And then there were five. In late summer 2004, Sykes Enterprises (SYKE) informed city and state officials that it planed to close both its Marianna and Palatka, Florida, call centers by October 2. The two Florida closings bought to nine the number of U.S. call centers the Tempa-based company would close in 2004. By the end of the year, just five of the company's U.S.-based centers would remain: Bismarck, North Dakota; Wise, Verginia; Morganfield, Kentucky; Ponca city, Oklahoma; and Sterling, Colorado. Like many of its competitors, Sykes was shifting its operations to lower-wage countries in an attempt to remain competitive and to meet client demands for reduced costs. Palatka and Marianna would face challenges not unlike those that still plagued Milton-Freewater, Oregon.
Like many similar small towns desperate to add jobs and maintain both population and tax bases, Milton-Freewater, Oregon, was willing to take significant risks to survive. In 1998, town officials signed a multimillion-dollar agreement with Sykes Enterprises in which the town promised land, roads, utilities, and tax abatement. Althought the company refused to guarantee a minimum number of jobs, minimum length of stay, or salary levels, Minton-Freewater negotiated a $2.2 million loan with the Baker-Boyer National Bank of Walla Walla, Washington, to meet the company's cash incentive requirements. In early March 2004, Sykes announced that it would close the Milton-Freewater center and lay of its remaining workers by May 2.
In her March 9, 2004, letter to the company, Milton-Freewater city Manager Delphine Palmer asked the Sykes donate its 42,000-square-foot building and land parcel back to the city. She noted: You asked us to dig deep into our pockets to provide Sykes with generous incentives to entice you. I am asking you personally to (help) our small rural American city to cope with this major loss.
Sykes had previously refused a similar request from Eveleth, Minnesota. In that case, CEO John Sykes said it was not his building to give away and noted that he was obligated to give shareholders the highest possible return on their investment, including assets obtained through legitimate government contracts. Sykes sold the Eveleth center for $2.3 million.
This case was prepared by Professor Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright ©2005 by Professor Maryanne M. Rouse. This case cannot be reproduced in any form without the written permission of the copyright holder, Maryanne M. Rouse. Reprint permission is solely granted to the publisher, Prentice Hall, for the books, Strategic Management and Business Policy–10th and 11th Editions (and the International version of this book) and Cases in Strategic Management and Business Policy–10th Edition by the copyright holder, Maryanne M. Rouse. This case was edited for SMBP and Cases in SMBP–10th Edition. The copyright holder, is solely responsible for case content. Any other publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Maryanne M. Rouse has granted an additional written reprint permission.
In a surprise announcement in January 2005, the company disclosed that it would lay off staff and close yet another call center—this time in Bangalore. Rising costs and competition for skilled workers in that southern Indian city, together with what the company termed inadequate rates of return, led Sykes to hand off a number of remaining contracts to other company call centers in the Asia/Pacific region—most likely China or the Philippines—where Sykes had had operations since 1997.
The India layoffs did not suggest that Sykes was retreating from its aggressive relocation strategy. More likely, the move reflected a growing disillusionment with the economics of operating in large Indian cities. Perceived advantages of the Philippines included lower attrition rates, closer cultural ties to the United States, and less noticeable accents. Filipino workers were also thought to be more service-minded than their Indian counterparts.
Company Overview
Sykes Enterprises provided outsourced customer management solutions and services to Fortune 1000 companies worldwide via two geographic segments: the Americas (U.S., Canada, Latin America, India, and the Asia/Pacific Rim area) and EMEA (Europe, the Middle East, and Africa). For the six months ended June 30, 2004, the Americas segment contributed between 60% and 61% of consolidated revenues, with the balance coming from EMEA.
Operating Segments
Customer support outsourcing accounted for 91% of consolidated revenue for the company’s 2002 fiscal year. Sykes’ core business, this segment comprised primarily inbound technical support services (installation support, “up and running” support, troubleshooting, and usage support), customer support (order status, account maintenance, service dispatch, and customer relations), marketing support (inbound and outbound sales, lead generation, up-sell and cross-sell programs), and speech solutions. The company’s customer support contacts included product information requests, description of product features, activation of customer accounts, resolution of complaints, and handling of billing inquiries. Sykes delivered customer support services via a number of communications channels, comprising telephone, e-mail, web, and chat.
