• July 1, 2005
  • By Coreen Bailor, (former) Associate Editor, CRM Magazine

An Inside Look at Outsourcing

Article Featured Image
Few topics can upset Americans quite like outsourcing, the CRM industry's dirty word. More specifically, offshore outsourcing opponents argue that it delivers a brutal body shot to the economy by shipping jobs out of the country, and supports what they believe to be an unpatriotic attitude. Still, sending those once in-house operations to locations like India and the Philippines is attractive to some organizations--it shrinks labor costs for qualified employees. But being motivated purely by the thought of shelling out less in workforce compensation should certainly not be the only reason to call on an outsourced services provider. Projected cost savings may seem too good to pass up, but additional expenses, including travel and training outlays, may cut into those anticipated savings. Perhaps even more damaging is the risk of tarnishing the organization's image. Dell experienced this, and moved some of its customer service support back onshore as a result of customer complaints. In April, however, the company announced its plans to add 2,000 additional employees to its India locations for back-office work and software development. Customers who are against outsourcing may also choose to make a move to a competitor. "Going offshore definitely can save you money, but if you do it very badly you destroy customer relationships and the image of your firm," says Robin Goad, senior analyst at Datamonitor. "Going offshore may in the longer term not save you any money at all." In fact, according to a study released in April by Deloitte Consulting, 44 percent of respondents indicated that as a result of outsourcing, they did not realize cost savings. Although it doesn't settle the issue of sending jobs outside of U.S. borders, nearshoring options provide an alternative to more far-flung locations. For example, Canada is a popular nearshore option for its proximity to the U.S. and for its similar culture. Latin America is also gaining traction, especially among companies with Spanish-speaking customers. Regardless of the location and services provider that is selected, simply putting a signature on the contract is only the beginning. There is another set of issues to keep an eye on when managing outsourced customer relationships--not just at the contract's onset, but also through the course of the agreement. Consider the following five initiatives to make sure that your outsourced customer interactions are properly handled over the long run. Establish Metrics When an organization outsources a function, especially in the contact center, it loses that direct contact with its customers. Monitor the customer experience by implementing scorecards to gauge how well the customer interactions are managed. Michael Corbett, author of The Outsourcing Revolution
and executive director of the International Association of Outsourcing Professionals, warns organizations against signing a contract without establishing a clear set of scorecards to be reviewed on a regular basis. And Ruth O'Brien, senior vice president of regional operations at ClientLogic, says that "it might be handle time for one client and it might be a sales-close rate for another. If you're measuring that on an ongoing basis you can see where successes are, find out where you are having issues, and immediately address them." Measuring customer satisfaction, says Andrea Ayers, vice president of Convergys Customer Management Group Marketing, is a critical component of contact-center program management. "Data must provide meaningful and actionable recommendations, [and] satisfaction must be measured consistently across all service channels and all types of customer interactions." Toni Portmann, president and CEO of Stream, a global technical-support and customer-service outsourcing provider, suggests monitoring customer-satisfaction empirical data points, along with investing in technology like quality monitoring tools, workforce management applications, and advanced IVR technology. "The robust reporting that comes out of not just hitting service levels and getting your metrics done, but more importantly [knowing] the top-five reasons that people call in the first place provides more efficient and effective customer experience." Raise the Bar If outsourcing a portion of a business paralleled a series of Groundhog Day experiences, BPO relationships would be much easier. The reality, though, is that evolving business needs are not as predictable. To cap any deviations that may stunt improvement, revisit the business strategy to see what has changed, as well as the elements you considered when selecting your outsourced services provider. "Take a look at the capabilities and the changes in terms of what the service provider is capable of doing. Reexamine all of the parameters of the relationship relative to that and establish a new plan for the coming year," Corbett says. Part of that plan must include aligning and integrating processes to successfully deliver a seamless customer experience. "Look at the processes and if they are continuing to be clean to be sure you're improving along the way and that you're understanding each other's business," O'Brien says. Dana Stiffler, research director at AMR Research, suggests offering the services provider incentives as a way to improve service levels. "It's not viewing it as a one-off transaction or just turning over an existing process. It's keeping it fresh." As part of its efforts to continuously enhance its service level, Professional Education Institute (PEI), a 20-year-old education and training institute focused on real estate investing and financial management, uses multiple outsourcers that include Alpine Access's home agents (primarily for inbound sales calls to spur productivity). "You create an environment of healthy competition between multiple outsourcers where each vendor has an equal opportunity to earn the lion's share of your call volume. It not only increases overall performance, but also gives you that backup if a vendor runs into an issue where they can't handle your calls," says Roger Sinnes, CMO at PEI. Keep Attrition at Bay Keeping both outsourced and in-house contact center staff on board isn't easy. To reduce staff attrition to the lowest level possible, understand the true churn of the employee population before and after it is outsourced. "There needs to be an agreement as to the type of talent that is going to be brought in to the operation, how they are going to be trained, and how proactive you are in the ongoing management of bringing that new talent on board," says Chris Carrington, president of outsourcing services and BPO for the Americas at Capgemini. Engage in a contractual agreement that