Outsourcing, Off-Shoring: Truth and Consequences-Part 2
In our last article we examined offshore outsourcing the costs the real and perceived benefits and the steps an organization should take before embarking on an outsource and/or offshore venture.
In this article we focus on how an organization should best move forward to ensure that their outsourcing or offshoring venture will succeed and not be mentioned in the ever growing list of companies that failed in this exercise.
There is a lot of common steps and activities that need to be taken regardless of whether the service will be provided domestically, in a ‘near shore’ location (Canada) or offshore. We first examine the steps and activities that apply to all locations and then look at those that are location specific.
Following this activity checklist can prevent lots of pain and suffering for both the organization and the outsource partner. This is an essential step in building a successful outsource relationship.
The first questions you need to ask are the ones we discussed in the previous article…
Are your service transactions a one-off or are they part of a broader on-going customer relationship?
What are the risks to the customer relationship associated with off-shoring?
· From the companies perspective?
· From the customers perspective?
Can these risks be mitigated?
Are we willing to accept these risks and the worst case scenario to save approximately 15%?
Have we optimized our existing internal operational model?
· Is our technology the best possible to support the delivery of service?
· Do we have the right people with the right skills delivering service today?
· Do we have the appropriate training and development in place to grow and develop our staff to deliver ever improving service?
· Are our operational metrics aligned with the goals and objectives of the company?
Do we have the resources and appropriate knowledge internally to source, implement and manage an outsource provider?
Do we possess a network and IT infrastructure that can support extension to an outsource provider?
If your answer is ‘No’ to any of these questions then you will be creating problems for yourself by moving forward with outsourcing until you can answer “yes’ to each.
Assessing the Outsourcer:
Now with your ‘yes’ answers in hand you are ready to move forward to source an outsource partner, as you move forward keep in mind that all outsourcers you speak with want your business and will regale you with how wonderful they are. The first qualification area we will address in terms of qualifying potential outsource partners is Experience.
Experience:
Take all statements related to experience and knowledge with a grain of salt. Ask the vendor specific questions related to their experience such as;
o Which companies in my vertical have they worked with?
o Are they still working with these companies? (and if not, why not)
o Can they provide reference contacts at these firms?
Based on their answers you may have to ask yourself if you want to work with an experienced firm or if you want to be a guinea pig?
Of course even if the outsourcer has experience in your vertical it doesn’t mean that they are good at it or even that this is a core competency. You will want to ask them:
o What percentage of their business (in terms of dollars, minutes or seats) is in the same vertical as you operate in?
o What types of services they have provided to that vertical? (they may have experience in publishing but if they have only handled inbound change of address requests this isn’t terribly relevant if you are looking to outsource outbound renewals)
o What awards or recognition they have received for their work in the sector? Of course they could do very good work and have received no awards or recognition, but if they have received awards etc., then you can know that some third party assessed their work or submission and felt that it had merit.
Staffing:
It is essential that you understand the staff who will be working on your project. After all it is these people who will be interacting with your customers. It is based on this interaction that your customers will judge your company[1]. You need to know the following:
· What the skills and competencies they look for when hiring staff? Be wary of anyone that only or primarily looks for call/contact center experience as this often just hires someone else’s’ problems.
· How do they test for these Skills & Competencies? The tests should be objective and independent of the interviewers’ subjective opinion. Ask to see these tests.
· What is their annual staff turnover and how is this calculated? Turnover is the percentage of staff that leaves the center each year. This can include ‘turnover’ those that leave the organization and ‘churnover’ those that leave the contact center but are still with the company. Turnover should include staff from the first day they are on the job. Be wary of companies who don’t include ‘churnover’ or who don’t include the training period or the first X days in their counts. These exclusions tend to occur in companies that want their turnover numbers to appear to be lower.
· Ask if you can interview and/or speak with some of their staff. You will get better insight to the staff and organization by speaking with them directly.
Training:
You need to understand how your potential outsource partner approaches staff training. Not just the product knowledge, but also the soft skills related to effective communication, active listening, sales and agent development.
Specifically you should ask:
· To see their agent training program (agree to sign an NDA if requested). This shows how they invest and equip new staff before they go on a program such as yours.
· To see any tests or assessments they complete to ensure comprehension and recall of trained knowledge?
· A training outline for a program similar in nature to yours? They should remove client identifiable elements.
· How will your training be done? Will they train all of the staff, will you train the trainer or will they expect you to train all of the staff?