At the close of 2002, Sykes operated 15 stand-alone customer support centers in the United States; 3 centers in Canada; 15 in Europe, the Middle East, and South Africa; and 7 offshore in the Peoples’ Republic of China, the Philippines, India, and Costa Rica. The company’s strategy in the United States had been to locate centers in smaller and rural communities with lower labor (wage plus turnover) and infrastructure costs. A weak economy, pricing pressures, and the need to reduce costs had led to the company’s gradual relocation from rural America to more cost-effective locations overseas. Communities that had met all the company’s requirements (cash and land grants, site preparation, and tax abatement)—including Ada, Oklahoma; Eveleth, Minnesota; Hazard, Kentucky; Pikeville, Kentucky; Bismarck, North Dakota; Greeley, Colorado; Klamath Falls, Oregon; Milton-Freeman, Oregon; and Scottsbluff, Nebraska—were stunned and angry at the closures, which many regarded as a breach of trust.
Fulfillment and enterprise support services accounted for approximately 11% of the company’s revenue for fiscal 2002. Fully integrated with its customer support services in Europe, fulfillment services provided multilingual sales, order processing via the Internet and telephone, inventory control, kitting and assembly, product delivery, and product returns handling, multi-currency payment processing, and financial services, as well as vendor management and warehousing. In the United States, Sykes provided a range of enterprise support services for client internal support operations, including technical staffing, IT services, IT help desk services, and corporate help desk services.
แล้ว มี 5 ในช่วงปลายฤดูร้อนปี 2004, Sykes วิสาหกิจ (SYKE) ทราบเจ้าหน้าที่ของรัฐและการเมืองที่ มัน planed ปิดทั้งรับและ Palatka ฟลอริด้า ศูนย์การโทร โดย 2 ตุลาคม ปิดที่ฟลอริด้าสองซื้อกับเก้าของสหรัฐอเมริกาศูนย์โทรตาม Tempa บริษัทจะปิดในปี 2004 โดยสิ้นปี ห้าศูนย์สหรัฐอเมริกาของบริษัทจะยังคงอยู่: บิสมาร์ค นอร์ทดาโคตา Wise, Verginia Morganfield เคนตั๊กกี้ Ponca ซิตี้ โอคลาโฮมา และสเตอร์ลิง โคโลราโด เช่นหลายคู่แข่ง Sykes ถูกขยับการดำเนินงานค่าจ้างต่ำกว่าประเทศในความพยายาม เพื่อแข่งขัน และ เพื่อตอบสนองความต้องการลูกค้าการลดต้นทุน Palatka และรับที่จะเผชิญความท้าทายไม่ต่างจากที่ยังคง เลือกมิ Freewater ออริกอนเหมือนมากเหมือนเมืองหมดหวังที่จะเพิ่มงาน และรักษาประชากรและฐานภาษี มิ Freewater โอเรกอน ถูกยินดีรับความเสี่ยงที่สำคัญเพื่อความอยู่รอด ในปี 1998 เมืองเจ้าหน้าที่ลงนามข้อตกลงดอลลาร์ multimillion กับวิสาหกิจ Sykes ซึ่งเมืองสัญญาที่ดิน ถนน สาธารณูปโภค และลดหย่อนภาษี Althought บริษัทปฏิเสธการรับประกันจำนวนต่ำสุดของงาน ความยาวต่ำสุดของการพักผ่อน หรือระดับเงินเดือน Minton Freewater เจรจาเงินกู้ $2.2 ล้านมีเบเกอร์ Boyer แห่งชาติธนาคาร Walla Walla วอชิงตัน การจูงใจความต้องการเงินสดของบริษัท ในช่วงต้นเดือน 2004 มีนาคม Sykes ประกาศว่า จะปิดตัวมิ Freewater และวางของแรงงานที่เหลืออยู่ โดย 2 พฤษภาคมIn her March 9, 2004, letter to the company, Milton-Freewater city Manager Delphine Palmer asked the Sykes donate its 42,000-square-foot building and land parcel back to the city. She noted: You asked us to dig deep into our pockets to provide Sykes with generous incentives to entice you. I am asking you personally to (help) our small rural American city to cope with this major loss.Sykes had previously refused a similar request from Eveleth, Minnesota. In that case, CEO John Sykes said it was not his building to give away and noted that he was obligated to give shareholders the highest possible return on their investment, including assets obtained through legitimate government contracts. Sykes sold the Eveleth center for $2.3 million.This case was prepared by Professor Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright ©2005 by Professor Maryanne M. Rouse. This case cannot be reproduced in any form without the written permission of the copyright holder, Maryanne M. Rouse. Reprint permission is solely granted to the publisher, Prentice Hall, for the books, Strategic Management and Business Policy–10th and 11th Editions (and the International version of this book) and Cases in Strategic Management and Business Policy–10th Edition by the copyright holder, Maryanne M. Rouse. This case was edited