WHY OUTSOURCE? HOW TO BEST USE CALL CENTER OUTSOURCING TO GROW YOUR COMPANY S PROFITS. A Results Companies White Paper.

Transcription

1 A Results Companies White Paper GLOBAL CUSTOMER CONTACT SOLUTIONS WHY OUTSOURCE? HOW TO BEST USE CALL CENTER OUTSOURCING TO GROW YOUR COMPANY S PROFITS By Michael Schein

2 OVERVIEW Outsourcing is here to stay. According to a Gartner study, companies that successfully contract with third party providers to handle their customer service and technical support can lower their costs by at least 25 to 30 percent. 1 On the other hand, a company that mishandles its outsourcing strategy can do irreparable damage to its brand, customer loyalty, and bottom line. This white paper will examine the growing need for outsourcing in today s economic climate, mistakes that many firms make when choosing an outsourcer and best practices to ensure that any outsourcing program will have optimal results. THE GROWTH OF OUTSOURCING In light of the recent economic crisis, many analysts predicted that firms would cut back their outsourcing initiatives. In fact, the opposite has occurred. According to Brendan B. Reed from Customer Interaction Solutions, [In] the current economic climate To cut costs clients are focusing more than ever on their core competencies, which has led to more of them knocking on BPOs [Business Process Outsourcers ] contact centers. At the same time they are seeking more in the way of service and quality from BPOs at competitive pricing so they can retain more of their clientele and maximize the value from them with the limited resources available. 2 Many experts believe that outsourcing also increases long term planning ability and predictability. 3 Companies that successfully contract with third party providers to handle their customer service and technical support can lower their costs by at least 25 to 30 percent. According to an analysis conducted by IDC: Revenue for the outsourcing market was $55.7 billion in 2007 Revenue for the outsourcing market will reach $95.1 billion by PROJECTED GROWTH OF OUTSOURCING 95BILLION 75BILLION 55BILLION Outsourcing as Risk Management Of the many ways that contracting with a BPO enhances efficiency, the most significant might be the ability of an outsourcer to manage a client s risk. 01

3 A company has to make a considerable investment every time it sets up a new internal call center. Overhead includes buildings, telephony, workforce management and CRM technology, computers, furniture, employee benefit packages and utilities, to name just a few. These expenses are not insignificant. If amortized across a typical call center s staff, overhead expenses would make up, on average, half the all-in cost of each employee. Doing the Math: The True Cost of an In-house Call Center Employee The all-in cost of an in-house call center employee (with trainers, supervisors and managers taken into account) is $50,000. In short, outsourcing alleviates client risk. It allows clients to remain flexible. The cost of overhead per agent (real estate, technology, benefits, utilities etc.) is.5 times the all-in cost of an employee. This comes out to $25,000 per agent. Hence, the total cost of an in-house call center agent is $50,000 + $25,000 = $75,000 5 While making a big capital investment can be somewhat scary, doing so without knowing whether there will be a return on that investment is downright terrifying. For example, take a scenario where a company decides to build and staff a new call center based on growth projections, but where growth was not as large as expected. This hypothetical company might very well be stuck with the vast amounts of overhead needed to run a full call center but with very little business to place there. The truth is that instances like this one occur on a regular basis. With outsourcing, on the other hand, it is the BPO that owns the building, manages payroll, and worries about the utilities. Outsourced call centers are usually located in areas with a lower cost of living, and they are often able to plug new clients into existing technology platforms to more effectively manage cost. In short, outsourcing alleviates client risk. It allows clients to remain flexible. The Other Side of the Story Many business leaders have recognized they cannot afford to give up the savings and efficiencies gained through outsourcing. Companies are increasingly choosing to focus their time, talent, and dollars on producing the core products or services that brought about their initial successes and leaving the management of phone service staffing to organizations that specialize in that field. But there is a flipside. Among many customers, there has been a backlash in regards to outsourcing - namely the growing perception that outsourced call centers equal subpar quality. Increasingly, companies are looking to gain the advantages that come with outsourcing without having to sacrifice the relationship they have with their customers. 02