Management Processes:
You need to understand how the outsource partner will manage your business. Specifically you need to understand:
· The key metrics or KPI’s they employ in managing their business from a macro level? They are in business to make money, so costs and margin certainly need to be present. They also should include metrics such as Service Levels, Quality Levels, escalations, First contact resolution, etc.
· What are the specific metrics they believe your program should be governed by? By asking this question before you provide your desired metrics will tell speak volumes about their perception of your project and requirements.
· Who will manage your business? Will they assign a project manager? Where is that manager located? Are they dedicated to your account? How will you interact with them: phone, email, face to face, instant messaging etc.? What are the response parameters you should expect? Ask them to provide a service level agreement to respond to your phone calls and emails. Ask to see a bio or resume for the project manager. Ask for references for the project manager. This person will be an extension of your company; you should be very comfortable with this person before agreeing to proceed.
· What reporting: type and frequency will they provide to you? Ask to see sample reports and ask if they can produce ‘ad-hoc’ reports and how quickly they can do so?
· Ask for a standard implementation project plan. This will show you how they manage projects and what tasks are required as well as how much time they feel should be devoted to each activity.
Technology:
Any outsourcer you partner with will need to integrate with your systems and processes. It is important to understand both their structure and knowledge levels. Specifically:
· Ask to see their Disaster Recovery Plan. If there is a problem, you want to know what will happen and when. Otherwise your own service to your customers may be compromised.
· Are their telephony and power systems redundant and to what level? Determine if they are speaking of battery back up, on-site diesel power generation or physical connection to two power stations or telco central offices.
· How do they envision connecting into your systems? How they connect and the security around the connection are going to be very important to your own IT group
Pricing:
This is often the only element that companies look at closely. Those that do this, do so at their peril. Price is always important, but it should never be the only consideration. Before you select a vendor you need to understand their pricing model and how it would apply to your project. Specifically you will want to know:
· What is the basis for their pricing model? Is it per connect minute, per talk time minute, per call, staff FTE’s etc.
· Are there discounts or price breaks based upon volumes? We know that there are economies of scale as a business grows, to what degree do they share this with their customers?
· What are the set up or establishment fees and what are these charges for? Some companies charge for training, opening a file, reporting set up, telecommunication set up, data connectivity set up etc.
· What other fees are there and when would they apply? Do their rates for example include long distance and if not what is the ‘per minute’ rate they charge you. Can the long distance or toll charges be billed directly to you by your existing carrier? Are charges for additional reports and what are these fees?
· What service level guarantees are they willing to offer? Are the service levels targets or requirements? More than one company has been burned by thinking that a target service level meant that it would be consistently achieved as apposed to something to strive for.
· What is the measurement period for the service level? There can be significant variances in actual service delivered if it is measured on a daily, weekly or monthly basis.
· What penalties and recovery periods will apply when a service level is not achieved?
· What contract terms are they seeking and what benefit do you receive for a longer agreement? It is not uncommon for multi-year agreements to include rate escalation clauses. It is generally in the clients best interest to not have a blanket escalation rate but rather a increase/decrease tied to an independent measure such as ‘cost of living’ etc.
General:
Always do the following:
· Visit the contact center where your business will be completed. Seeing the site and meeting the Supervisors and staff will provide great insight into the company.
· Be concerned if they tell you they do not have a center for you today. While this can speak to growth it can also lead to delaying the project timetable if they are working out funding, have construction delays or need more clients to justify the build.
· Check references. Check a minimum of three current clients. Ask to speak with former clients as well. Find out why former clients are not still dealing with the outsourcer. Ask specifically about adherence to service levels, budgets and timeline and how easy the access was to the project manager and senior company resources.
· Do a ‘credit check’ on the company. You don’t want to risk you customers with a company that is struggling to stay afloat. If they collapse you may be down for days or even weeks.
Location specific questions:
Near Shore
Canada is the most popular near shore location for call and contact center activities. Jamaica, Mexico and Puerto Rico also host a number of contact centers. In all cases these have lower operating costs due to their location. A part of the outsource operating advantage is dollar arbitrage, The lower the exchange to the US dollar generally the lower the costs in that country. Regardless of the country you need to ask a number of questions including:
· Will the outsourcer invoice you in US dollars? This frees you from concerns over the relative exchange rates between US Dollars and the local currency.
