Has UK Plc’s Indian summer of outsourcing finally begun to cool off? As more major high street names turn their backs on their offshore operations, is this a trend or – as at least one company insists – simply a minor enhancement of a wider strategy?

The latter argument is certainly the one that insurance firm Norwich Union (NU) believes. NU has brought call centre jobs back to the UK after admitting to problems over cultural differences between customers and staff in India – but it insists that it remains committed to offshoring.

The life and general insurer, owned by Aviva, said 150 jobs had been shipped back to the UK since 2004, including call centre operations for household insurance claims. But now first-call claims for household insurance will be handled in the UK and the group said it was also looking at bringing entire processes back to the UK.

The cultural issues appear to be pretty basic. For example, customers calling to make a claim for loss or damage were having to explain basic concepts to Indian call centre staff due to cultural differences, such as how a broken immersion heater could cause flood damage.

"In terms of our customers explaining what the problem is, call handlers in the UK could more readily identify with, for example, an immersion heating issue," said a spokeswoman. "Consumers were having to take longer to explain household claims, whereas with a car or a car accident, they are pretty much the same [in both countries] in terms of the parts and damage."

Only recently, Aviva said it would make 4,000 UK staff redundant, with 1,000 of those jobs relocated to India. By the end of this year it was aiming to have transferred 7,800 jobs to Delhi, Pune and Bangalore, or to its call centre in Sri Lanka.

But the company denied it was reversing its 2003 plan to offshore many call centre and back office operations to India, saying it was on track to offshore those roles to India by the end of the year. "There are 150 roles are coming back to the UK," Aviva’s spokeswoman said. "It is a very small number out of the 7,800 roles we will have out there, so you can hardly call it a u-turn."

Nonetheless the decision will clearly be seen as an extraordinary admission of failure for one of the largest outsourcers in the financial services sector, and a blow for Patrick Snowball, executive chairman of NU and a vocal supporter of overseas call centres.

But perhaps it’s hardly surprising. Last year a report carried out for Aviva found that 51 percent of customers were "appalled" by call centres abroad, with India consistently singled out for criticism. Respondents said staff in the subcontinent "lacked knowledge of Britain". A further 87 percent said they believed call centres were not good for the UK economy.

Research suggests that few British customers are happy with overseas call centres. Last year, Powergen, one of the UK's biggest electricity suppliers, said it was closing its Indian call centres and reverting to UK-based advisers. The move followed a number of complaints from customers, as well as a decision that it would be easier to manage and train staff in the UK.

Powergen started using Indian call centres almost five years ago, but from 2007 all calls from this country will be answered at the company's five UK call centres in Bedford, Bolton, Leicester, Nottingham and Rayleigh in Essex.

Some calls and letter writing will continue to be made from India, but this too is scheduled to stop. Nick Horler, managing director of Powergen, said: "Offshore call centres may have their place for certain industries. However, we believe that we can best achieve industry-leading customer service by operating solely in the UK.

"When customers contact us they need to be confident that their query will be fully resolved quickly. Although the cost of overseas outsourcing can be low, we're simply not prepared to achieve savings at the risk or expense of customer satisfaction."

Other firms are taking a similar tack. Insurance tycoon Peter Wood, best known as founder of Direct Line, has moved the call centres of his esure company back from India, blaming poor service and cultural issues.

"One customer said 'I've got a hatchback' and the guy in India said 'I'm terribly sorry, I hope you get better soon'. The customers do not like it and we got more turnover than we thought we would," Wood commented.

"Customers are everything and if they don't like it, I'll change to what they want. Back office processing in India is fine - the employees are very well educated. If you start to damage your reputation, forget whatever trivial money you're saving."

The Newcastle Building Society is also shutting down its back office processing unit in Mumbai, India, after finding that UK staff were more efficient, accurate and cheaper. The building society set up an Indian pilot two years ago, but the society has concluded that the Indian unit did not offer the expected flexibility or cost savings. Tyneside workers also outperformed their Indian counterparts in terms of efficiency, accuracy and costs, and the company will now increase the number of staff it employs at its operations in the northeast of England.

But it’s too early to write off the Indian call centre. Phone giant 3 has confirmed plans to move around 120 call centre jobs from Scotland to India. The company is axing nearly a quarter of its contact centre staff in Glasgow over the next three months.

The move followed a review of the company's call centre services, but 3 added it was investing in retail outlets so customers could have more face-to-face contact. By the end of 2007, 3 will have opened 27 stores in Scotland, creating 190 jobs.

Originally published in Outsource Issue 11, Spring 2007 p6