4 THE NEW OUTSOURCING MINDSET A Change in Strategy Although outsourcing is on the upswing, the picture of success for BPO providers is far different than that of even a few years ago. In the not too distant past, many companies selected outsourcing firms with massive thousand-plus seat call centers, most of which were located in countries with minimal cultural ties to the US, such as India. Over the last few years, though, the outsourcing industry [has continued] to grow - but with an emphasis on nearshoring. 6 In other words, as companies continue to outsource, if they are looking for an international solution, they are tending to pick locations that better meet their enterprise objectives, either geographically or culturally. Quality Issues: Foreign and Domestic One reason for the backlash against the old model of offshore outsourcing is that with unemployment hovering between 8% - 10%, customers have become especially sensitive to inferior performance from agents who clearly lack a connection to the US. Although this attitude has recently reached its peak, the sentiment has been steadily building for the better part of a decade. According to Ginger Conlon in her article The Great Outsourcing Debate, Those who are against [outsourcing] say that companies lose control of important functions, add complexity to the outsourced business processes, and increase the risk of problems and errors. Additionally, they cite offshore outsourcing as a drain on the US economy and job market. 7 One Company s Wrong Turn One example of a company that was forced into a costly change of direction to its offshore strategy is the Midwestern insurance firm Conseco, Inc. Conseco bought India-based ExlServices for $52.6 million in 2001, anticipating savings of $60 million a year in call-center costs. But customers complained they could not understand the It is essential that non-domestic agents have both the cultural familiarity and linguistic aptitude needed to deliver truly stellar customer service. heavily accented call agents Conseco sold ExlServices at a $20 million loss. 8 Stories like Conseco s are common. Domestic customers have been growing more and more irritated by even the slightest deviation from top quality service and mutual understanding. Therefore, it is essential that non-domestic agents have both the cultural familiarity and linguistic aptitude needed to deliver truly stellar customer service. Brand Damage While the negativity toward outsourced customer service is most acute when customers believe the agent is handling the call from a distant location such as India, it can also come up when the outsourcer is domestic. In many cases, the problem stems more from the operational philosophy of those running the call centers than 03

5 from the inherent abilities of the agents. While contact center operators generally accept that outsourcing customer service can improve dealing with clients, reduce costs and boost operating efficiencies, writes James Vander Putten of Direct Magazine, some also believe it doesn t help reinforce brand essence Too often, outsourced customer care is evaluated as a basic operational decision in contact centers [with the] primary concern to save money and increase operating margins The risk of this approach is the huge potential for failure, not to mention the devastating effects a poorly executed program can have on a company s long term customer satisfaction. 9 The focus on lowering costs at the expense of all other factors has become a pervasive mindset in much of the call center outsourcing world. Massive call centers make it hard for supervisors to give agents the attention they need to perform well. Plus, it is often difficult for agents in these mega-sites to identify with the brand of the company they are servicing when there are so many different client programs under the same roof. While controlling costs is always important, the loss in future revenue that results from the damage to a company s brand is immeasurable. In a constantly online world where poor word of mouth spreads like a virus, bad customer service can bring a company to its knees in no time. There are a surprising number of international and domestic alternatives that address today s most common outsourcing challenges. An Increasingly Expensive Proposition Another factor in changing the traditional outsourcing dynamic is that locations like India are no longer as inexpensive as they once were. With so much competition in these popular spots, agents are now demanding more money. As a result, companies that choose this solution must keep increasing their wage rates to stay in the game. Many experts see change on the horizon. According to one, As wage inflation has set in improving productivity and training keeps...[outsourcing]...costs attractive. Therefore, outsourcing isn t about making one decision anymore... It s become a portfolio of choices. 10 Today s decision makers must develop a comprehensive plan that takes the unique concerns of the new business landscape into account. A REVISED APPROACH There are a surprising number of international and domestic alternatives that address today s most common outsourcing challenges. New Locations for a New Experience One way that a firm can utilize an international outsourcing solution without jeopardizing its brand identity is to select a location where the population has a true understanding of American culture. For example, even though the Philippines is many 04