· What taxes are charged in that country and can any of these be recovered. Local country taxes often can be applied to call and contact center services, though often you can become exempt or have the taxes refunded if you are a non resident company.
· Language skills vary from location to location based upon the educational system in that country. For US companies seeking English language services Canada often reflects the best option as Canada has an excellent educational system. It is also heavily influenced by American media.
· Culture is important in any call or contact center. All customers will employ slang, idioms expressions and phrases that are not taught in school. It is imperative that the agents representing your company can communicate effectively with your customers.
· Infrastructure can be a concern outside of Canada. Generally in Mexico and the Caribbean the telecommunication and electrical infrastructure is inferior to that seen in Canada or the US. You must ask about reliability, redundancy, failure history, recovery periods etc.
· Weather can be a concern regardless of where the center is located internally, domestically or near shore. Snow in the north, hurricanes in the south, tornadoes in the mid west all pose potential risks that need to be identified and assessed. It is interesting to note that locations with regular and significant amounts of snow loose fewer days annually to weather than locations that see small amounts or infrequent snow storms.
Offshore
There are numerous offshore locations for contact centers around the globe. They include countries such as India and the Philippines but also include countries such as;
o South Africa,
o New Zealand,
o Ireland,
o Romania,
o Poland,
o Malaysia,
o China,
o Singapore,
o The Seychelles,
o Sri Lanka,
o Pakistan,
For each of these countries you must examine all of the universal and near shore questions plus the following;
· Access, will you need a visa to get into the country? This can be a factor sourcing individuals who will work providing training and managing the vendor relationship.
· How safe is the location or how safe will your staff feel when they are there. We often forget that: India is a nuclear state that is in a constant state of near war with Pakistan or that the Philippines has an on-going guerrilla war underway and that there are semi-regular riots in the streets of Manila. All of this has a bearing on your ability to get staff to travel to these locations.
· Infrastructure in many of these countries can range from poor to very good. Often service providers operate their own private networks rather than rely on the public grid. In these cases their redundancy and Business Continuity plans take on far more significance.
· Cultural Context can be very important in countries that have little exposure to the US culture. We see a phenomena call cultural context training. This is a process designed to train staff to deal with North Americans. This can range from the ludicrous (employing a full season of the sitcom Friends to teach Indians about US culture) to good (broad cultural trainings, accent neutralization training, slang, axioms and expressions training). You cannot skimp with this aspect of your assessment as this will likely be the most obvious clue to your customer that you have offshored the center.
· Time zones also play a role in the ongoing management of an offshore vendor; you need to plan to communicate at 5, 8, and 10 hours off the normal North American clock if you wish to stay on top of your partner. Waiting till the next day often means you can’t speak to who you want to and will likely lose another day before changes or adjustments can be made. When was the last time you had an internal crisis where you had the liberty of taking 3 days to fix it?
· Due Diligence is essential before you travel overseas to meet with a potential partner. Before you go, check their references, find a local lawyer, consultant and accountant or tax planner. You will need to know the implications of establishing a contract offshore. For example the laws of what country will govern the agreement? How will judgments be enforced if any are executed? How will disputes be resolved, what are the risks to any assets you send overseas etc.
The world seems to continually become a smaller place and outsourcing and offshoring are here to stay. But with the proper preparation any company can navigate these potentially dangerous waters and develop effective and meaningful partnerships.
[1] Perdue University- 92% of consumers judge a company based upon their experience with the company’s contact center.
Wednesday, February 28, 2007
Tuesday, February 27, 2007
Consulting firm launches B2B Tele-Sales Contact Center service provider
Ajax, Canada. February 27, 2007- The Taylor Reach Group, Inc. (TRG) announced today that it has launched “Teleffective Inc.” a call and contact center service provider. Colin Taylor the CEO of TRG said, “Many of our clients asked us to assist them in sourcing a high quality service provider. After some mixed experiences we concluded that we should create our own. Then we ensure the highest level of quality to our clients by proper control of the process.
No stranger to the world of outsourced call center operation Taylor spent 18 years with Watts Communications Inc. (now part of Resolve). During his tenure as CEO at Watts Colin grew the business more than 700%. He personally generated a third of a billion dollars in call and contact center sales. In addition Taylor is recognized for excellence in contact center operations through the receipt of more than 27 awards on two continents.
