there were 300 call center employees inthe region. By the summer of 1998, this had grown to 1500, and by the summer of 2000


there were over 2,300 people employed in call centers in the region (HIE 2000). HIE antic-ipated that this figure will have grown further to around 4,000 by the beginning of 2001.Table 1 provides a breakdown of call center jobs by firm and by location in the summerof 1998.

Based on estimates of call center employment by consultants Mitial (1999), HIE claimsthat call center employment as a proportion of the total workforce is about twice the levelof that of the UK as a whole (HIE 2000).2 Call center employment has become particu-larly important in certain towns. For example, in Thurso and Dingwall the proportion ofcall centers employees to the total workforce reaches around 8 and 5 percent respectively(HIE 2000).

Three overlapping waves of call center investment can be identified. The first wave wasvery much concentrated in the relatively populous and prosperous area around Dingwalland the city of Inverness, which constitutes the ‘capital’ of the Highlands. This area hascontinued to attract investment. The exception in the first wave was the BT call center atThurso, which is located at the extreme north of mainland Scotland. BT already had a sitethere, but was able to draw on the workforce made redundant by the decommissioning ofa nuclear power research establishment and its associated administration. The Thursoexample set the trend for the second wave of call center investment. Here HIE was rea-sonably successful in directing companies to locations within the region which have suf-fered the precipitous loss of other implanted industries; for example, defense in Dunoonand Rothesay, and aluminum smelting in Kinlochleven (see Figure 1).

In the year 2000 a third wave became apparent, with HIE having some success inattracting call center activity to the more remote parts of the region (see Figure 1). For


TABLE 1. CALL CENTERS LOCATED IN THE HIGHLANDS AND ISLANDS OF SCOTLAND,SUMMER 1998.

Company Activity Location CallCentEmp

BT/Manpower Telecoms support Thurso 400BT/Manpower Telecoms support Alness 180Cap Gemini Multi-client out-sourcing Forres 110Cap Gemini Multi-client out-sourcing Inverness 80Cap Gemini Multi-client out-sourcing Dingwall 300TSC Multi-client out-sourcing Rothesay 190TSC Multi-client out-sourcing Dunoon 30Database Direct Multi-client out-sourcing Dunoon 155Database Direct Multi-client out-sourcing Kinloch-Leven 11Bank of Scotland Telephone banking Dingwall 60

Source: Richardson and Gillespie, (2000b).

example, Iomart, a Glasgow-based web services company, have established a web-enabledcall center in Stornoway on the Isle of Lewis. The Stornoway site now employs 100 people,including 80 call center staff. The process of attracting call center work to the more remoteareas of the Highland is not, however, straightforward. Also in the year 2000, anothercompany, Braidgrove Ltd, which, together with its technology provider Graham Technol-ogy already has a call center in Alness, was planning to establish a series of ‘micro’ callcenters throughout the smaller towns and villages in the region, with overflow capacity totake calls to home-based workers at peak times. Braidgrove is a third party ‘customercontact’ company which handles calls on behalf of client companies, either on a short termcontracts basis or through forging longer term relationships. It was anticipated that the first


Inverness

Thurso

DingwallAlness

Forres

0 50 miles

0 80 km

Dunoon

Stornoway

Gairloch

Rothesay

Kinlochleven

EdinburghGlasgow

Call centresProposed centre

Figure 1. Call centres locations in the Highlands and Islands of Scotland,Summer 2000.

Source: Author research.

site would be opened in Gairloch, a rural town in the northwest Highlands (see Figure 1).Telephone interviews carried out in the summer of 2001, however, suggested that this ideahad not yet come to fruition, with potential clients hesitant to place business which is tobe carried out at such remote and small centers.

Given its remoteness and predominantly rural nature, the region has been relativelysuccessful in attracting call center employment. We now turn to the pull factors behindthis success: telecommunications; labor availability and cost; subsidized and customizedproperty; and a number of other contingent factors.

Telecommunications. Highlands and Islands Enterprise (HIE) was one of the firstpublic agencies in Europe to recognize the potential role which advanced telecommuni-cations can play in economic growth (Richardson and Gillespie 1996). It had become clearby the beginning of the 1990s that British Telecom (BT), the former monopoly providerof public telecommunication infrastructure and services in the UK, remained the de factomonopoly supplier in the Highlands despite legislation to liberalize telecommunicationsprovision nearly a decade earlier. New market entrants were concentrating on urban loca-tions where their corporate clients were located. BT, therefore, saw no commercial incen-tive to upgrade telecommunications provision in this sparsely populated region in whichit already possessed—and given the absence of competitors seemed likely to retain—amonopoly position.

HIE decided to intervene and, by providing a public subsidy of £5 million, persuadedBT to undertake a £16 million upgrade of the region’s network. It was claimed that by1992 70 local exchanges had been converted in order to support ISDN.3 More than 70 percent of the population and about 80 per cent of businesses in the area were said to haveaccess to ISDN. It soon became clear, however, that the more remote areas, many of whichincluded businesses (such as the whisky industry) crucial to the region’s economic success,were not being served (Richardson and Gillespie, 1996). This also impacted on theprospects of attracting new businesses such as call centers to those more remote areas. Asrecently as 1998, call center managers interviewed by the authors complained that theiroptions were limited by the reluctance of BT (which still remained a de facto monopolysupplier of telecommunications in the region more than fifteen years after the opening upof the market to competition) to invest in more remote areas. One company had to makea five year commitment to a particular location to ensure the installation of a digitalexchange, which may also have been subsidized by public agencies. In 1997 HIE soughtto address this problem by negotiating an extension to the upgrade to cover the 20 per centof the population not covered by the earlier investment. HIE contributed £1.7 million to a£4.8 million program, which mainly consisted of upgrading exchange software to carrydigital signals. Unsurprisingly, given the physical remoteness and difficult terrain of theregion, and the lack of competitive spur, completion of the work program was not quick,though by late 2000 most exchanges had been upgraded. Iomart, the company mentionedabove which has recently located its web-enabled call center on one of the islands, com-mented upon the importance of the state of the art telecommunications infrastructure toits location decision.


Interviews with call center managers in the region suggest that in most cases the pro-vision of this infrastructure was crucial to location in the Highlands. Even where firmsdeveloped their own virtual private networks and did not use the publicly-switched ISDNlines, it was suggested that the digital telephone exchanges which had been installedenhanced their private network capabilities.

In the context of a monopoly environment in terms of provision, subsidized, highquality telecommunications can be seen as a key factor that has facilitated the location ofcall centers in the Highlands and Islands region. On its own, however, it is not sufficientto explain why firms have chosen to locate in the region. We now turn to look at the otherfactors which provide this explanation.

Labor availability and costs. The call center managers whom we interviewed duringthe course of the research reported here were effusive about the quality of labor in the region. The region has a good reputation regarding the levels of education it provides.Some employers expressed initial doubts as to whether the required volume of labor would be available when making their original decision, but most had overcome these doubts shortly after arrival. One reason why labor has continued to be available isthat HIE has used grant aid to direct companies to locations which have recently sufferedfrom (relatively) large scale job losses and where there is little alternative industry. Thishas resulted in low turnover of staff, a fact commented upon by several managers. A similarpoint was made by the managers of the new call centers recently established in the morewesterly parts of the region, where alternative work opportunities are limited.

Opinions differ as to whether the region will be able to sustain its growth in call centers.One call center—TSC—which has its base in the Highlands, for example, recentlyannounced that it was opening a new call center in the urbanized central belt of Scotland.The company envisages that this call center will eventually employ 1,000 people and sug-gests that there is an insufficiently large labor pool in the HIE region (outwith the tight labormarket of Inverness) to permit such large-scale expansion (Financial Times 2000). HIE itself,however, claims that there remain untapped labor resources in other parts of the region.

Subsidized Property. The situation regarding call center property in the HIE regionis straightforward. All the sites from which call centers operate have been custom built orbuilt ahead of demand by the appropriate part of the HIE network as part of a ‘uniquepackage of tailored assistance’ provided to new employers. All the call centers are on smallbusiness park type developments, owned by HIE, and all have room to expand. A Build-ing Grant is available for new premises and for adapting, improving or extending existingpremises. Rental rates are also low compared with many other parts of the UK and incertain circumstances a rent free period may be agreed. Furthermore, lease periods areflexible which is unusual in the context of the UK property market. The availability ofproperty at low rental rates was mentioned by several interviewees as a contributory factorin their decision to locate in the Highlands. Property in the HIE portfolio is also ‘cus-tomized to take full advantage of telecommunications’.

Contingent factors. There is one important contingent factor in the HIE experiencewhich needs drawing attention to; namely that several of the call centers have been estab-


lished by managers and entrepreneurs who were to some extent ‘championing’ their homeor adopted region. Commercial rationalism was, in these cases, accompanied by a socialconcern. So, for example, BT’s Thurso call center was established partly at the wish of itsthen Chief Executive, a Scot (it also was part of the deal for public subsidy of BT’s networkdevelopment); TSC was established by a local man who had retired from a multinationalorganization and wished to help create and sustain employment in his native region; thefirst Cap Gemini site (though a part of a multi-national concern) was established by anotherlocal returning to the region; finally, the new Stornaway call center and the proposed centerat Gairloch have been established by people with local connections.

Another factor evident in the Highlands case study, which undoubtedly helps to explainthe region’s success in attracting call center employment, is the high level and targetednature of the institutional support within the region. This ranges from HIE pro-activelyseeking out potential investors, though various forms of place marketing and through theprovision of subsidized sites, to the Local Enterprise Councils providing subsidized callcenter training.

Lessons from the Highlands ExperienceWhat lessons can we learn from this brief review of call center related development in

the Highlands and Islands of Scotland in terms of how such work can be promoted in ruralareas, and to what extent are these lessons generalizable to other rural areas?

First, it is clear that it is possible for remote, predominantly rural areas to attract callcenter employment given the right policy mix and the pro-active involvement of the localpublic agencies. After an initial phase of call centers locating only in the most populous partsof the region, around Inverness (population 40,000), activity began to be directed to areassuffering from industrial decline, mainly resulting from the loss of a single industry on whichthese areas had become over-dependent, and, latterly, to more remote areas. As can be seenfrom Table 1, call centers are now beginning to form a key economic activity in relativelysmall towns in rural areas. The Highlands can be regarded as one of the first rural regionsin Europe to benefit appreciably from the attraction of call center jobs, following on fromexamples in North America, such as maritime Canada, where the trend is more clearly estab-lished (Jarman et al. 1998; Buchanan, undated; Buchanan and Koch-Schulte 2000).

Second, it is evident that the provision of digital communications is a crucial elementin a policy to attract call centers to a rural region. Interviews with the call center man-agers (and other companies) make this clear. The advanced telecommunications infra-structure, and in particular the digitization of the network, was regarded as very important.One respondent suggested:

a digital exchange is essential if any data-oriented companies are going to locate in theregion, you can’t deal with data off the back of analogue. ... it’s the only way the area willdevelop (Call center manager).

Third, the Highlands case study suggests that such advanced provision of telecommu-nications infrastructure is unlikely to be provided in rural areas without public subsidy.


There is an apparent conflict here with the emerging European telecommunications regulatory regime, which is characterized by liberalization, is market-led, and has a very restricted universal service provision (USO) definition, which excludes advancedservices. In such a regime, competition is used to drive investment and service improve-ment. But as the Highlands example well illustrates, competition is unlikely to act in this way as a spur in low density, rural regions, due to the absence of competitors wishingto enter the market. Thus more than fifteen years after the commencement of liberaliza-tion in the UK, BT remained the de facto monopoly provider of fixed link services for the vast majority of people and businesses in the Highlands. Only in 1999 did an alterna-tive fixed link supplier emerge, and this company is targeting a very restricted customerbase. Alternative providers have also emerged in mobile communications, but mobiletelephony is not yet capable of hosting intensive data traffic. The infrastructure under-pinning these new fixed and mobile services providers was also subsidized by public money.