6 miles away from the United States, there is a connection between the two countries stemming back to the period between 1898 to 1946 during which it was a US colony. 11 To this day, English is taught widely in schools there, and many Filipinos use the language as a means of everyday communication with each other. The nearly accent free English spoken by Filipinos is one of the main reasons that American customers report a much lower rate of dissatisfaction when talking to Filipino customer service agents. However, it is important to choose the right location in the Philippines. With the rapidly increasing popularity of the country for call centers, the competition is increasing at a rate that rivals India just a few years ago. Many of Manila s sites are located in crowded proximity to one another, with multiple centers often in the same high rise buildings. It is common for managers and HR departments of the various outsourcing firms to jockey to hire from the same labor pool. To gain the full benefit of the Philippines unique advantages, an outsourcer should analyze the following features of a location before making a site selection: Immediate competition Labor pool vs. call center concentration Transportation flows into the area Physical workplace availability IMMEDIATE COMPETITION LABOR POOL vs CALL CENTER CONCENTRATION In order for a company to truly leverage the advantages of outsourcing, the BPO firm it chooses to work with should have a domestic option at least as strong as its international presence. TRANSPORTATION FLOWS INTO THE AREA PHYSICAL WORKSPACE AVAILABLE Of course, that the Philippines is not the only option. A number of cities in Mexico, for instance, are close to the US border, which translates into another largely fluent labor base. DOMESTIC OUTSOURCING 2.0 In order for a company to truly leverage the advantages of outsourcing, the BPO firm it chooses to work with should have a domestic option at least as strong as its international presence. Many companies and outsourcers avoid domestic call centers because they assume they will be too expensive. While there are ways to control 05

7 wages domestically, it is a mistake to view the rate paid to agents as the primary concern. [Despite] the stigma often associated with it, outsourcing...[is] not always about finding the cheapest solution. The smartest businesses farm out the functions that aren t their core expertise, which adds value and saves money. 12 Rural Locations - Where Caring and Empathy are a Way of Life Many US call centers suffer from the same problems as their foreign counterparts too many employees, an overcrowded labor market, high attrition. To a considerable number of agents working in big city call centers, the job is a stopover point to whatever their ultimate career will be. A better option is the small town call center. In many small rural communities, the call center is among the town s largest and most prominent employers. Residents of these towns often view being an agent as an ideal work opportunity in that it offers the chance for advancement that many regional employment alternatives do not. As a result, employees at rural call centers typically work harder and more diligently than their big city counterparts. The cost of living is lower in rural communities, which makes it easier for employers to control their labor expenses. Furthermore, many rural communities are tight knit, leading to an atmosphere of civility and friendliness. For agents in these areas, caring and empathy are not simply skills taught in a training class they are a way of life. Smaller Client-Centric Facilities Another piece in the puzzle of delivering superior service through outsourcing is the practice of using smaller client-centric sites. By keeping the headcount in call centers to a few hundred agents or less, managers can give every agent the attention they need to succeed. With only one or two client programs per facility, agents come to identify with their project s brand and deliver service comparable to an agent working directly for the client in-house. Effective Quality Management In addition to selecting the right location, the ideal outsourcing firm should have procedures, processes, and technologies in place to help them best handle the challenges that regularly come up. The outsourcer should utilize the most sophisticated Customer Experience Management, CRM, and reporting systems available to ensure consistency in quality, data management and after call notation. Likewise, the outsourcer must have in place rigorous hiring and testing procedures, scientifically-tested call flows and sufficient organizational experience to ensure continual decreases in attrition and consistent increases in customer service quality across the organization. The outsourcer must have in place rigorous hiring and testing procedures, scientifically-tested call flows and sufficient organizational experience to ensure continual decreases in attrition and consistent increases in customer service quality across the organization. HOW THE RESULTS COMPANIES CAN HELP The Results Companies is a leading customer contact solutions provider for Fortune 500 and 1000 companies. Established in 1990, The Results Companies provides 06

