Considering Offshore Sourcing? Take Time to Do It Right

In this election year the offshore outsourcing issue seems characterized in our nation's collective consciousness as "sending American jobs away." Our current job climate is not wholly the result of an evolving global economy, but overseas sourcing does account for an escalating portion of domestic job attrition. Lately, proponents of offshoring seem to have set their crosshairs on customer service centers. As part of their fiduciary responsibilities, executives are obliged to explore the viability of overseas sourcing and its potential positive effects on profitability. Technology advances continue to yield productivity gains in contact centers, but vast differences in pay scales between the U.S. and emerging nations cannot be ignored (see chart). In addition to reducing labor costs, a well-conceived offshore plan also can:

expand hours of operation;

accelerate technical implementations;

provide seasonal workforce flexibility;

enable rapid scaling of operations;

support business continuity and disaster-recovery plans;

redeploy resources to core business services. These benefits, however, can be easily overshadowed when the outsourcing plan fails to consider the perspectives of customers and employees. Dell Computer* learned this lesson when it reversed its cost-driven decision to move customer support, including support for its highest-value business customers, overseas. Customer response was swift, vocal, and negative. In the U.K. Shop Direct** experienced a similar reaction when customers threatened defection after a series of cost-focused offshore decisions. The culprit in each example was a perceived failure in the customers' eyes of offshore resources to "connect with" customers due to language and/or cultural barriers. Despite many "neutralization" training programs, perceptions of language programs may never be fully erased. Certain risks will always loom in an offshore environment:

loss of revenue and market share from customer attrition;

shrinking resource pool from disaffected employees;

diminished quality assurance and operational governance;

hidden migration costs;

contractual/legal exposure from unfamiliar offshore business practices;

political/societal instability affecting business stability;

high correction costs for failed overseas initiatives. In addition, wage competition and resultant attrition already have narrowed the compensation gap mentioned above. For companies that have not committed to the siren call of offshore sourcing, advice from those organizations that have tried and thrived can be summarized as, Take time to do it right. Here are five keys to success: 1.Keep customer support of core business at home:

Segment and retain complex service processes and key customer relationships.

Match non-core transactional work with demonstrated offshore vendor competencies. 2. Commit to an active management presence at offshore locations for:

quality assurance

training

policy and knowledge management 3. Partner with a reputable onshore outsourcer with offshore operations and capabilities. 4. Insist onshore command and control centers monitor and route networks, systems, and applications, whether in-house or partner-provided. 5. Have a back-out clause and a backup plan:

request and retain current backup data downloads;

include clear termination processes in all contracts and agreements;

dual-source onshore. Offshore sourcing may represent only a small percentage of direct job losses today, but the burgeoning global economy means overseas options will receive escalating attention and momentum every year. By considering the five principles offered above, executives can maintain the value of onshore positions and lower the risks of offshore opportunities. * "Dell Drops Some Tech Calls to India," Ed Frauenheim, Staff Writer, CNET News.com, 11/24/03 ** "Low Costs Let the Offshore Outsourcing Genie Out of the Bottle," Linda Musthaler, Network World Technology Executive Newsletter, 2/9/04 About the Author David Raia is a senior principal in eLoyalty's Contact Center Optimization Skill Group, and a recognized thought leader in the areas of contact center operational strategies, enterprise consolidation, strategic sourcing, and performance management.

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