A fourth lesson is that advanced communications, by themselves, are unlikely to besufficient to attract and retain call center activities. Most of the call centers in the regionhave received financial incentives and grant aid in one form or another, as well as on-goingsupport in terms of consultancy and advice. In addition most of the call center premiseswere purpose-built from public funds through Highlands and Islands Enterprise and otherbodies. As HIE’s promotional material states:

All these [call center] developments and their expansion, have benefited from theenlightened approach by the Highlands and Islands Enterprise network to the provision ofmodern high-specification offices developed on an advance or bespoke basis (HIE, pro-motional brochure).

Fifth, the Highlands experience suggests that concentrations of reasonably educatedworkers in areas offering little alternative employment are preferred by call center opera-tors seeking to locate in rural regions. In consequence, only a limited number of places inthe Highlands and Islands have as yet benefited from call center investment. Call centershave located in the more urbanized areas, being centered mainly around the region’scapital. Inverness, or in towns that have lost major employers. Latterly, however, the pro-vision of advanced communications, together with subsidies, has drawn call centers to‘deeper’ rural areas, such as the Isle of Lewis (though it should be noted that Lewis boastsone of the highest proportion of university-educated people in the UK, due largely to‘lifestyle’ in-migration). The focus of call center investment to date being in the urbancenters and in towns suffering from the decline of existing industries parallels the Canadian experience (Jarman et al, 1998).

The sixth lesson from the Highlands case study is that both institutional and individ-ual ‘champions’ can play an important role in establishing a call center industry. It is likely,however, that these individuals will have had business experience and contact networksbeyond the region. This is hardly surprising given that call centers are customer contactcenters for largely urban-based customers; the call center model will then almost invari-ably be an ‘import’ into a rural area.


The Benefits and Limitations of Call Centers for Rural Development

It is clear from the foregoing that call centers can be attracted to, at least some, ruralregions which are disadvantaged by their remoteness, as firms seek to use the locationalmobility provided by ICTs to benefit from the supply of under-utilized labor. It is thoughalso clear that significant public resources are likely to need to be mobilized by rural areaswishing to attract or promote call centers. Now consider whether such use of public fundsis justified, in terms of the nature of the economic development benefits which call centersbring.

Benefits of call centers in rural regions. The evidence from the case study presentedabove suggests that call centers have the potential to create a range of benefits for lessfavored regions. First, and most obviously, they create employment. In the HIE region, rel-atively large numbers of jobs have been created over a comparatively short period of time.As most of the customers of the call centers identified live outside the HIE region, a highproportion of the new jobs can be seen as net new employment which will not displaceother local work.

Second, call centers bring new capital and technological investment to a region,notwithstanding that this investment will often require subsidy. It is unlikely that the Highlands and Islands could have generated development on the scale achieved throughindigenous growth, and neither is it apparent that other forms of inward investment couldhave been attracted during the period in question. Evidence from the Highlands also sug-gests that the extra telephone call traffic generated by call centers can help to pull throughadditional investment in the telecommunications infrastructure. In at least two cases thatwe have identified, new digital exchanges (beyond those provided as part of the originalHighlands and Islands Initiative) have been installed by the telecommunications operatorin order to meet the demands generated by in-coming call centers.

Third, call centers have the potential to bring new types of employment to rural areas.Traditionally the Highlands region has not had much in the way of export-oriented privatesector office employment. A survey of employees in call centers in the HIE region in 1996(Richardson and Gillespie 1996) suggested that only 2 per cent of workers felt that similartypes of jobs had previously existed in the area.