“To be successful in any business”, said Taylor “you must add value. We have done that at TRG and we will do that at Teleffective. At the end of the day our success will be a result of the value and benefits that accrue to our clients. We can only succeed when they do”.
“Teleffective will focus on assisting clients in: Business to Business Sales lead generation; account management, direct sales and interim inside sales/telesales programs. Teleffective will succeed through effectively developing, implementing and operating programs using best practice methods for all programs. These sales functions are grossly under serviced in both Canada and the US today and there is great opportunity to redefine the value proposition.”
Teleffective opens its doors with a stable of clients including a major technology company and large financial service organization and two business services companies.
About The Taylor Reach Group, Inc. - With offices in North America and Australia, The Taylor Reach Group, Inc. (TRG) is one of the leading Call/Contact Center and Customer Service consultancies. This award winning company founded in 2001 by Colin Taylor today boasts a stable of Fortune 1000 companies. The staff at TRG possess more than 100 years of Call Center, Customer Service and Customer Satisfaction experience in delivering effective and significant benefits from Operational Innovation.
The Taylor Reach Group, Inc. may be reached at 905-426-5055 or on the web at http://www.thetaylorreachgroup.com/
About Teleffective – With offices in downtown Toronto and Ajax , Ontario Teleffective provides: Business to Business sales support in lead generation, account management, interim Inside sales/telesales and direct sales.
For more information on Teleffective visit our website at http://www.teleffectiveinc.com/ .
Teleffective can be reached at 1-888-732-5470 or 905-426-2305 or by email at info@teleffectiveinc.com
No stranger to the world of outsourced call center operation Taylor spent 18 years with Watts Communications Inc. (now part of Resolve). During his tenure as CEO at Watts Colin grew the business more than 700%. He personally generated a third of a billion dollars in call and contact center sales. In addition Taylor is recognized for excellence in contact center operations through the receipt of more than 27 awards on two continents.
“To be successful in any business”, said Taylor “you must add value. We have done that at TRG and we will do that at Teleffective. At the end of the day our success will be a result of the value and benefits that accrue to our clients. We can only succeed when they do”.
“Teleffective will focus on assisting clients in: Business to Business Sales lead generation; account management, direct sales and interim inside sales/telesales programs. Teleffective will succeed through effectively developing, implementing and operating programs using best practice methods for all programs. These sales functions are grossly under serviced in both Canada and the US today and there is great opportunity to redefine the value proposition.”
Teleffective opens its doors with a stable of clients including a major technology company and large financial service organization and two business services companies.
About The Taylor Reach Group, Inc. - With offices in North America and Australia, The Taylor Reach Group, Inc. (TRG) is one of the leading Call/Contact Center and Customer Service consultancies. This award winning company founded in 2001 by Colin Taylor today boasts a stable of Fortune 1000 companies. The staff at TRG possess more than 100 years of Call Center, Customer Service and Customer Satisfaction experience in delivering effective and significant benefits from Operational Innovation.
The Taylor Reach Group, Inc. may be reached at 905-426-5055 or on the web at http://www.thetaylorreachgroup.com/
About Teleffective – With offices in downtown Toronto and Ajax , Ontario Teleffective provides: Business to Business sales support in lead generation, account management, interim Inside sales/telesales and direct sales.
For more information on Teleffective visit our website at http://www.teleffectiveinc.com/ .
Teleffective can be reached at 1-888-732-5470 or 905-426-2305 or by email at info@teleffectiveinc.com
New TeleSales Business- Teleffective
Well launched another new business today. The company is called Teleffective Inc. and the company is in response to our clients requesting assistance implementing effective tele-sales and inside sales projects.
So we opened the doors with 40 stations and three clients!
So if anyone is looking for assistance in implementing successful and profitable direct sales, account management or lead generation programs then please visit our website www.teleffectiveinc.com
So we opened the doors with 40 stations and three clients!
So if anyone is looking for assistance in implementing successful and profitable direct sales, account management or lead generation programs then please visit our website www.teleffectiveinc.com
Sunday, February 18, 2007
Quality Monitoring
Monitoring call and contact center agents is a central and key activity within any call or contact center. Of this is the primary means to ensure that an acceptable level of service is being provided to the company’s’ customers. This process validates the hiring and training process and often acts as a mini-performance review for agent staff, identifying the superior performers and those where improvement is needed.
So how is today that many organization are electing to outsource this key and critical activity? While each company or organization may have their own reasons and rationale for making this decision, a number of consistent themes emerged over the study. Key influencing factors include: lack of resources, an increase in non-phone related activities and technology related issues.
