Making the Right Call on Contact Center Outsourcing

Jan 22, 2009 1:35 AM  By

Are you considering outsourcing your contact center services – either partially or entirely? If so, you had better proceed cautiously, because there are a lot of risks in going down this path, because of the myriad of factors that come into play.

Customer contact outsourcing can be a complex and challenging task. Not only do you have to determine whether outsourcing is right for your organization, you also have to convince upper management that this is the right way to go, accurately assess your outsourcing requirements, and evaluate vendors.

There are a lot of practical reasons why companies decide to outsource their contact center services. They do it to:

–Improve company focus
–Gain access to best practice capabilities
–Accelerate reengineering benefits
–Share risks
–Free up resources for other purposes
–Make capital funds available
–Reduce and control operating costs
–Acquire resources that are not available internally
–Delegate a function that is difficult to manage or is out of control
–Delegate a function that is not the company’s core competency
–Avoid customer contact technology investment
–Test a project
–Respond to demand fluctuation
–Provide 24-hour access for customers
–Meet an aggressive project time frame
–Implement disaster recovery/back up operations

What’s more, the reasons for outsourcing today are not the same as 10 years ago. In the “old days,” contracts were usually put together in haste because the outsourcer often took over a distressed situation in which performance levels were not easily agreed upon. Consequently, very few meaningful metrics and standards were defined. The outsourcer provided limited information to the company in terms of its cost for providing services, and any inquiries made by the company were often given less than immediate attention.

The result was a poorly understood relationship in which both parties blamed each other for increasing levels of nonperformance. These relationships historically resulted in a win/lose adversarial type of relationship where both parties sought to win at the loss of the other.

In the new outsourcing model, the company looks at the outsourcer as a long-term asset that is a source of ongoing value to the company. As an asset, time and resources are dedicated to managing the relationship and maximizing its value. The company’s resources are held accountable for extracting value from the outsourcing relationship.

The intent is to keep the relationship for as long as it brings value – understanding that over time, new parties and new alliances may need to be formed as technology and organizations change. Therefore, companies strive for long-term relationships and align the outsourcer’s motivation by developing appropriate incentives and disincentives. They invest in tools that can objectively measure outsourcer performance and contribution as well as foster communication.

Not only that, there is interdependency between the two organizations – that is to say, change in one affects the other. This way, both parties understand the cost drivers of the two infrastructures and coordinate changes so as not to drive additional costs into the process. Company and outsourcer behave as an integrated chain rather than win/lose adversaries.

Making the decision to outsource

To make a good outsourcing decision, companies must first baseline their current performance. This decision should not be based on frustration, but rather than facts. Metrics should be used to establish a baseline of productivity, quality, and the costs associated with providing customer contact in-house.

When analyzed against “industry norms,” the results may show that your company’s performance is not that far off. In addition, the baseline may uncover process improvement opportunities to eliminate many frustrations.

On the other hand, the analysis may result in the realization that outsourcing is truly a viable alternative. Having quantifiable baseline data allows a company to enter into an outsourcing venture knowing the objectives they want to achieve, the anticipated benefits, and the metrics required to measure and manage the partnership.

Second, companies need to seek a partner. The right outsourcing contract is a strategic relationship, almost like a merger/acquisition activity. It takes a lot of hard work and communication to maintain a smooth relationship. The relationship starts with not seeing it as a company/supplier relationship, but as a partnership.

Third, companies need to understand the reasons for outsourcing. Is it just a financial transaction or is the company seeking more? Is it for technology transformation? Is it for a business transformation? Once companies understand the objectives, they’re in a much better position to choose their partner.

When evaluating outsourcers, it is best to pre-qualify them based on references, reputation and existing relationships. Research shows that many companies fail to do this. This adds support to the growing emphasis on pre-qualifying outsourcers based on their total capabilities prior to RFP distribution.

You should never outsource on the basis of subjective or personal preferences or strictly on the basis of the lowest competitive bid. As for choosing the lowest bid, any advantage is illusory. Price is only one element of total cost. Whatever is gained by low price can be more than offset by excess costs in operation and performance.

There are many factors that can contribute to imperfect outsourcing partnerships. Some of the more common ones include:

–Fixing the price and performance levels at the start of the contract and not including any meaningful mechanism for continuous improvement: Having fixed pricing and performance at the start sets the stage for continued mediocrity and doesn’t allow the partners to benefit from learning opportunities. Further, it sends the erroneous message that the company and outsourcer know everything up front.

–Not addressing culture in the partnership: Differences in company and outsourcer cultures can cause misunderstanding and distrust. Even if the cultures are mostly compatible, the two partners still have fundamentally different goals and objectives that are frequently difficult to harmonize. These differences must constantly be addressed.

–Not allowing any flexibility in contracts: All outsourcing contracts are based on key assumptions regarding technologies, business conditions, personnel, and other relevant issues. As soon as the contract is signed, these assumptions begin to change.

–Underestimating the time and effort required to manage an outsourcing relationship, or worse, handing over management responsibility to the outsourcer: If the outsourcer is given the responsibility to manage the relationship, they soon begin to operate in a priority vacuum. Service levels may deteriorate because the outsourcer’s objectives get out of sync with the company’s objectives.

–Assigning a new team of people to the responsibility of managing the ongoing relationship: These new team members may or may not understand the contract’s intentions. The team that negotiated the contract needs to stay engaged in contract management.

Next week we’ll look at one of the most complicated tasks involved in the process of outsourcing your contact center operations: Writing the request for proposal.

Kathryn E. Jackson, Ph.D, is president of Ocean City, NJ-based contact center consultancy Response Design Corp.