Fourth, and related to the two previous points, call center employment can stimulatethe up-dating of skill sets. There is, of course, a critical debate about the nature of skillsin call center work as well as of the nature of the work process itself (e.g., Bain and Taylor2000; Buchanan and Koch-Schulte 2000; Baldry et al. 1998; Belt et al. 2000). Call centersdo tend to be characterized by a relatively narrow range of functions, meaning that thevariety and depth of skills in these centers will be somewhat limited. However, otherresearch (Belt et al. 2000) into the nature of work in call centers suggests that the fol-lowing skills can be enhanced through call center work; key-board skills, customer serviceskills, communications skills, team working skills, the ability to pick up product knowl-edge quickly, and flexibility. It is perhaps the customer service skills which are most impor-tant. Nickson et al. (2000) point to the growing demand for what they term ‘aesthetic labor’


as a source of competitive advantage. Call centers may offer one avenue for regions notrenowned for their service culture to begin to reproduce such labor, albeit in perhaps atruncated form. It is not suggested that the skills listed above are particularly specialist orrare skills; nevertheless, they may be increasingly useful generic skills in a networked,informational economy, and may serve as entry-level skills for those not currently part ofthis economy. Furthermore, as call centers evolve, perhaps integrating Internet and otherfunctions with telephone calling activities, skills will also evolve, though such evolutionmay also result in a fall in the numbers employed and should not be taken for granted inall places (see below).

Fifth, a related point is that call centers can bring a new work culture to an area. Aswith the skills question, this is not, of course, unproblematic. Several authors have, quitecorrectly, pointed to the deficiencies in the work culture of call centers, such as newmethods of worker exploitation (for example, Fernie and Metcalfe 1997; Bain and Taylor2000). However, it may be that exposure to new management methods and organizationalforms, together with exposure to customers from other regions, can play a role in whatmight be described as the modernization of the work culture of rural regions.

Sixth, research suggests that many call centers have a commitment to training whichis well above that in some other areas of office employment, albeit that this training tendsto be of a rather narrow kind (Belt et al. 2000). Several of the firms interviewed in theHighlands had developed training programs and obtained external accreditation and hadgalvanized those responsible for training provision to enhance their offerings.

Finally, call centers tend to create work opportunities for women. The situation re-garding women’s careers, as opposed to jobs, may be less encouraging given the flat hierarchical structures and the limited number of activities undertaken in call centers inperipheral regions (see below), but opportunities for promotion to supervisory grade maybe greater for women in call centers than in more traditional parts of rural economies.Another group which may also benefit from the presence of call centers are the young.The provision of work for the young may help ameliorate the outflow of young people, aproblem that affects so many rural regions.

The limitations of call center investment for rural development. There are, however,also a number of problems or shortcomings associated with call center employment whichmay serve to limit the contribution it can make to regional or rural development. The firstand most significant of these concerns the relatively low quality of the employment created,in terms of both skills and levels of remuneration, with some arguing that call centers per-petuate a rural low wage economy (Buchanan, undated). The experience of the Highlandsof Scotland does suggests that such regions may be able to attract only a limited range ofcall center activities and that these will be at the lower end of the spectrum in terms ofskills, remuneration and so on. For example, the relatively limited presence of firms inhigher skilled areas, such as IT, must be a cause for concern. Also missing from the port-folio of call centers in the Highlands are those which serve markets beyond the UK andwhich may thus require linguistic skills.

This lack of higher order call center activities in the rural Scotland case may be gen-


eralizable to other rural areas, though there is some limited evidence from Ireland that atleast some rural areas are capable of attracting such activities if a sustained policy of decen-tralization is applied and if the required skills exist within, or can be attracted to, a ruralregion. The Irish Development Agency (IDA), with considerable success, has focusedmuch energy in attracting call centers which aim to serve pan-European markets, posi-tioning the country as the “Call Center of Europe”. Initially, the vast majority of thesecenters—79 per cent in the year 1996—located in or around the capital, Dublin. Further-more, over 90 per cent of technically-oriented, pan-European call centers were located ingreater-Dublin (Richardson 1999). Great efforts by the IDA to disperse investment awayfrom the capital, initially resulted in relatively few call centers locating in rural Irelandand those that did tended to be reservation-type activities (Richardson and Gillespie 2000b;see also Breathnach 2000). Latterly there is some evidence that this ‘regionalization’ policyis having some locational impact on call centers, with urban centers beyond Dublin, suchas Cork and smaller cities such as Kilkenny (population 19,000), attracting call centersand other mobile service investment, some of which require multi-lingual and other higherorder skills (ASPECT 2001).

