Call center outsourcing face-off

The case for outsourcing

The case against outsourcing

Can I make a case for outsourcing? Yes, absolutely. In today's "flat," highly competitive world, companies have to consider options that could help them save costs, potentially drive more revenue and, yes, even deliver better service. In over 13 years of consulting, I have had many clients who outsourced very successfully. Some of these companies outsourced down the road, some on the other side of the country. Some outsourced across the border, while others outsourced across the ocean. At this moment in 2006, I have more clients than ever outsourcing or preparing to outsource key business functions. Outsourcing is a "must consider" for today's smart, strategic thinking companies. You have to look at when and why to use it, and carefully approach it so you do it right. But I can definitely make a case for outsourcing.

When to outsource
Outsourcing comes in many different shapes and sizes. So when you consider outsourcing and its fit for your business, you need to consider many options. The list below highlights outsourcing's variety of scale and scope as it addresses a wide range of business challenges and opportunities. Each scenario is a positive case for outsourcing.

Outsource your entire center
The first option to consider is to outsource the entire call center because it is not core to the business. While this might sound like an extreme option, I think it is a good place to start. Not every business is all about "service," and not every company has service or sales as a core competency. If you have read The Discipline of Market Leaders (Treacy and Wiersma), you know the arguments for figuring out how your company will differentiate and focusing on that. Some companies are going to focus their resources, funds and time on product development, marketing or other strengths. The call center may be a required delivery or service channel, but not one they can or should focus on. These types of companies will find an outsourcing partner that completes them. The outsourcer may run the center under the same roof as the company or in their own facility. But they are in charge of customer interaction.

Outsource specialized functions, or routine/common functions
A variation on the total outsourcing scenario is to outsource specialized functions that are required, but that the in-house center doesn't have the right staff, processes or technology to handle. Sales and collections are two excellent examples where contracting with an outsourcer can be a more efficient and effective way to handle specialized functions than an in-house center.

In some cases, an outsourcer is the right answer because they routinely handle the types of transactions required. These may be relatively straightforward transactions, such as orders, or more complex but common transactions such as help desk support. An outsourcer handling these contacts for many companies can deliver them better and at a lower cost than many companies can internally, especially if the needs are small.

Outsource for peaks, extended hours, and business continuity
Another outsourcing sweet spot is to deliver flexibility, agility and accessibility -- an area where all too many call centers fall short. For example, I have seen companies that operate convenient hours for their staff, but certainly not for their customers. Or companies with monthly peak cycles, such as mortgage servicing, or seasonal peak cycles, such as retail, that struggle to staff up to handle customer needs during peaks. Companies that for one reason or another can't staff in house to meet demands are a great fit for using outsourcing to extend their accessibility and provide more consistent service. And today's technology can enable the outsourcer and in-house center to run as part of one virtual operation. Further, with the emphasis on disaster recovery and business continuity, those same outsourcing partners can be a critical source of coverage in the event of service-disrupting events, especially for single-site contact centers.

Outsource to manage costs
Overseas outsourcing has been a huge hit because of cost control. While it should not be the only consideration in outsourcing, an outsourcer with lower labor costs -- whether overseas, operating out of home offices, using government-subsidized disabled workers, operating in a lower cost part of the US, across the border or even in a prison -- can deliver the needed services at a reduced cost. Of course labor isn't the only cost, so the total cost of outsourcing must be considered.

Ensuring success
For those that buy the argument for outsourcing, it is important to pursue it carefully and thoroughly. Here are some important keys to success:

1. Start with a strategy. Define the business goals, the type of calls to outsource and the type of outsourcer to seek. Define the key drivers, such as cultural alignment, and match with your customer demographics. Strategy should include considering what form the outsourcing will take -- U.S.-based, managed in-house, near shore, offshore, etc.
2. Have good processes first. You can't outsource bad or undefined processes. Make sure you have a solid foundation so your outsourcer can succeed.
3. Provide the right tools. Depending on the contact types you are outsourcing, you may need to provide knowledge management (KM), customer relationship management (CRM), core business applications access or, most importantly, good integration with your systems. Clearly define what you can provide to the outsourcer, and what you need them to provide. And keep in mind the value they might bring in delivering better technology capabilities, faster.
4. Select your partner carefully. I used the word partner, not vendor, intentionally. You must view the outsourcer as a strategic partner in your success. Take the time to pick the right partner, conducting thorough due diligence. Address all the anticipated concerns (security, quality, cost, etc.). Speed can't be your biggest driver in getting started. And if for some reason the relationship doesn't work, be prepared to make a change.
5. Write appropriate service-level agreements (SLAs) in your contract. Ensure that the outsourcer is accountable for their performance, through targets and incentives (or penalties).
6. Plan for ongoing, involved, daily management of the partner. An outsourcing arrangement is not something you contract for, turn on and ignore. It requires time to set up effectively and ongoing performance monitoring, evaluation and optimization. If you are going to get the results you expect, and make the outsourcer a transparent part of your organization to your customers, you need to invest time and energy in helping them succeed initially and afterwards.

