Reading beyond stereotypes: considering Ontario, Canada, for outsourcing and call centers.

If you're honest, you'll admit when Canada becomes the topic of conversation the initial thoughts that come to mind may include the following: cheap prescription drugs; horse-mounted police; the dog-eat-dog sporting world of curling; SARS; mayonnaise on everything; Hollywood's production stand-in for every major U.S. location; and Bryan Adams.

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Well, the narrow-minded and industry-uneducated in the call center/CRM field should entertain this: If you find that your company's competition is offering more advantageous call center service than yours, it may be that you should blame Canada, as it were. As Canada's most populous province, at 12.2 million people, Ontario is offering significant call center and outsourcing advantages from which numerous companies are benefiting.

The province is Canada's corporate and banking headquarters. Home to more than 7,000 call centers--half the call centers in all of Canada--employment in Ontario expanded by 108,000 jobs in 2004. Ontario's unemployment lies at 6.5 percent, as of September 2004.

Municipalities/Population

There are six main regions in the province: Northeast, Northwest, Greater Toronto Area, Central, Southwest and Eastern Ontario. Within each region there are a number of municipalities of varying sizes suitable for call center operations. The following are the respective populations for some of the larger communities in these areas.

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Northeast
Sault Ste. Marie                 74,000+
Sudbury                          85,000+
North Bay                        50,000+
Timmins                          43,000+

Northwest
Thunder Bay                     100,000+

Greater Toronto Area
Toronto                       2,400,000+
York Region                     729,000+
Durham Region                   506,000+
Mississauga                     612,000+
Burlington                      150,000+
Oakville                        144,000+
Oshawa                          139,000+

Central Ontario
Kitchener/Waterloo/Cambridge    386,000+
Guelph                          106,000+
Barrie                          103,000+

Southwest
Hamilton                        490,000+
London                          336,000+
Windsor-Essex                   208,000+
St. Catharine's                 129,000+
Brantford                        86,000+
Sarnia                           79,000+
Niagara Region                   78,000+

Eastern Ontario
Greater Ottawa Area             774,000+
Kingston                        114,000+
Peterborough                     71,000+
Cornwall                         45,000+

Nearshore Advantage

As our northern neighbors, Ontario offers U.S. firms some key nearshore advantages. Employees in the province are nearby, making direct collaboration and face-to-face meetings easy. Ontario is located in the epicenter of the North American marketplace, and it operates on Eastern Standard Time. Clients or customers calling from anywhere in North America will find a three-hour time difference maximum. Business centers such as Toronto, Ottawa and London are about a two-hour flight from major U.S. centers; Detroit, Chicago, New York and Boston, for starters.

Ontario has three international airports: Toronto's Pearson International; Ottawa's Macdonald-Cartier; and Hamilton's John C. Munro. Pearson, the largest, is serviced by dozens of airlines that provide same-day service to 43 U.S. cities and 42 cities abroad. Ontario's extensive highway network is linked to U.S. routes at 10 commercial border crossings and railway lines to meet the U.S. at five commercial crossings; because of the Free and Secure Trade Program, processing at the border can be instantaneous.

Labor Force/Workforce Data

The absenteeism rate of Ontario's call center workforce is three percent. The skills and talents of its employees are at the heart of the outsourcing industry's growth. Ontario workers are dedicated; staff turnover in call centers is low--circa 20 percent average (inbound, out-bound and blended). The 2001/2002 Global Competitiveness Report ranked Canada first in the world at developing knowledge workers.

Education

Ontario's 6.7 million laborious workers are well educated. Fifty-nine percent of its workforce (aged 25+ years) has completed their post-secondary education. That's a higher percentage than any industrialized country, according to the Paris-based Organization for Economic Co-operation and Development (OECD). Its network of 18 universities, 25 colleges of applied arts and technology (community colleges) and more than 450 registered private career colleges produces more than 29,000 university graduates each year in mathematics, engineering and science; all of which have liaison officers to assist businesses in finding staff from among their students, according to the Ontario Investment Service. Additionally, 16 community colleges across the province offer accredited and specialized call center operations training programs. The output of graduates from these schools with specialized training programs is steadily increasing in order to meet the growing demand.

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Language

Contradictory to popular U.S. belief, not all Canadians speak like Bob and Doug McKenzie of "Strange Brew" fame. On the contrary, Ontario's population is both culturally and linguistically diverse. English is the primary language in Ontario, and the accent in Ontario is considered neutral, which makes the spoken English there (and by customer service representatives) easy to understand around the world.

