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Offshore call center outsourcing: Is it saving money or costing you?

Although it may seem like a cost saver, several factors can instead turn the initiative into something that costs more than the existing in-house contact center.

The primary reason most companies consider call center outsourcing is to save money. Common secondary reasons for cost center outsourcing are to reduce headcount and possibly to get assets off of the books -- in other words, to reduce management overhead and improve the balance sheet.

Companies do not outsource to improve service quality. It is clear that the decision to use call center outsourcing usually has little to do with the current “buzz du jour” of providing an outstanding customer experience -- an objective that is easy to proclaim but clearly difficult to achieve.

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Look at whether money is the only motivation for call center outsourcing

Companies, under pressure to deliver strong financial results, often do whatever it takes to improve their bottom line. Executives make the difficult decision to trade off a potential decrease in service quality for a significant cost savings from having an offshore call center. The problem is that it’s difficult to quantify the financial return and benefits from providing an outstanding customer experience, while it seems easy to see how call center outsourcing can save a company a significant amount of money.

Identifying cost savings

When companies want to reduce operating expenses, the contact center is an obvious target because it often has one of the highest staff headcounts in the company. Consultants can provide analysis that shows that the cost of handling a call in India or the Philippines is around half the cost in the U.S. (These numbers may vary based on many factors.) Even if it takes an offshore call center longer to handle a call -- let’s assume an extra 20% in talk time due to language issues, which alone should be a red flag -- the analysis still shows substantial cost savings.

There are three major problems with this call center outsourcing analysis:

  1. Enterprises assume that it’s a one-to-one call ratio -- that they will have one call to an offshore call center for every one that was placed to their U.S. call center. While the numbers vary, and there are exceptions, DMG estimates that call center outsourcing increases call volume by 15%, due to customers hanging up and calling back in search of a more helpful answer.

The good outsourcers acknowledge this issue, but present it as a short-term concern that will resolve itself when customers become accustomed to the new service experience. DMG agrees that this issue gets better over time, but believes that a portion of the percentage improvement is due to lost customers.

  1. Average talk time will increase by at least 20% as callers try to work with the offshore call center agents to obtain the information that they need. Even worse, only after failing -- and wasting their time and the agent’s time -- they hang up and call back in the hope of getting a different agent who is better able to help them.

This may force agents to diverge from their fixed script, which is a surefire way to receive a very poor quality assurance score. Script adherence is usually required because the U.S.-based employer doesn’t trust the outsourcer to do the job they were hired to do -- a cycle of failure.

  1. Service quality can be quantified, particularly if a company is willing to take a longer-term and more creative approach to measuring the benefits of contact center outsourcing. The process of quantifying service differentiators should be more thorough than simply measuring the number of social media “likes” or positive sentiments.

Not all offshore call center outsourcers are bad, and not all U.S.-based contact centers are good. Providing an outstanding customer experience is an elusive goal for too many organizations, but one worth striving for. Outstanding service is an important differentiator, even if you have not yet figured out how to measure it. Cost savings and excellent service can go hand in hand, and one should not be sacrificed for the other. Don’t be fooled by the offshore cost savings hype -- if you’re going to do a financial analysis, base it on facts, not promises.

ABOUT THE AUTHOR

Donna Fluss is the founder and President of DMG Consulting LLC, the leading provider of contact center and analytics research, market analysis and consulting.

This was last published in June 2012

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This article is very old and the options for outsourcing customer service have changed greatly. There are a number of nearstaffing companies based in Latin America that cure the language/cultrue problem that was described in this article. US companies can hire customer service reps through these nearstaffing companies for less than minimum wage while getting high quality speakers that handle calls as efficiently as the in house option.
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