Secondly, and related to the relatively low grade nature of rural call center work, suchcenters offer only a limited amount of career development potential for those that work inthem. Call centers almost invariably have a flat management structure and often have alimited range of support activities on-site. Promotion opportunities are limited therefore.At the lower levels this is compensated for by the rapid growth of the industry and by thehigh turnover of staff. So, for example, promotion from basic grade to supervisory levelmay well be more rapid than in other sectors (Belt et al. 2000). Promotion to managementgrade in the call center is, however, likely to be more difficult. This is partly because thereare few management positions, but also because call centers based in less favored regionsare likely to be dominated by inward investors. Managers are likely to be ‘parachuted’ inand to stay for a relatively limited period. Promotion to other parts of the organization willalso be limited or will require staff to move from the region raising questions regardingpublic investment in human development, skills training and so on.

A final concern regarding whether it is sensible to devote public subsidy to attractingor creating call center employment in rural areas is the likely sustainability or longevityof such employment. There appears to be considerable potential for growth in call centeremployment in Europe over the next few years, even though the rate of growth appears tobe slowing. As urban labor markets become over-heated, opportunities for rural areas toattract a greater share of that employment may increase. New call center technologiesdesigned for the SoHo (small office home office) market may encourage this, as could theforecast growth in smaller call centers.

There are, however, a number of reasons why call center work may not be sustainableon the scale which has recently emerged. These include:

• The more effective management of call center capacity as managers become more expe-rienced in managing what remains a very new work environment, and as technologyallows them to manage more effectively;


• The level of merger and acquisition activity in industries which have seen very rapidcall center growth, such as financial services and mobile telecommunications. This islikely to lead to a rationalization of call centers;

• The outsourcing of call center work to third party specialists. Again this may lead to arationalization of call centers;

• The ‘off-shoring’ of call center work from European countries to cheaper locationsabroad. This has already occurred in the U.S. (see, for example, Wilson 1995). Theprocess has been slower in Europe and a number of barriers have been identified whichmay make the off-shoring of call centers more problematic for firms than similar relo-cations of manufacturing activities or of back office activities which do not require real-time interaction with customers, particularly with final consumers (Richardson 1999).These include: technology–cost, regulatory, organizational and cultural (in both termsof conservatism of business culture and cultural attributes of potential workers) barri-ers. The technology–cost barriers have lessened over the past few years, however, andcall center industries are growing in countries such as India and Malaysia, with spe-cialist outsourcing companies targeting UK markets and other English-speaking markets(Coxon 2001). Such companies can employ graduate labor at rates reported to be abouta fifth of the lowest paid non-graduate labor in the UK markets (Financial Times 2002).Acculturation procedures are being put in place to familiarize workers with the popularculture of target markets, and staff are up-dated on UK TV soaps and news and weather(BBC Radio 4, 2002; Newcastle Journal 2002a). Major players in the UK financial serv-ices industry including HSBC, Zurich Financial Services and General Electric haveeither taken the decision to transfer call center work to India or have established pilotoperations there (Financial Times 2002; Newcastle Journal 2002b). Over time thesedevelopments could impact negatively on call center employment in general in advancedeconomies, but particularly on employment in those areas whose comparative advantageis essentially low cost and low turnover labor and various forms of public finance. The jury is still out, however, on whether large numbers of calls will eventually behandled from overseas (Massey 2001) and further empirical research is required in this area.

