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Smart Outsourcing
How to select an customer center outsource provider, negotiate terms and manage the relationship effectively.
Posted Jun 18, 2000
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Ten years ago most corporations would have scoffed at the idea of entrusting a third party with anything but basic cold-call telemarketing. Today, a growing number of companies are placing major components of their direct customer contact in the hands of professional call center providers.

The market for commissioned call center services is transforming. Rather than simply providing a nameless group of voices who read basic scripts to phone-list prospects, outsourcers are increasingly a top choice for inbound customer acquisition, general customer service, even help desk and technical support services. still, it pays to be wary. A call center agent represents your company just as surely as your own field sales rep, and can make a powerful impression on your customers. The trick is to ensure that impression is a positive one.

Outsourcing Surge
"Sometimes, companies find that it's not a core competency to manage a call center," says Katrina Menzigian, program manager for CRM and call center services at research firm IDC. In those cases, "it's more expedient, and in some cases, less expensive, to outsource." Firms from Fortune 500 companies to dot com darlings to budding businesses are relying on vendors to service some or even all of their telephone, e-mail and Web customer contacts.

SITEL, a leading provider of call center services to large companies, has seen tremendous growth in the 15 years since they began operations. According to Director of Investor Relations Jim Jacobsen, the company employs roughly 18,000 agents who serve over 400 clients from 75 centers in 18 countries. And the workload of those thousands of agents has shifted dramatically over the past five years. When SITEL went public in the mid '90s, their call volume was dominated by telemarketing engagements. Today, some 60 percent of their total call volume (both inbound and outbound) consists of customer care contacts.

Despite promising growth and growing enthusiasm, the outsourcers have not yet displaced the traditional call center. Paul Kowal, president of teleservices consulting firm Kowal Associates, estimates that "barely 20 percent" of all teleservices are currently outsourced, while Menzigian doubts that the number is even that high. While firm numbers are elusive, the banking, financial services, insurance, telecom and utilities industries head the client lists of a number of outsourcing specialists.

These companies are generally not dismantling their entire in-house call center operations overnight and switching to fee-for-service telephone support. At the same time, many call center providers prefer to specialize their services, rather than provide soup-to-nuts, telemarketing-to-tech support service. It's more common to find companies adding an outsourcer for a particular new product line, or a new category of customer, such as a rewards or loyalty program.

Dot Com Directive
Often, the pressure to seek help from the private sector is coming from the expansion of e-mail and Web customer service needs. What may have started as a lark four years ago, with the company webmaster answering three or four customer e-mails a day, has for a number of companies turned into a flood of online customer contacts that need professional care. The more aggressive your "dot com" strategy, the more "dot com" your customers expect the relationship to be.

"At the beginning, everyone wants to keep [e-customer contact] in-house, protectively," says Eyal Rimmon with WiredEmpire, a developer of online customer service management tools. "Then they do the math and realize it's almost always better to outsource it." WiredEmpire customers, such as call center provider TCIM Services, are finding a great deal of demand for specialized e-commerce support solutions, leading TCIM to launch a division dubbed interactioncenter.com to manage the new business.

"In some cases, outsourcing can allow you to implement technology more quickly than if you were to build the call center up internally," says IDC's Menzigian.

Due Diligence
To negotiate effectively with a call center provider, you need to understand your customer service needs right down to how many rings and how much hold time you want your customers to endure. You also need a solid understanding of internal call center operations and capital costs in order to make an educated conclusion about the pricing being offered by outsourcers.

Industry data suggests that a dedicated service rep through a third-party can cost from the low $20s to the high $40s per hour, with technical support and quality assurance tasks ranking higher on the scale. Incoming telecommunications (customer calls) tend to be charged at about 10 cents/minute, not counting toll-free charges.

Expect additional costs, such as monthly account maintenance and the necessary IT integration, to put your CRM databases online at their site.

The consequences of being unprepared could resonate far beyond simply not getting the best deal on call center services. "The provider has more experience and more education, and they're going to start telling you how to run your marketing programs and your customer service programs," says Chris stanvick, a consultant with Kowal Associates. "That's the start of a bad relationship, because you are no longer in control of your own destiny."

Part of that preparation includes a fairly clear idea of how you want new technology to work for your customer service. A potential outsourcer may have the latest in Web chat, Internet telephony and interactive voice response (IVR) automation available, but Menzigian recommends that companies resist the urge to automate huge portions of their customer contact without a deliberate plan. "The long-term costs [customer dissatisfaction] are not going to be attractive," she says.

Negotiate your Needs
Menzigian recommends that rather than settle for a flat fee-for-service contract, call center service agreements should include a "risk and reward" component. The teleservices company then has a direct stake not just in answering the call or e-mail in the most expedient fashion, but in the quality and satisfaction your customers get from the experience.

Chris Gongol, senior vice president of business development for call center provider Telespectrum, recommends that your potential partner be a pedigree and have a track record in your industry. Your research should include client references, which need to be rigorously verified.

Creating a detailed service level agreement necessary goes beyond striking a balance between service and price to covering as many potential pitfalls as possible. Kowal's stanvick points out that emergency plans are potentially more important for your call center service than you might think. "If a call center loses power, that's going to affect your program," he explains. "There are a lot of call centers in Florida because of the labor market there, and there are also a lot of natural disasters. You want a way to either transfer the business, or receive some sort of credit," especially if your call center goes offline the next time a hurricane shuts down the southeastern U.S.

Insurance Assurance
Customer dissatisfaction can go beyond losing business. If a customer takes offense with a CSR, or receives negligently false information, lawsuits are a very real possibility. Stanvick suggests that the very first questions you ask of a potential outsourcer is, "What do you have for insurance?"

"You want them to have liability insurance, for one thing, as well as errors-and-omissions insurance," he says. "I would never do business with anyone who didn't have errors-and-omissions insurance." Insurance is not a substitute for reliable personnel or solid management, but when your business lives and dies on your customer relationships, it's worth ensuring that your CRM partners are both willing and prepared to shoulder responsibility for their actions.

Remember that you are responsible for instilling the goals and values of your company in the outsourced agents. "You want them to feel like they are a part of your company, because that's going to come through on the phone call," says stanvick. That means sending your own people to the call centers to conduct training sessions as well as strongly considering regular visits to meet with managers and front-line CSRs. And you will likely be billed for the time you spend training the reps.

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