OUTSOURCING. Outsourcing Mission-Critical. Communications to Improve. Customer Relationships. DST Output

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1 W H I T E P A P E R OUTSOURCING DST Output Outsourcing Mission-Critical Communications to Improve Customer Relationships

2 1 OUTSOURCING Successful outsourcing allows companies to focus on their core competencies and accomplish their mission. Trust is at the core of every organization s decision to outsource a mission-critical task. Once trust is established and the organization sees a clear link between resolution of their most pressing business issues and the decision to outsource internal functions, a strategic partnership is often the result. According to Frank J. Casale, chairman and chief executive officer of The Outsourcing Institute, while outsourcing has been viewed as a viable means to achieve cost control and economies of scale, many companies are incorporating outsourcing as a strategy in business planning. Today outsourcing is a given, with growing popularity as an essential management lever for improved customer relationships, business innovation, and competitive advantage. MANY COMPANIES INCORPORATE OUTSOURCING AS A BUSINESS STRATEGY. In this white paper, we will explore the trends and benefits of outsourcing customer communications as part of an integrated customer relationship management (CRM) strategy. Customer communications include but are not limited to bills, invoices and transaction-oriented documents; financial statements, trade confirmations, policy renewals, explanations of payments or benefits, newsletters and direct mail.

3 2 OUTSOURCING The Growth of Outsourcing To be competitive, companies must remain vigilant. They must be aware of current and developing market conditions, prepare effective strategies for acquiring and building customer loyalty, and develop products and services to rapidly grow and retain market share. Those core functions are critical to a company s survival. Services that support these mission-critical functions are constant throughout many companies and fall into the following general categories: Technology information data centers, application service providers, hardware and software services and repair, networking, database and data warehouse services, and training Operations human resources, accounting, customer service, technical support, facilities, and customer communications delivered across multiple channels such as the Internet, paper, call center workstations, wireless applications and more Manufacturing contract manufacturing Logistics travel, transportation, distribution. According to the Outsourcing Institute, throughout the 1970s and 1980s, only low-level tactical functions such as keypunching were outsourced. Most organizations preferred to manage revenue-generating functions with in-house systems and dedicated personnel. In the late 1980s, organizations began outsourcing higher-level functions such as facilities management, and payroll processing while leading companies like Kodak began outsourcing information systems and computer operations. Also during this time, many companies turned to strategic partners to help them manage their communications in order to grow and retain customers. The growth of outsourcing has been enormous. According to CapV, a document outsourcing consulting firm, U.S businesses spent $2.4 billion on outsourcing customer-oriented business communications functions like statements, bills, invoices, policy renewals, stock trade confirmations, and more.this figure is expected to grow to $4.7 billion by Why Outsource? In the past several years, spurred by technology development that eliminated the distance barrier between businesses and their customers, a new type of company has emerged. These companies have become strategic partners to businesses; specializing in communications applications that relieve corporations of numerous difficult management problems and help them close the gap between company and customer. Traditional examples such as payroll and accounting firms have expanded to include companies that specialize in customer communications. For example, at DST Output, customer communications are the core competency of our business and we dedicate research and resources to perfecting this function. We plan, design, and create statements, invoices, trade confirmations, and direct mail and deliver these communications through a variety of channels. THE OUTSOURCING INSTITUTE MAINTAINS THAT COMPANIES OUTSOURCE FOR THE FOLLOWING REASONS: IMPROVE COMPANY FOCUS GAIN ACCESS TO WORLD-CLASS CAPABILITIES FREE INTERNAL RESOURCES OBTAIN RESOURCES NOT AVAILABLE INTERNALLY ACCELERATE RE-ENGINEERING BENEFITS As information and communications technologies become more advanced, companies realize the disparity between the potential of these technologies and the ability of their own in-house staffs to manage it. And, customer-centric companies know that harnessing the value of rapidly advancing customer relationship technology can help them keep their most loyal customers over the long haul.