provides incentives to the service provider if it can keep employees on staff. According to Portmann, an organization can drive the sales culture in a technical support or customer service environment while attracting higher-caliber professional support professionals--they have the opportunity through their performance to earn more money. "It's actually an indirect way to work around Do Not Call lists, because now, while I have you on the phone, I have that advantage to actually sell something without making an outbound call," she says. If you're looking to provide incentives, but are on the fence about instituting monetary rewards, consider the approach taken by PEI. "If the rep is incentivized to upsell...you're ultimately loading up a customer," Sinnes says. Instead, the institute has promotional incentives and rewards employees with giveaways. To keep morale high while enhancing agents' familiarity with the institute, PEI also has incentives structured around giving its product to the representatives. "That cultural aspect, that aspect of the agent feeling like they belong as an extension of the company, is very, very important," says Amit Shankardass, senior vice president of solution planning at ClientLogic. Remain Flexible An outsourcing relationship, if properly executed, is an extension of the client company's culture. Even so, uncontrollable operational issues may affect the service provider's ability to handle your needs. For instance, PEI's Sinnes recounts an instance when severe weather prevented representatives from getting to a call center facility. "Have a backup contingency plan that you can put into place on very short notice to reroute your calls," he says. Additionally, there still must be ongoing governance of the two organizations to address day-to-day issues. "Whether that's making sure that the organization is continuing to get best practices, or that it has training access to enhanced technologies, it all relates back to how the two organizations really live the new relationship," he says. "The contract is a point-in-time activity and the governance is really the focus about how that relationship will change postcontract." Pull Up a Chair Services providers know outsourcing, but may not know a particular business's customers as well as an employee does. Remain involved and visible over the course of the partnership instead of washing your hands of that process and the responsibility attached to it. Maintain visibility by engaging in ongoing communication via periodic business reviews for an outlook of how well the outsourcer is really doing. Make sure to have face-time with the individuals who actually deliver the service to show your appreciation for their efforts. Obtaining feedback from the agents, who are the individuals with the closest and most frequent interactions with customers, will give you a deeper insight into how to improve the business. If possible, consider periodically meeting with executives from your outsourced services provider. David Smith, director of marketing at Library of America (LOA), a nonprofit book publisher that outsources the front-end aspects of its continuity program to Des Moines-based Communications Data Services (CDS), flies to CDS about every six months for in-person planning sessions. AMR's Stiffler says, "There are people on the ground that are responsible for the everyday operation of these things, but sometimes it's important for the people at the executive level to keep in contact and to know what's going on and to know each other." "As a client you don't want to throw the work over the fence and then check on it every quarter," says Rob Duncan, director of customer care for Capgemini Energy. After all, it is still your customer base. To establish and maintain clear lines of communication Duncan suggests extending meetings beyond a quarterly review to more of a monthly review. "The service provider needs a seat at the table with the business from a strategic standpoint to ensure that they are both in line. But the client also needs a seat at the table with the service provider so that there are no surprises," Duncan says. For instance, if you are releasing a new product or service offering that isn't closely integrated into the workforce management side of the outsourced relationship, the services provider may be inappropriately staffed to service your customers. Conversely, stay in touch even if you're not expecting out-of-the-norm occurrences within your business to keep from being overcharged as a result of being overstaffed. "Keep the outsource partner engaged in the actual business as to what are the business drivers that are happening on their side of the business that could result in changes in managing the customer relationships," Carrington says. Sinnes agrees: "Make sure that you understand--as the client at a very granular level--the nature of your own call volumes, and become an expert at forecasting those volumes, because there is no vendor that can staff appropriately without accurate call forecasts." It is a must to be involved, but Shankardass says the challenge is allowing the outsourcer to do what it does best. "Sometimes you can undermine an outsourcing engagement when you start micromanaging every element of the outsourcer. So while you want to be involved and visible, you don't want to micromanage." LOA's Smith has daily contact with CDS, due to the several projects that the outsourced fulfillment provider handles for LOA, but he leaves certain elements like training employees on CDS's SMART technology, a system that ties customer data with appropriate offers in real time, up to CDS. CDS has seen its returns drop, as a result, from about 16 percent or 17 percent to almost 10 percent. The company has also reduced its call volume by about 40 percent, and has experienced 10 percent to 17 percent acceptance rates on cross- and upsell opportunities over the telephone (in an industry where the average response rate, according to LOA, is as low as 2 percent). "I only get a general sense of how they are doing the training," Smith says. "This is the type of thing I leave to CDS, because they really know what they are doing. I was totally happy with the results, so whatever they're doing is working. I'm not about to go in there and try to fix it." The if-it-ain't-broke, don't-fix-it approach works for some companies, but it isn't a one-size-fits-all philosophy. Similarly, how an organization manages its outsourced customer interactions and its plan for doing so must be tailored to fit its customers' needs. If properly executed the services provider will act as a seamless extension to the organization, and not a detached entity. Contact Assistant Editor Coreen Bailor at cbailor@destinationCRM.com
CRM Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues