Contact centres: To outsource or not outsource – how do you know?

Fairly or unfairly, the outsourcing of customer service operations has become an emotive issue over the past decade. While other outsourced duties don’t even solicit so much as a raised eyebrow, contact centre outsourcing has attracted plenty of unwanted headlines for brands in the past and there remains a stigma attached to it.

Despite this, the outsourcing of contact centres continues to be an appealing option to a significant number of businesses, with some major brands having announced huge outsourcing deals in recent months. So how has the outsourcing sector changed since its darkest days, and how can you tell if your business would benefit from outsourcing your contact centre operations?

The first thing to make absolutely clear is that while controversy has dogged contact centre outsourcing, there is no doubt whatsoever that it can be just as valuable as any other outsourcing project.

“Outsourcing can work very well,” emphasises Paul Smedley, executive director of the Professional Planning Forum (PPF). “You can easily get better customer service with an outsource partner than you can in-house. People outsource because they want to do it better and because they don’t want to invest in it themselves. There are some organisations that have been award-winning for customer service that it outsourced. And to do that they invest quite a lot in being clear about what it is they want to do, so the discipline of outsourcing can help some organisations to be clearer about what they are really trying to do for the customer. So if you invest in that, it is really going to help.”

But there is a caveat: “People do often outsource because they want customer service done better – but I don’t think that has always been the case with offshore. Some haven’t offshored to do it better, they have done it to do it cheaper.”

Offshore off the menu?

There was a time when the outsourcing of contact centre duties to offshore providers was a common practice, with a large proportion of major brands using destinations such as India for telephone support. But despite a growing appetite to offshore services such as IT, in recent years there has been a marked shift away from the offshoring of contact centres.

A recent survey of 250 British firms by Aspect found that 90% of retailers and utility firms now have their primary customer service operations based back in the UK, with only 2% having their contact operations outside of Europe.

And research by Ovum indicates that there are no signs of the shorelines shifting in the foreseeable future, with its findings suggesting that only 2% of large enterprises in Europe, North America and Australia have plans to offshore customer services imminently and only 10% expecting to offshore customer service through 2014. 80% said they have no plans to offshore.

“A few years ago, offshore outsourcing was very popular because it was seen as a low cost option to providing customer contact. But since then, the value has often not been realised,” says Nick St John, account director at Aspect Software.

“From a customer perspective, there has also been a backlash in terms of the locality of their customer experience, with some businesses feeling the need to revert back to a more personal and local contact with their customers. It is this emphasis on the value and quality of the customer experience that has resulted in the shift away from offshore outsourcing.”

St John believes that businesses and in particular brands have begun to understand the dynamics of the ‘cost versus value’ argument.

“During the rise in offshore outsourcing, businesses were heavily focused on reducing costs with less of an emphasis on value. Increasing the profit margin was the driving motivator and the fastest way to achieve this was the reductions in cost that moving operations overseas could offer. While this focus on reducing costs still applies to a degree, the dynamics of the argument has changed. Businesses are becoming more and more customer-focused which has placed the quality of their customer experience at the forefront of their business strategy; shifting the balance towards providing true value to their customers.”

What works for you?

But irrespective of this shift, the offshore contact centre industry still represents an enormous sector, with new bases for providers such as The Phillippines and South Africa developing rapidly to rival more established destinations as India. Clearly there is still a demand for the services they offer. Indeed, while there has been a backlash against brands seeking to cut costs by moving their service operations abroad, the decision to offshore is now more often motivated by other considerations.

“What is driving the decision now is really levels of flexibility and businesses doing business globally, rather than in one place,” says Anne Marie Forsyth, chief executive of the Contact Centre Association. “It is about acquiring new markets. It is about acquiring skills that perhaps you don’t have. It is about being multilingual. The cost issue is there, but it’s not such a big thorny debate now because the UK is actually quite a cheap place to do business now, property values are lower and the employment market is not tight – a lot of young people are looking for jobs. So the decisions are much more about whether it works for us abroad, rather than can it be done cheaper there.”