for SMBP and Cases in SMBP–10th Edition. The copyright holder, is solely responsible for case content. Any other publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Maryanne M. Rouse has granted an additional written reprint permission.In a surprise announcement in January 2005, the company disclosed that it would lay off staff and close yet another call center—this time in Bangalore. Rising costs and competition for skilled workers in that southern Indian city, together with what the company termed inadequate rates of return, led Sykes to hand off a number of remaining contracts to other company call centers in the Asia/Pacific region—most likely China or the Philippines—where Sykes had had operations since 1997.The India layoffs did not suggest that Sykes was retreating from its aggressive relocation strategy. More likely, the move reflected a growing disillusionment with the economics of operating in large Indian cities. Perceived advantages of the Philippines included lower attrition rates, closer cultural ties to the United States, and less noticeable accents. Filipino workers were also thought to be more service-minded than their Indian counterparts.Company OverviewSykes Enterprises provided outsourced customer management solutions and services to Fortune 1000 companies worldwide via two geographic segments: the Americas (U.S., Canada, Latin America, India, and the Asia/Pacific Rim area) and EMEA (Europe, the Middle East, and Africa). For the six months ended June 30, 2004, the Americas segment contributed between 60% and 61% of consolidated revenues, with the balance coming from EMEA.Operating SegmentsCustomer support outsourcing accounted for 91% of consolidated revenue for the company’s 2002 fiscal year. Sykes’ core business, this segment comprised primarily inbound technical support services (installation support, “up and running” support, troubleshooting, and usage support), customer support (order status, account maintenance, service dispatch, and customer relations), marketing support (inbound and outbound sales, lead generation, up-sell and cross-sell programs), and speech solutions. The company’s customer support contacts included product information requests, description of product features, activation of customer accounts, resolution of complaints, and handling of billing inquiries. Sykes delivered customer support services via a number of communications channels, comprising telephone, e-mail, web, and chat.At the close of 2002, Sykes operated 15 stand-alone customer support centers in the United States; 3 centers in Canada; 15 in Europe, the Middle East, and South Africa; and 7 offshore in the Peoples’ Republic of China, the Philippines, India, and Costa Rica. The company’s strategy in the United States had been to locate centers in smaller and rural communities with lower labor (wage plus turnover) and infrastructure costs. A weak economy, pricing pressures, and the need to reduce costs had led to the company’s gradual relocation from rural America to more cost-effective locations overseas. Communities that had met all the company’s requirements (cash and land grants, site preparation, and tax abatement)—including Ada, Oklahoma; Eveleth, Minnesota; Hazard, Kentucky; Pikeville, Kentucky; Bismarck, North Dakota; Greeley, Colorado; Klamath Falls, Oregon; Milton-Freeman, Oregon; and Scottsbluff, Nebraska—were stunned and angry at the closures, which many regarded as a breach of trust.Fulfillment and enterprise support services accounted for approximately 11% of the company’s revenue for fiscal 2002. Fully integrated with its customer support services in Europe, fulfillment services provided multilingual sales, order processing via the Internet and telephone, inventory control, kitting and assembly, product delivery, and product returns handling, multi-currency payment processing, and financial services, as well as vendor management and warehousing. In the United States, Sykes provided a range of enterprise support services for client internal support operations, including technical staffing, IT services, IT help desk services, and corporate help desk services.
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