4 3 OUTSOURCING The shortage of skilled personnel makes outsourcing even more compelling. It transfers the need for recruiting, training and maintaining experts to a strategic partner, allowing the organization to focus their staff on more essential functions. Outsourcing also transfers the responsibility of keeping up-to-date on technological change to partners who specialize in particular services. Companies with specialized expertise in selected markets and hundreds of long-term client relationships can help overcome the corporate knowledge learning curve. Outsourcing partners with industry expertise bring a greater understanding of what it takes to manage highly specialized data streams associated with clients in a variety of industry segments. Economies of scale allow strategic outsourcing vendors to invest in the very best technology and spread the cost over a number of customers, providing them access to personnel resources, technology, and systems that would not be a wise investment for a single company. Barriers to Outsourcing The barriers to outsourcing mission-critical customer communications are primarily focused around security and control, data and corporate knowledge, and the reversibility of arrangements after contracting for services. Security concerns involve a fear that the confidentiality of client data will be compromised in some way. To ensure protection of data, the clients of outsourcing partners must demand that secure environments be established. Staff must be trained to follow security measures and those measures must be outlined in contracts with outsourcing partners. BARRIERS TO OUTSOURCING INCLUDE CONCERNS OVER DATA SECURITY, CONTROL, AND CONTRACT REVERSIBILITY. Lastly, many companies believe that turning over critical internal functions will result in a loss of skills and expertise within the organization. Often, the reverse is true. Companies that turn over critical functions to an outside source have more time to keep current on skills and technology and are in a better position to assess the best options for a variety of different situations. Major Benefits to Outsourcing Benefits to outsourcing customer communications typically fall into four general categories: improving customer relationships, maximizing operational capabilities, obtaining needed technology resources, and gaining financial benefits. Control issues often relate to responsiveness and the flexibility of contractual arrangements. Many clients doubt that vendors can respond as quickly as in-house staff. However, the truth of the matter is that many in-house departments are already overburdened and may be less responsive than the strategic partner who is offering the services. Performancebased contracts and proficiency at metrics measurements will ensure that strategic vendors deliver what s promised. There is also a concern that strategic partners do not possess the industry expertise to handle the needs of the enterprise. Customer Relationship Benefits More often, customers are expecting companies to respond to their needs quickly and to communicate with them in meaningful and relevant ways. A partner like DST Output can help identify key opportunities in a company s customer base in order to cross sell customers existing products, educate customers on new programs and services, and create personalized outbound customer communications that build loyalty and return-on-investment.

5 4 OUTSOURCING Management information Outsourcing customer communications is more than managing the print or mail function. It involves integrating data from disparate sources and building communications for delivery across a variety of channels. At DST Output, we see a marked shift from overseeing the daily demands of printing and mailing to creating a seamless flow of customer information across multiple channels mail, Internet, , workstation, wireless and more. STRATEGIC PARTNERS CAN INTEGRATE DATA FROM DISPARATE SOURCES SUCH AS CALL CENTERS, PRIMARY DATA FILES, AND THIRD PARTY VENDORS TO PERSONALIZE OUTBOUND COMMUNICATIONS. Interactive marketing tools Sophisticated technology solutions make it possible to communicate with customers at the individual level by inserting personalized messages and dynamic content directly into statements, invoices, trade confirmations and other communications regardless of the final delivery channel. customer service representatives (CSR s) workstation, or even a newsletter or direct mail piece, these compelling tools can function as robust marketing vehicles. Powerful Internet tools For electronic presentment of communications, the Internet provides an interactive opportunity that enables immediate two-way communication with your customers and allows self-help customer service. Marketing opportunities also increase with an electronic solution that offers robust back-end functionality. Using customer information, companies can display personalized, clickable marketing messages to cross sell and up sell to customers who log on to pay bills or receive business communications electronically. The immediacy of the Internet also makes it possible to test the impact of a message and pull it from the site or roll it out to a wider audience within hours. A WELL-EQUIPPED OUTSOURCING PARTNER CAN ACCELERATE MARKETING CAMPAIGNS THROUGHOUT THE ORGANIZATION. Where limits on printing or electronic technologies may inhibit an in-house department from using dynamic messaging or developing content rich communications, a well-equipped outsourcing partner can accelerate marketing campaigns and apply them consistently throughout all business communications channels without inhouse retooling. Compelling marketing tools High-quality statements that carry strong personalized images and messages are shown to improve customer interaction and increase customer loyalty. That s because your customer communication is a powerful means of connecting with your customers. Whether it s a print or electronic statement, an invoice, a viewable document at a Sophisticated solutions An outsourcing partner can afford to invest the staff hours and costly expertise in developing advanced applications. Instead of working within a limited technology range, you can select from all available tools for graphic design, database management, delivery over multiple channels, advertising messaging and tracking, and other technologies that directly influence the effectiveness of your customer communications. Operational Benefits Using an external resource to manage the customer communications process can result in a number of operational efficiencies.