8 services through over 4,000 Customer Contact Agents located in 14 domestic and international locations worldwide. Results is an innovative organization with a proven track record in customer service and sales performance. With a foundation rich in technology and innovation, Results has developed systems to improve call management, enhance service, increase performance and deliver an ideal end experience to the customer on every call. For over 20 years, Results has partnered with organizations to grow their customer base and increase their market share. The Results Business Model - A Better Customer Experience Results offers clients looking for an outsourced customer service, technical support or sales solution a wide array of international and domestic options to best fit their needs. People, Process and Technology One of Results premier features is its ReadiSuite of technologies and processes - a powerful integrated solution designed to systematically strengthen clients businesses. ReadiSuite is comprised of: There is extensive screening of all international agents to ensure they have the ability to communicate with customers on a level that is on par with or exceeding that of agents in domestic call centers. ReadiCall - a desktop call guidance technology that drove the achievement of the J.D. Power and Associates Award by one of Results clients. ReadiCom - a secure online tool that combines curriculum design and performance management, as well as supplying all levels of site personnel with notifications, training material, assessment tools, forms, reports and subject matter training assistance ReadiNet - a reporting, monitoring and digitized recording platform that gives a complete view of the performance of each representative, call-by-call and minuteby-minute. ReadiAdvantage - a system of performance excellence through leadership, development, quality and business development. Results Global Presence Results has developed an approach to setting up call centers that it calls rightshoring. The company locates its sites outside of the US in areas selected on the basis of the availability of employees with top-tier English language ability and cultural affinity with the United States. Facilities include the Silver City, Eastwood, and W Building locations in Manila, Philippines. Each facility undergoes an in-depth analysis to ensure that the sites are desirable work environments easily accessible by public transportation but far enough from popular call center hubs to avoid the problem of an overly competitive market. Another Results location is Hermosillo, Mexico, which is located only three hours by car from the Arizona border. There is extensive 07

9 screening of all international agents to ensure they have the ability to communicate with customers on a level that is on par with or exceeding that of agents in domestic call centers. Results Domestic Centers Results domestic business model is based on the concept that it is most effective to operate a number of interlinked centers in less densely populated rural areas that are the right size for the projects at hand. This stands in contrast to the traditional model of operating just a few massive centers in metropolitan locations. The Results model creates a contact center culture that revolves around maintaining customer satisfaction, as well as meeting and exceeding client goals. Top Employer - Results selects locations for its centers where it is able to quickly become at least one of the top five employers in the community. This strategy allows Results to find agents and managers that view working with the company as a career rather than a transitional job. Lower Attrition - The desirability of employment as a Results agent translates into a markedly lower level of attrition as compared to the typical large metropolitan call center. Results selects locations for its centers in which being an agent is a position that people go out of their way to obtain, view as permanent, and do whatever they can not to lose. Results believes that customer service agents are the voices and hearts of clients in the minds of their customers. Culture of Caring - Results believes that customer service agents are the voices and hearts of clients in the minds of their customers. Because of this philosophy, Results chooses areas for their domestic centers that are inhabited by people with a strong work ethic, friendly attitude and empathetic outlook. Career Development - Results employees have risen from positions on the call floor to high-level executive management. Agents learn about the possibility of growth early on, and site leaders reinforce this message as often as possible. Abundance of Eager Quality Agents - Unlike most large metropolitan call centers that struggle to fill vacant seats, Results domestic call centers often have to turn away candidates. Site directors and Human Resources managers know their communities inside and out, which allows them to find the right people for the right positions whenever necessary. Please visit The Results Companies at TheResultsCompanies.com. To find out more about how The Results Companies can help with your outsourcing strategy, please call ext. 123 or service@resultstel.com. For more information contact us at: service@resultstel.com ext

10 1 Goasduff, L. (March 2005) Retrieved from Gartner Press Release website: 2 Reed, B. (Nov. 2010). BPOs: Doing More With Less. Retrieved from Customer Interaction Solutions website: 3 Conlon, G. (Feb. 2004). The Great Outsourcing Debate. Retrieved from CRM website: 4 Boyer, Eric James. (Oct. 2008). Sykes Enterprises, Inc. Initiative Coverage Report. Wachovia Capital markets Report 5 Innovar Consulting Michael Hollohan Interview. 6 Musico, C. (March 2008). Re-shoring Contact Centers. Retrieved from CRM website: 7 Conlon, G. (Feb. 2004). The Great Outsourcing Debate. Retrieved from CRM website: 8 Heller, M. (June 2004). A Call-Center Scam Prompts Greater Scrutiny. Retrieved from Workforce Management website: index.html 9 Vander Putten, J. (Jan. 2005). Call Center Technology: Image on the Line. Retrieved from Direct website: 10 Hyatt, J. (Oct. 2006). The New Calculus of Offshoring. Retrieved from CFO website: 11 Srivastara, M. (Dec. 2010) Philippine Call Centers Overtake India. Retrieved from Bloomberg Businessweek website: htm?chan=magazine+channel_news+-+global+economics 12 Hughes, I. (July 2010). Not Just Cheaper. Retrieved from Entrepreneur website: 09