Managing the risk.
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Over the past several years, companies in all industries have begun to experience the benefits of offshoring. But the cost savings derived from offshoring are just the tip of the iceberg. Particularly for multinational corporations, offshoring is a strategic imperative that transforms businesses by effectively leveraging the global workforce to compete in the global economy. While many corporate business processes are good candidates for outsourcing, none is more strategic than CRM. Outsourcing call center activities--lead generation, sales, customer support, and collections--delivers wide-ranging benefits, from meeting cyclical spikes in demand to providing multilingual customer support.
But these rewards are not without risks. When a corporation outsources its call center, it does not transfer this risk to the service provider. Rather, the company must continue to manage its regulatory, operational, and brand-related risks. It is, after all, the corporation's reputation and brand that can be damaged--not the outsourcer's--as a result of poor customer service, business disruption, and negative publicity.
By understanding the external and internal risks and by putting in place plans to manage or avoid these risks, companies can successfully offshore call center activities and meet corporate objectives.
External Risks of Offshoring
Any risk that a company cannot control or influence internally is considered an external risk. Common examples are political and country risks, risk of natural disasters, and regulatory risks. Before offshoring its call center, a company should ask questions including:
1. How stable is the political environment in the country where the offshored function will be located?
2. What regulatory requirements and country-specific laws must be adhered to?
3. Is the offshored location prone to natural disasters?
In addition to these external risks, the company must also address internal risks that it can control and, therefore, better manage.
There are three primary types of internal risks to outsourcing:
Operational risks. While companies should and often do address operational issues like service-level agreements (SLAs), workforce training and knowledge transfer, agent turnover, and integration with upstream and downstream processes in the contract, the risk lies in the potential negative consequences of the offshorer not being able to deliver on the terms of the contract.
Information security and privacy protection risks. Call centers that handle high volumes of in-bound and out-bound customer calls must be extremely careful about the access, handling, and storage of sensitive customer data. Loss of control due to outsourcing only increases the risk of information leakage.
Cultural risks. Differences in language and communication protocols, social and business norms, and even time zones between the country or countries in which the company is based and the country to which the call center activities are offshored are some of the cultural risks that exist in outsourcing the call center and must be actively monitored and managed.
Managing Outsourcing Risks
The most effective way to manage outsourcing risks is to adopt leading outsourcing practices--well before contracts are signed and responsibility for the call center operations is transferred to a third-party provider. In most cases, this means establishing a strategic steering committee, a cross-functional organization that reviews the risks of offshoring the call center function, creates a plan to manage these risks, and manages the entire outsourcing process.
Before setting a plan in stone, the committee should consider the following five leading practices:
Select call center-related processes to outsource for reasons other than just cost. Based on your organization's risk appetite, outsourcing certain activities can improve management of off-peak demand, increase multilingual support capabilities, and enhance access to new technology.
Pick the right partner. Treat vendors as partners and look for a fit beyond simple business capabilities, such as synergy in company size, culture, and values. Aggressively negotiating on price will only hurt you in the long run.
Know your specific needs before you engage the service provider. While you should be aware of the service provider's overall capabilities, do not let the provider drive your requirements for the activities to outsource.
Build flexibility into the agreement. Your business will change and the requirements for the outsourced operations will too.
Plan for the unexpected. When consolidating and outsourcing call centers, especially in politically unstable regions or those prone to natural disasters, you must have contingency plans to ensure business continuity.
To succeed, the resulting outsourcing plan must have visible executive sponsorship, a clear identification of accountabilities, and sufficient funding. While smaller organizations and individual business units can manage outsourcing on an informal basis, large, global organizations should approach offshoring the call center in the context of all its offshoring activities. Through outsourcing centers of excellence, companies can develop consistent processes for outsourcing and make it easier to manage vendor relationships at an enterprise level.
About the Author
Pawan Verma is a director in PricewaterhouseCooper's advisory practice. Please visit www.pwc.com.
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