Is outsourced third party monitoring appropriate for you? That depends on your organization and how it operates, but it is clear that as the demands upon Supervisors time increase, adding many non-phone related activities something has to give. For some organizations they have found the best success in outsourcing their quality monitoring.
The Taylor Reach Group, Inc. has just released a research study called " Outsourced Quality Monitoring: Emerging Market or Outsourcing Core Competencies".
Let me know if you would like to receive a copy.
So how is today that many organization are electing to outsource this key and critical activity? While each company or organization may have their own reasons and rationale for making this decision, a number of consistent themes emerged over the study. Key influencing factors include: lack of resources, an increase in non-phone related activities and technology related issues.
Is outsourced third party monitoring appropriate for you? That depends on your organization and how it operates, but it is clear that as the demands upon Supervisors time increase, adding many non-phone related activities something has to give. For some organizations they have found the best success in outsourcing their quality monitoring.
The Taylor Reach Group, Inc. has just released a research study called " Outsourced Quality Monitoring: Emerging Market or Outsourcing Core Competencies".
Let me know if you would like to receive a copy.
Tuesday, February 13, 2007
Some proven examples of getting past the gate keepers of the C-Level suite.
Relevance, persistence and value. You must offer something of value, real value not just sales fluff. Contact tactics -
1-Try building a relationship with the gatekeepers...they can be your friend or ensure you never talk to anyone
2- Call when the gatekeepers aren't there. You would be surprised the number of CEO's who are in the office at 6 am and 6 pm...their admins are not.
3- Mine the company for a referral. Even if it is a "only the CEO can make that decision"...reference the name of the referrer to the gatekeeper,
4- Tell them what you want..."5 minutes of time". Avoid sales speak..." to show how we can help, demonstrate value" etc.
5- Leave Voice mails- no one will know how hard you are trying without a trail. Be specific- don't just use your elevator speech, tell them what you have done, where and why it is relevant to them..voice mail allows you a 30 second commercial to the CEO
6-Keep calling- persistence often gets you through eventually
1-Try building a relationship with the gatekeepers...they can be your friend or ensure you never talk to anyone
2- Call when the gatekeepers aren't there. You would be surprised the number of CEO's who are in the office at 6 am and 6 pm...their admins are not.
3- Mine the company for a referral. Even if it is a "only the CEO can make that decision"...reference the name of the referrer to the gatekeeper,
4- Tell them what you want..."5 minutes of time". Avoid sales speak..." to show how we can help, demonstrate value" etc.
5- Leave Voice mails- no one will know how hard you are trying without a trail. Be specific- don't just use your elevator speech, tell them what you have done, where and why it is relevant to them..voice mail allows you a 30 second commercial to the CEO
6-Keep calling- persistence often gets you through eventually
Monday, February 12, 2007
Managing Knowledge in complex telecommunications call center environment
“In a call or contact center environment I can see two distinct types of knowledge; the knowledge that is utilized and leveraged in providing service to customers and the knowledge that is generated through the operation and execution of the call/contact center services. In the first case most call/contact center are very poorly structured and designed to manage the knowledge they utilize in providing service. In the majority of center the agent requires 3 or more windows open on their desktop to access the different systems where the information resides. I have personally seen center where agents have 15 or more windows open! According to Gardner one of the fastest growing sectors within the call/contact center, ICT space is that of agent tools and analytics. Old approaches of building in-house systems, screen scrapes and in- house intranets have helped the centers but don't solve the problem as knowledge management and maintenance cause the information to become stale or duplicated. The real solution must lie with the development and deployment of an enterprise knowledgebase. This is a single repository of organizational knowledge which is available not just to the call center, but to the broader organization. This is not and cannot simply be a call center initiative as you must engage the Subject Matter Experts and Subject Matter Owners throughout the organization. These are the individuals who can identify the current knowledge and define the review cycles approvals and work flows required to maintain this knowledge. Call and Contact centers provide data, tons of data and all of this information can become knowledge in the right hands...that is to say in the hands of someone with the detailed and in-depth knowledge of the contact center industry and who is an expert on the technologies being employed. Your call or contact center is the canary in the mine, it is your early warning system. But this only will work when you can understand the information and knowledge generated. The key elements will not always be the same for each organization and will vary based upon the companies goals, objectives and customer base. The first step in this understanding process must be Service management. This has both internal and external components. Internally it encompasses Service Level, Speed of Answer, Abandon Rate, Blockage, Handle Time, First Contact Resolution, schedule adherence and other quantitative measures. In addition we need the qualitative measures: Quality Assurance, Customer satisfaction, Employee satisfaction, Repurchase, life-time value etc. All of these metrics need to be established in a spreadsheet or database to the the key elements can be tracked and managed going forward. By employing forecasts and charting activity and shift in the KPI's over time the inter connectivity between and among these metrics becomes clear and it is possible to identify the key knowledge factors for your particular organization.