So if it’s a case of weighing up what can be offshored that works, what should brands be asking themselves and the providers?

“The first thing to consider is whether they have the processes,” continues Forsyth. “Is everything the way it should be before it goes off your site? Have you done as much as you can with them? Do you have the management capability in the offshore location that you’re thinking of, or can you get it easily? Or are you going to be aligning people from home, bearing in mind that there will always be problems with travelling? So most of the complex issues that people are dealing with now require really good management – not just management of voice, but management of multichannel, management of offshore operations, management of new systems, etc. Quite often that piece is understated.

“If you’re using an offshoring partner or outsourcing partner offshore, you really need to get the right references and right framework to make sure that the partnership is on equal footing from day one; that the required flexibility is built in so that if your customer base changes, for instance, you don’t have an inflexible arrangement that doesn’t deliver what you need.”

Outsourcing on song

With offshore outsourcing becoming a more strategic but less popular option for businesses, onshore outsourcing has emerged as a more appealing option for many, ensuring that out-of-house service expertise can be leveraged, while addressing consumer issues with the lack of ‘local touch’ and language barriers. 

Telco giant O2 is the latest business giant to outsource telephone support in a  10-year deal worth £1.2bn, transferring 2,700 staff to provider Capita in what is one of the UK’s biggest ever outsourcing deals.

“Over recent years, the UK government has played a far greater role in providing financial incentives for businesses to use UK Plc as a hub for contact centre activity,” notes St John. “These incentives, deeper on-site support and training and a general ‘up-skilling’ of the workforce have encouraged businesses to relocate and re-think their contact centre strategies. Such benefits are beginning to be realised as onshoring of the contact centre has led to deeper and improved customer contact. There still remains the issue with Full Time Equivalent (FTE) costs but there appears to be a narrowing of the gap between cost and value. As the balance continues to tip towards value, a preference for onshore outsourcing of contact centres will continue.”

So how do you know if the outsourcing of contact centre duties is a path worth taking for your own organisation – and how can you ensure that if you do decide to outsource, you get it right?

“The measures and targets of success that you use are really important,” says Smedley. “Customer satisfaction surveys, covering indirect as well as direct customer experience, are very important to use. And you should be talking to your outsource partners regularly – ever week if not more often – and to ensure that success estimations are within the KPIs of your contract. If you simply outsource call handling based on the old traditional measures of how quickly calls are handled, that is a recipe for a poor customer experience.”

He continues: “The other thing I would recommend is to include your outsourcers in just the same way you include the employees of your company in innovation and learning. Feed back to them on their ideas, pilot things with them as well as your internal people. If you’re outsourcing successfully, what you’re effective doing is pushing the boundaries of your organisation further out, rather than separating yourself from them. This is really important. It is a mindset.

“It has to be a partnership, because if you think of them simply as suppliers, and you stop worrying about that part of the business and you don’t take any notice of it, and there’s no feedback loop of learning from that part of the business, then that is really dangerous for customer contact. You don’t want to think you’re just outsourcing the production of a widget – that is not appropriate thinking. You have to think of them within your environment of innovation and learning – you listen to them, you combine people and your outsourcers, because they can also make a difference to what your company is doing and what products you develop and things like that.”

St John has a final piece of advice for businesses that are considering outsourcing as an option for their customer service operations.

“Businesses need to understand what value they place on their customers before thinking of outsourcing. Some businesses prefer to focus on their core business activity and leave non-core activity to experts in their field. But for other businesses, they see bringing in this capability as having greater control and as a potential cost saving. It very much depends upon the metric of cost versus value and the type of market vertical you are in. The same also applies to those businesses thinking of offshoring/onshoring with the added consideration of local/non local support and some elements of losing control of this function.

“There have been mixed reports over recent years of the merits of onshoring and offshoring, either way the outsourcing market for contact centre is still fairly vibrant and there are now a wealth of tools to help customers in reducing costs and at the same time improving efficiencies.”