You can't ignore the outsourcing opportunity
I'm going to close with a great example of a perfect outsourcing fit. An insurance company handles its insured customer calls in-house; these are high-value customer interactions that are key to the business. However, they outsource provider calls overseas to save costs and ensure greater availability of in-house resources for customers. Insurance companies often route provider calls to self-service. When a provider's office needs to talk to someone in this outsourced scenario, their calls are handled by a lower cost but highly qualified, well-trained resource. Further, many providers outsource the calls they must make to the insurance companies. You have to smile to learn that in many cases an overseas outsourced resource calling the U.S. is routed to another overseas outsourced resource, possibly just down the road!

This scenario shows effective sourcing strategy, effective management and a win-win for the company and its different customers. If that's not an argument for outsourcing, I don't know what is.

Lori is a recognized industry leader in contact center strategy, technology, and operations. She has 19 years of experience in the contact center industry, 13 of them as a consultant. She shares her knowledge and experience through speaking engagements, articles, a two-day call center technology course, and her book, Call Center Technology Demystified (Call Center Press).

Staying in touch with customers is an expensive business, and despite all efforts to persuade them otherwise, customers really do like to speak to a person, not to a machine or a Web page. For many companies, this means maintaining a contact center -- a call center that supports multiple communication channel choices. Because this is expensive, many companies look to save costs by off-loading their call center to an outsourcing provider.

Is this a good idea? In a word: No. Your customers are your No. 1 asset -- upset them, give them bad service or simply frustrate them and they will tend to spend less money with you, or worse -- they'll leave. The outsourcer might be a specialist at running a contact center, but how much can they know about your company, your policies, your culture and the way you want to treat your customers? How can they know which customers are special and need exceptional service, or the situations in which a lesser or automated service might suffice? All in all, going to an outsourcer might seem like a cheaper option, but how many will admit to the hidden costs and risks?

The risks start on day one. As soon as you hand over responsibility for handling your customer calls to an outside third party, you start losing touch with them. And just one call can damage the whole relationship, sometimes beyond repair. If the outsourcer's agents aren't properly briefed, don't follow the right process, don't have access to the right information, say the wrong thing, can't be understood or just aren't as good as promised, they can easily make a mistake during the first call. If customers start spending less, or they move to a competitor, those losses will easily outweigh any savings.

Operational experience and research carried out by several companies confirms that agents have the greatest impact on customer satisfaction. Good agents can easily make up for bad processes and technology, but the reverse is simply not true. One of the main claims, particularly from the offshore centers, is that they have a ready supply of highly skilled agents who cost just a fraction of what agents cost in the western world. This assumption alone underpins their value proposition. But as we know, an agent's job is not the most glamorous, and this is illustrated by the fact that the average tenure of an agent in the U.S. is less than two years. Highly skilled agents tend to have higher job aspirations, so those agents move on even more quickly. The net result is that calls are constantly being handled by very inexperienced agents who are more likely to get it wrong than experienced agents. The risk of upsetting or losing customers is multiplied when you consider that an outsourcer is less likely to provide uniform service and treat your customers the way you want them to be treated.

If agents are key to maintaining customer satisfaction, then protecting your data is paramount to commercial survival. In order for the agents to have the tools they need to do their job, you have to allow them access to sensitive customer data. For example, if customers are going to call about a balance inquiry, the outsourcer's agents must be allowed to access that information. They either need access to your billing system or you need to send them the relevant data. That brings with it three major issues.

One:
The physical security of the data as it is exchanged between your site and the outsourcer, and while it is at their site. The data can be subjected to any amount of encryption, password control and on-site security checks, but these can all be broken by determined criminals.

Two:
Controlling user access. It is difficult to control which users have access to certain information. Most applications are not good at screening out fields on screens and it is mostly a case of everyone sees everything. User profiles and log-in processes can control which users are allowed to access certain screens and functions, but with agents being off-site, you need a high level of trust that this information won't be shared.

Three:
The agents themselves. Most fraud or misuse of data is perpetrated by employees. This is the responsibility of the outsourcer; they recruit, train, manage and reward the agents. If they get it wrong, there are cases where disgruntled agents have copied client customer data and sold it for their own gain, as reported recently in the U.K. national press. There is little you can do to prevent this, but the consequences and costs can be extremely high. Once again you have to put a lot of trust in the outsourcer.

Finally, there is the potential for a conflict of interest between you and the outsourcer. Your interest should revolve around customers, keeping them satisfied so they spend money with you. On the other hand, the outsourcer's main concern will be meeting the terms of their contract and any service-level agreement bound within it. If this balance is wrong, customers will suffer and so will your business. One key to getting it right is setting the right measures and having them reported in a timely manner. It is too late to find out at the end of the week that customers left because they didn't receive good service. Not only do you need to know that the outsourcer has provided the right number of agents and has handled the targeted number of calls within the expected time frame, you must also be kept informed about business-related measures so you can be confident that they are handling your customers as you want them to. Measuring the true level of customer satisfaction is extremely difficult, and most recognized techniques -- such as asking the agent to score each call -- are open to high degrees of subjectivity. Place this in the hands of the outsourcer and you run the risk of not getting the right picture, and not getting it soon enough to take remedial action.

If you decide to hand over your customers to a third party, the potential risks and hidden costs are very high. Why gamble with your customers, your biggest asset? These days, you have other options. Just about very aspect of running a contact center can be purchased "on demand"; i.e., as a monthly service paid for on a usage basis. You still have to recruit and manage a pool of agents, but at least YOU stay in control, the systems and data stay in-house and you can keep your finger on the pulse of how your customers are being treated.