Sunday, February 11, 2007
Outsourcing, Off-Shoring: Truth and Consequences
Outsourcing, Off-Shoring: Truth and Consequences
Outsourcing and Off-Shoring are not new ideas or a new way of doing things. Companies have been moving manufacturing to lower cost of production centers since the sixties and services since the late eighties. It isn’t new but once service outsourcing received the stamp of approval from mainstream media it has increasingly been perceived as a panacea for all ills that are impacting the company. Of course outsourcing/off-shoring won’t solve all a companies ills, it can if, executed well, it can reduce the cost of delivering service. But there are risks in outsourcing: degrading service quality, eroding customer loyalty and negatively impacting employee morale. So how can a company determine when and where to employ outsourcing/off-shoring and estimate what the savings might really be? In this article we will examine a number of questions that a company should ask when considering outsourcing the provision of service to help gain a realistic perspective or what they can achieve through outsourcing or off-shoring.
First a couple of definitions:
Outsourcing is the use of an independent company to provide services that previously were delivered by a companies own staff.
Off-Shoring is the use of resources that are located in a country remote to the company.
Both of these concepts can be executed independently or in combination. There are domestic outsource service providers, there are off-shore outsource service providers and there are captive (company operated) off-shore service providers. Another term that comes up in discussions of outsourcing and off-shoring is ‘near-shoring’ the provision of services in another country, but one that is close both geographically as well as culturally.
The news has been full of outsourcing stories gone bad…British Rail outsourcing their call center to India and then telling customers that they cannot book a ‘slipper car’, when the customer wanted a ‘sleeper car’. Dell has publicly announced moving support services to India and then publicly returning it to the US. An automaker outsourced technical support for their mechanics to India only to have the mechanics boycott the center and ultimately bring it back to the US. In the latter two cases the costs to move the business off-shore and then to bring it back cost significantly more than leaving it alone in the first place. What were the company executives thinking when they made their original decisions, did they ask themselves and their organizations the right questions?
The media message related to outsourcing is that companies can save 40, 50 even 60% of their processing costs simply by moving the services to an off-shore location like India or the Philippines. The truth is quite different while the costs of labor in off-shore locations are significantly less than the costs to operate domestically (often less than half), there are other costs which can be significant. These additional costs include: Management costs; to support a service operation half way around the world requires a team of staff to support this initiative, Systems and networks need to be expanded and secured, Travel costs to deliver trainings and to attend meetings is not insignificant in terms of both costs and senior management time. So what is the bottom line? According to Gartner the average savings a company actually achieves is only 12%. Savings greater than 12% can often be achieved domestically by streamlining or reengineering the current operational model. In call and contact centers we often se organizations that save 20% to 30% by improving the existing center.
So what should a company consider when considering outsourcing and/or off-shoring? First, we must understand what the nature of the services that are being provided. Specifically we must look at whether the service provides direct interaction with customers. Back office processes where no customer interaction are the easiest services to move to an outsource and/or off-shore provider. This assessment focuses almost exclusively on the price and quality of the work that will be completed. But where the service involves direct interaction with customer such as a call center the assessment becomes far more complicated. For simplicity’s sake we can classify customer interactions into two categories: those that are one time or one-off events and interactions that are a part of a broader customer relationship. In the case of a one off one time transaction then quality of service is often less important than the cost to provide the service. These types of interactions can usually be off-shored within acceptable cost and quality parameters. Where the interaction is a part of an on-going relationship we must consider the value of the relationship, the lifetime value of a customer and the quality of the service that can be delivered. The costs of executing service may well be lower off-shore, but the quality is impacted by customer perceptions, actual quality of linguistic or communications skills and the context of knowledge that the provider may or may not possess. Thus the service quality may actually erode customer value, drive churn and increase customer dissatisfaction.
Second, before any company looks at outsourcing or off-shoring they need first to ensure that they have taken all possible measures internally to improve the service quality that is delivered to customers. Outsourcers of all kinds but significantly domestic outsourcers employ labor arbitrage and economies of scale to deliver an operational cost lower than that possible internally. In reality outsourcers take the existing processes and procedures and deliver the service employing these operational parameters with lower paid staff and across a larger more technologically sophisticated and more efficient operation. Outsourcing and expecting the outsource provider to reengineer your processes and procedures is unrealistic. So if your processes are dysfunctional or your procedures are counterproductive the outsourcer will deliver the service with the same dysfunctional and/or counterproductive activities at a lower cost. There will be no operational breakthroughs through outsourcing. The company must ensure that they have optimized their service provision before outsourcing, because it won’t happen after.
So as you assess your company’s suitability you must determine:
Are your service transactions a one-off or are they part of a broader on-going customer relationship?
What are the risks to the customer relationship associated with off-shoring?
· From the companies perspective?
· From the customers perspective?
Can these risks be mitigated?
Are we willing to accept these risks and the worst case scenario to save approximately 12%?
Have we optimized our existing internal operational model?
· Is our technology the best possible to support the delivery of service?
· Do we have the right people with the right skills delivering service today?
· Do we have the appropriate training and development in place to grow and develop our staff to deliver ever improving service?
· Are our operational metrics aligned with the goals and objectives of the company?
Do we have the resources and appropriate knowledge internally to source, implement and manage an outsource provider?
Do we possess a network and IT infrastructure that can support extension to an outsource provider?
Outsourcing can be an effective and efficient means of delivering service. Outsource agencies can deliver superior service than a company may be able to deliver internally. While this seems counter intuitive often companies cannot secure sufficient resources to provide appropriate technology, sufficient staff or may simply lack the knowledge or resource bandwidth to create and deliver effective hiring, training and service delivery.
Outsourcing any service carries risk and we must take the time ask the important questions before we jump. Failure to take the appropriate steps and assessments can result in higher costs and a loss of customer loyalty. Unfortunately many companies fail to complete appropriate due diligence before they jump: a survey conducted by Orbys found that almost 50% of blue chip companies entered the sourcing process to select an outsourcer without “knowing exactly what they want or how best to source it”. Perhaps not surprisingly one third of the companies ultimately found that heir outsourcing arrangements failed to meet their needs and almost 25% ultimately brought the services back in house.
In our next article we will discuss the steps and activities a company should take once they have made the decision to outsource service delivery to ensure that they have the best opportunity for success.
Outsourcing and Off-Shoring are not new ideas or a new way of doing things. Companies have been moving manufacturing to lower cost of production centers since the sixties and services since the late eighties. It isn’t new but once service outsourcing received the stamp of approval from mainstream media it has increasingly been perceived as a panacea for all ills that are impacting the company. Of course outsourcing/off-shoring won’t solve all a companies ills, it can if, executed well, it can reduce the cost of delivering service. But there are risks in outsourcing: degrading service quality, eroding customer loyalty and negatively impacting employee morale. So how can a company determine when and where to employ outsourcing/off-shoring and estimate what the savings might really be? In this article we will examine a number of questions that a company should ask when considering outsourcing the provision of service to help gain a realistic perspective or what they can achieve through outsourcing or off-shoring.
First a couple of definitions:
Outsourcing is the use of an independent company to provide services that previously were delivered by a companies own staff.
Off-Shoring is the use of resources that are located in a country remote to the company.
Both of these concepts can be executed independently or in combination. There are domestic outsource service providers, there are off-shore outsource service providers and there are captive (company operated) off-shore service providers. Another term that comes up in discussions of outsourcing and off-shoring is ‘near-shoring’ the provision of services in another country, but one that is close both geographically as well as culturally.
The news has been full of outsourcing stories gone bad…British Rail outsourcing their call center to India and then telling customers that they cannot book a ‘slipper car’, when the customer wanted a ‘sleeper car’. Dell has publicly announced moving support services to India and then publicly returning it to the US. An automaker outsourced technical support for their mechanics to India only to have the mechanics boycott the center and ultimately bring it back to the US. In the latter two cases the costs to move the business off-shore and then to bring it back cost significantly more than leaving it alone in the first place. What were the company executives thinking when they made their original decisions, did they ask themselves and their organizations the right questions?