• Further developments in information and communications technologies, both in the call centers themselves and in the wider environment within which they operate.These include Interactive Voice Response (IVR) technologies and Internet-based service delivery channels, which are likely to reduce the need for human intervention,and hence, employment opportunities for call center agents. Call centers are beginningto evolve (at varying speeds) towards ‘web-enabled’, multi-media, multi-channel, customer ‘contact centers’ in industry parlance. These customer contact centers are designed to encourage self-service through email, web-sites, WAP phones and interactive TV (Morrell 2001). Again this could have a negative impact on employment,though past experience in the UK suggests that this change will be slow as many consumers are slow to migrate to new delivery channels and firms are required to continue to offer telephone in addition to new self-service channels in the short term.


These potential developments suggest that towns such as Thurso in the Highlands ofScotland, where over 8 percent of the employed population works in call centers, face thedanger of becoming over-reliant on a single industry which may begin to contract over thenext few years.

Summary and ConclusionsGiven the right policy mix and sufficient institutional and individual capacity, rural

areas can successfully attract call centers, which currently represent one of the fastestgrowing areas of employment generation in Europe. A crucial factor in the attraction ofthese centers, as well as other establishments which are heavily dependent on telecom-munications, is the ability to supply advanced telecommunications services. However,under the present regulatory regime in Europe, which is increasingly market-led and has a very restricted definition of universal service provision, rural areas are unlikely toattract sufficient private sector investment in telecommunications to enable them to attracttelecommunications-intensive users such as call centers. Public subsidy to telecommuni-cations operators is thus likely to be a pre-requisite for implementing call center attrac-tion strategies in rural regions, though targeting such strategies on the largest towns insuch regions will maximize the likelihood of private telecommunications investment takingplace. Although crucial, however, telecommunications investment by itself is unlikely to prove sufficient to attract call centers to most rural areas, since these areas will be incompetition with urban centers within their own countries, and, increasingly, overseas. Afurther set of policy interventions, therefore, are likely to be required. These will includethe provision of subsidized property and other forms of support such as training.

The successful attraction of call centers to a rural area is likely to result in a numberof benefits, notably increased employment opportunities, new forms of economic activity,the introduction of new skills and competencies, and capital formation in real estate andinfrastructure. There are, however, also a number of limitations associated with call centeremployment, including the relatively low quality of much of the work, limited career devel-opment opportunities, and not least of all the potentially limited life-span of the call center‘industry’ as a result of further technological advances.

In spite of these drawbacks, it would be unreasonable to suggest that those rural areaswhich are capable of attracting call centers should not seek to do so. Many of these areasface decline in traditional industries and resource-based activities and recent research suggests only limited success from policies aimed at promoting the indigenous small andmedium enterprise sector through the use of new technologies (e.g., Illerby et al. 1995;Grimes 2000; Mitchell and Clark 1999; Richards and Bryden 2000). The attraction ofmobile call centers represents, therefore, a viable—if time-limited and partial—route toeconomic development for at least some rural areas. Certainly for many such rural areas,call centers may offer one of relatively few realistic opportunities for participation in thenetwork economy.


NOTES1. Objective 1 areas are defined by the EC as regions whose development is lagging behind, and

which are afforded priority for assistance under the Community’s Structural Funds. Much of Spain,

southern Italy, Portugal, Greece, and Ireland are so designated. The key factor in Objective 1 des-

ignation is that a region’s GDP should be below 75% of the EU average.

2. Confirmation of the over-representation of call centers in the region, using different sources and

a comparison of number of centers rather than employment, is provided by Bristow et al. (2000);

in their analysis, the Highlands records a location quotient of 1.4, making it the highest ranked

predominantly rural region in Britain in terms of the relative incidence of call centers. Within the

Scottish context, the Highlands have a higher call center location quotient than the Tayside or

Grampian regions, though the urbanized central lowlands of Scotland (Lothian, Strathclyde,

Central Scotland, and Fife) all have location quotients above 2.0.

3. ISDN (Integrated Systems Digital Network) refers to a set of standards allowing integrated trans-

mission of voice, data, and still pictures in digital form.ISDN was regarded as an advanced system

at the time it was introduced to the Highlands, and the region was the first rural area in the UK to

introduce such a system.

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the call of the wild: call centers and economic development in rural areas

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