6 5 OUTSOURCING Control of the process One of the greatest concerns companies express when considering statement outsourcing is the fear of losing control of the process but tracking tools that let customers watch as statements and invoices move through the process can alleviate these concerns. Companies can track mailing dates and times, job performance, postage, transaction costs, turnaround time, and volume trends; options that are rarely possible with an in-house department. Ability to expand or change rapidly Use of an external service provider removes the burden of growing or changing internal data systems when the business changes. A company can add a new product line, new channel partners, move into a new territory, or absorb an explosive growth spurt without disrupting the business. The effort associated with rapidly hiring and training the skilled workforce necessary to expand into new territories or add new products can be diminished with the right outsourcing partner. No risk of late billing For billers, cost benefits extend to eliminating missed or late billing cycles that can wreak havoc on revenue. A qualified customer communications partner can immediately improve accounts receivables and increase a company s ability to predict revenue flow and call center traffic demands. Reduced call-center traffic A clear, easy-to-understand statement, bill, policy notice or trade confirmation, reduces call center traffic. According to the Gartner Group, each customer service call costs a company more than $4.00. Any tool that reduces such calls can have a tremendous impact on operational costs. When customers have quick but thorough access to the information they need, they call less often and enjoy a higher level of customer satisfaction, which translates into customer loyalty. Customer service monitoring In addition to less traffic, CSRs gain tools that allow them to see a duplicate image of print and electronic statements. With both customer and CSR looking at similar images, questions can be answered faster. Technical Benefits The velocity of change in technology seems to increase with each passing year. To keep up with the demands, every company in every industry is now forced to invest considerable resources into technology. But if a company s core business is telecommunications services, for example, the most important investments should be made to maintain and advance telecommunications-specific technology and not to maintain systems to operate functions outside their core competence. IN TODAY S BUSINESS CLIMATE, THE ABILITY TO MOVE QUICKLY TO ACCOMMODATE CHANGE IS A CRITICAL ADVANTAGE OF OUTSOURCING. Leading-edge technology Many companies now outsource technology-heavy areas such as statement processing to companies who can afford to develop specialized systems that match exact needs. Just as the telecommunications company knows that advanced technology provides a competitive edge, a strategic vendor considers it imperative to remain at the leading-edge of its industry s advances. Flexible workload schedules Technology has also moved much of the world to a 24 by 7 schedule. Electronic billing, for example, must always be operational to meet the needs of customers who may log on at any hour and from any location. This fast paced schedule also impacts in-house operations by delivering peaks that match demand rather than a typical 40-hour per week schedule. Experienced outsourcing

7 6 OUTSOURCING partners with flexible hours of operation can compensate for constantly changing workloads in ways not always possible with in-house operations. Ability to change rapidly As markets change and shift, increased capacities and new products and services are often added. A lone company may need to invest in additional equipment or data programming to match the demands that an outsource vendor can add with little effort. According to Frank Castle of the Outsourcing Institute, in today s business climate, the ability to move quickly to accommodate change may be the greatest advantage outsourcing offers. Established alliances Companies can also reap significant rewards from a well-established partner. Strategic outsourcing partners, who have established relationships with third party data providers, can be a huge asset in managing a company s customer communications. The complexity of the data management across multiple channels can be eradicated through an alliance with a reputable vendor. Cost-Saving Benefits Reduction of internal resources By eliminating a sizable in-house function, operational costs should decline. The need to constantly add new technology or equipment to keep up with capacity and the technology curve places a hidden cost pressure on customer communication functions. Outsourcing can lower capital outlay for technology and equipment, thereby driving down costs, reducing risk and freeing resources for other uses. Cost efficiencies created through volume Any operation that dedicates itself single-mindedly has a greater likelihood of perfecting systems and business processes. A partner that specializes in customer communications can offer cost efficiencies such as postal discounts for printed statements and strategic partnership advantages in the electronic arena. At DST Output, several innovations, including patented systems, have also allowed the company to trim turnaround times while improving quality control. Improved quality Outsourcing companies like DST Output that process tens of millions of statements each month invest in quality control systems that set them apart both from the competition and in-house departments. Volume processing and the need to deliver a better-than-home-cooked solution drive investments in proprietary systems that provide comprehensive checks and balances to ensure accuracy. Ability to transition from paper to multiple delivery channels It s also important to note that a partner that can deliver communications and messaging through the mail, the Internet, , voice technology, and workstation applications will enable a company to coordinate a cohesive program of communication with customers from one channel to multiple channels, if desired. Though compelling, cost efficiencies may prove to be one of the less important reasons for moving to an outsourcing solution when considering the opportunities outsourcing provides to drive revenue and increase market share through improved customer relationships. Conclusion In today s business climate, lean enterprises that specialize in their core competencies generally outperform companies who keep all administrative functions in house. An increasing number of companies are evaluating which functions external service providers can better perform so they can enhance the lifetime value of their customer relationships.

8 7 OUTSOURCING Customer communications is an ideal function to outsource because its benefit can be felt across the enterprise. From increased sales due to personalized marketing, to improved operational and technical capabilities, and to lower overall costs, outsourcing makes sense for companies with a vested interest in reducing customer attrition, developing loyalty, and expanding market share. About DST Output DST Output creates customer communications so personalized that company and customer are truly connected. By integrating advanced relationship management and communications techniques, we help the world s leading businesses create lasting, profitable relationships with their customers. It is also one of the smartest functions to outsource because it requires significant infrastructure and personnel investments. Even when established in house at the highest level, it will require a continuous money stream to keep it operating at the highest level, and may still not produce the quality or volume an outsourcing provider can offer. For More Information To learn more about outsourcing your mission critical customer communications, call (800) , or visit our Web site at The key to a successful outsourcing relationship is to choose your vendor wisely and to jointly establish internal processes that support the relationship. During the selection process, it is wise to tour the facilities of potential vendors, talk with current customers, examine their processes, and ask plenty of questions. Once you have made your decision, you will need to establish metrics that determine the success of the relationship. This last step is critical because it sets a clear standard for expectations that all can agree to up front. It also provides both companies with a benchmark to measure against in coming years. Copyright 2002 DST Output, Inc.