The media message related to outsourcing is that companies can save 40, 50 even 60% of their processing costs simply by moving the services to an off-shore location like India or the Philippines. The truth is quite different while the costs of labor in off-shore locations are significantly less than the costs to operate domestically (often less than half), there are other costs which can be significant. These additional costs include: Management costs; to support a service operation half way around the world requires a team of staff to support this initiative, Systems and networks need to be expanded and secured, Travel costs to deliver trainings and to attend meetings is not insignificant in terms of both costs and senior management time. So what is the bottom line? According to Gartner the average savings a company actually achieves is only 12%. Savings greater than 12% can often be achieved domestically by streamlining or reengineering the current operational model. In call and contact centers we often se organizations that save 20% to 30% by improving the existing center.
So what should a company consider when considering outsourcing and/or off-shoring? First, we must understand what the nature of the services that are being provided. Specifically we must look at whether the service provides direct interaction with customers. Back office processes where no customer interaction are the easiest services to move to an outsource and/or off-shore provider. This assessment focuses almost exclusively on the price and quality of the work that will be completed. But where the service involves direct interaction with customer such as a call center the assessment becomes far more complicated. For simplicity’s sake we can classify customer interactions into two categories: those that are one time or one-off events and interactions that are a part of a broader customer relationship. In the case of a one off one time transaction then quality of service is often less important than the cost to provide the service. These types of interactions can usually be off-shored within acceptable cost and quality parameters. Where the interaction is a part of an on-going relationship we must consider the value of the relationship, the lifetime value of a customer and the quality of the service that can be delivered. The costs of executing service may well be lower off-shore, but the quality is impacted by customer perceptions, actual quality of linguistic or communications skills and the context of knowledge that the provider may or may not possess. Thus the service quality may actually erode customer value, drive churn and increase customer dissatisfaction.
Second, before any company looks at outsourcing or off-shoring they need first to ensure that they have taken all possible measures internally to improve the service quality that is delivered to customers. Outsourcers of all kinds but significantly domestic outsourcers employ labor arbitrage and economies of scale to deliver an operational cost lower than that possible internally. In reality outsourcers take the existing processes and procedures and deliver the service employing these operational parameters with lower paid staff and across a larger more technologically sophisticated and more efficient operation. Outsourcing and expecting the outsource provider to reengineer your processes and procedures is unrealistic. So if your processes are dysfunctional or your procedures are counterproductive the outsourcer will deliver the service with the same dysfunctional and/or counterproductive activities at a lower cost. There will be no operational breakthroughs through outsourcing. The company must ensure that they have optimized their service provision before outsourcing, because it won’t happen after.
So as you assess your company’s suitability you must determine:
Are your service transactions a one-off or are they part of a broader on-going customer relationship?
What are the risks to the customer relationship associated with off-shoring?
· From the companies perspective?
· From the customers perspective?
Can these risks be mitigated?
Are we willing to accept these risks and the worst case scenario to save approximately 12%?
Have we optimized our existing internal operational model?
· Is our technology the best possible to support the delivery of service?
· Do we have the right people with the right skills delivering service today?
· Do we have the appropriate training and development in place to grow and develop our staff to deliver ever improving service?
· Are our operational metrics aligned with the goals and objectives of the company?
Do we have the resources and appropriate knowledge internally to source, implement and manage an outsource provider?
Do we possess a network and IT infrastructure that can support extension to an outsource provider?
Outsourcing can be an effective and efficient means of delivering service. Outsource agencies can deliver superior service than a company may be able to deliver internally. While this seems counter intuitive often companies cannot secure sufficient resources to provide appropriate technology, sufficient staff or may simply lack the knowledge or resource bandwidth to create and deliver effective hiring, training and service delivery.
Outsourcing any service carries risk and we must take the time ask the important questions before we jump. Failure to take the appropriate steps and assessments can result in higher costs and a loss of customer loyalty. Unfortunately many companies fail to complete appropriate due diligence before they jump: a survey conducted by Orbys found that almost 50% of blue chip companies entered the sourcing process to select an outsourcer without “knowing exactly what they want or how best to source it”. Perhaps not surprisingly one third of the companies ultimately found that heir outsourcing arrangements failed to meet their needs and almost 25% ultimately brought the services back in house.
In our next article we will discuss the steps and activities a company should take once they have made the decision to outsource service delivery to ensure that they have the best opportunity for success.
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