Further, 20 percent of Ontario's workforce (and 29.4 percent of Ontario's population) speaks at least one language in addition to English, including French, Spanish, Portuguese, Chinese, Mandarin, Cantonese, Punjabi, Italian, German, Polish and Ukrainian, according to the Ontario Ministry of Economic Development & Trade. More than 100 languages are spoken throughout the province.

Wages

Regarding Ontario's employment policies, minimum wage levels are established in the province under the Employment Standards Act. The legislated minimum wage rates, according to the Ontario Ministry of Labour as of February 2005, are as follows in U.S. dollars:

* Full-time staff: $5.43 per hour

* Students: $5.09 per hour

Tax/Incentives

Canadian tax incentives and credit programs for research and development (R & D) are among the most generous in the world, according to KPMG's Competitive Alternatives G-7 2004 Edition. The after-tax cost of $100 in R & D expenditures can be reduced to less than $42; R & D deductions can be carried forward indefinitely; and costs qualifying for R & D tax credits include wages and salaries, capital equipment, materials, overhead and consulting fees. [Source: Ontario Ministry of Economic Development & Trade]

The Conference Board of Canada's 2004 Connectedness Index found that, of the 10 leading Organization for Economic Co-operation and Development countries studied, Canada's costs are the lowest overall. As well, KPMG's 2004 report found that, of the 17 industry operations in 11 leading industrialized countries spanning a period of eight months, Canada is the overall cost leader (followed closely by Australia), with business costs approximately eight percent to nine percent below those in the U.S.

To assist call center outsourcing to Ontario, the government eliminated the Ontario sales tax for toll-free business telephone service. Additionally, the government has frozen workers' safety insurance premiums. Many businesses are exempt, including financial services; the rates for non-exempt call centers are three-tenths of a percent (.30 percent) of wages to a maximum salary of $42,000 per year.

Telecommunications Infrastructure

In Ontario, local and long-distance lines are 100 percent digitally switched, and long-distance trunk lines are 100 percent fiber optic. Its advanced telecommunications infrastructure designs, manufactures and provides seamless voice, video and data telecommunications, as well as the development of digital microwave transmission, satellite communications services and data distribution networks. Furthermore, Ontario has ISDN and ATM technology; fiber ring technology; dynamic routing; and high-capacity Internet access.

The telecom infrastructure links with major U.S. carriers, supporting the smooth cross-border operation of Ontario's outsourcing service providers. Ontario's four major carriers--Bell Canada, Sprint Canada, Allstream Canada and TELUS Communications--offer "one-stop-shopping" for companies looking to set up call centers, according to the province's Ministry of Economic Development & Trade. The business telecommunications costs--local, long-distance, data communications and wireless services--are 33 percent to 50 percent lower in Ontario than in U.S. centers. Thus, the telecom infrastructure is ideal in terms of service creation, reliability and "self-healing" network recovery.

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Call Centers

The Ontario Investment Service notes that there are already numerous call centers throughout Ontario, including those opened by some of the following prominent companies:

* American Express;

* British Airways;

* Citibank;

* Compaq;

* Convergys;

* IBM;

* Microsoft;

* Oracle;

* SITEL; and

* TeleTech Holdings.

Prior to moving a portion of, or all of, your business to a new location, all considered sites must be researched and scouted to confirm that the location finally decided upon is to the greatest benefit for your business. Ontario, as well as the rest of Canada, offers more than the bogus U.S. supposition--a false truism of curling Mounties who listen to bad adult contemporary pop music. Ontario's multilateral cultural, geographic and investment advantages make the province one option that deserves to be considered and further investigated for outsourcing and call centers.

Average Ontario pay rates are as follows:
*Figures are in U.S. dollars, at Canadian $1.00=U.S. $0.80

Inbound customer service representatives       $6.50-$11/hour
Inbound service representatives                $6.50-$10/hour
Technical help desk agents                     $7.50-$12/hour
Administrative staff                      $15,300-$21,000/year
Team leaders/supervisors                  $20,000-$27,000/year
Center managers                           $38,000-$60,000/year

[Source: Ontario Ministry of Economic Development and Trade]

COMBINED CORPORATE INCOME TAX RATES, 2003

Fed. + State/Prov. Tax Rates, %

Pennsylvania  41.5
Minnesota     41.4
Indiana       40.5
Ohio          40.5
New York      39.9
Illinois      39.7
Michigan      39.3
Ontario       36.1

Source: Ontario Ministry of Finance, 2003

Note: Table made from bar graph.

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By David R. Butcher

Assistant Editor, Customer Interaction Solutions