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Offshore Outsourcing - An Industry Viewpoint

18th Feb 2004
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Don't outsource, streamline processes and keep business in-house says Magic Solutions spokesperson: Neil Harvey, EMEA Vice President of Sales


Outsourcing specific areas of a business has been widely accepted as a crucial way of reducing costs. However, there are many fears about the hidden costs and risks associated with outsourcing as the increase in demand will undoubtedly push costs upwards.

A new report from Huntswood Outsourcing Solutions stated "..many in the financial sector feel the benefits to be gained from outsourcing are 'overhyped'." It went on to say, "when asked if they would offshore functions such as call centres, processing new business applications or customer service administration, 80 per cent said they would not.
Neil Harvey, EMEA Vice President of Sales for Magic Solutions, discusses how outsourcing is not the solution to cost savings and how simply scrutinising business processes can increase a business capacity to grow.

Magic Solutions Viewpoint:

A customer service solution is often regarded as the simplest division to outsource and combined with the perceived low costs of doing so, the prospect appears inviting. However things are not as clear-cut as they appear. Many companies are not aware of the various hidden costs when outsourcing. Workload transition, communication charges, controlling outsourced management, inflation, business continuity risks and security, are all factors that need to be considered as well as the impact it has on the country's economy.

Companies should instead be scrutinising business processes in-house and examining ways of increasing capacity through streamlining. The businesses that achieve this are consequently able to fully exploit their ability to share knowledge through extending the use of competent, versatile technology.

There are also various problems to consider when outsourcing to a different country and culture. For instance, research carried out by ContactBabel has found that while Indian call centres may work faster than their UK peers, UK workers deal with 25 per cent more calls each hour and resolve 17 per cent more first time. If a business wants to exceed the industry SLA standard of 25 per cent for first time call resolution and stay ahead of competition, it needs to look to its own workforce, not outside it.

A critical factor to reduce costs would be to change the focus from how to deal with more calls to considering how to actually reduce the amount of incoming calls. Companies need to explore ways of increasing accessibility through alternative means such as the internet, email and instant messaging.

The provision of a self-service facility allows benefits to be immediately reaped, as there is no need for the involvement of a customer service agent. Providing customers with an easy to use web interface allows them to search for information themselves and correct their problem without occupying a service desk agent. Without this facility employees end up spending nearly half of their time logging calls rather than solving them.
For instance, industry figures show that 15 per cent of calls are a password reset query. A self-service portal could allow customers to reset their password themselves, reducing support costs, releasing 15 per cent of employee resource and increasing customer satisfaction. The benefits and working environment for employees within a self-service organisation would also be significantly improved.

Contact through facilities such as instant messaging, frees resource to concentrate on more intricate aspects of customer service or other business areas. Instant messaging allows a customer service agent to have several queries open at once increasing productivity and resolution time, therefore greatly increasing customer satisfaction once again. Employees will also attain notably more job satisfaction through a varied workload which will boost output and morale.

Businesses also appear unaware of the financial implications involved in outsourcing. For example, it has to have the money to invest in the technology to be able to outsource in the first place. Then there is the recent news that countries such as India are capitalising on the trend with the introduction of tax breaks to prevent companies from withdrawing business operations in the future. No doubt this will be the first of several ways that countries will exploit the boom and to protect their own economy from collapsing.

I undoubtedly believe the best way to expand a business and the bottom line is to look at internal processes first. By keeping all aspects of the business in-house, a company can avoid any repercussions from outsourcing and develop superior customer and employee satisfaction. CEO's need to start realising the consequences of outsourcing, and for the sake of their business, need to maximise resources and opportunities within their own organisations. This will indisputably accomplish an economic advantage over competitors immediately or at the least, in the very near future.

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By iconway
19th Feb 2004 15:21

You have raised an excellent point. Outsourcing should only be considered once a complete analysis of the problem has been done and all the internal options have been ruled out.

However, there are an increasing number of options to pure outsourcing. We are finding that there are now highly experience management teams that have lived through the hype and have gained the experience to undertake an insourcing solution that reinforces the need to streamline processes internally, but also gain the benefits of low cost skilled workforces that the major players in most industries are leveraging. The growth in output and number of captive operations being created is an indicator of where the future lies.

In response to your point on customer service being often regarded as the simplest division to outsource. This is of course a fallacy and is often the cause of great disappointment in the latter stages of an outsourcing contract. Customer service is one of the most complex parts of an organisation where incompatible customer processes mesh with internal processes that are difficult to change requiring a strong culture to deliver high customer satisfaction.

For example, I have experienced McAfee’s excellent support processes using P2P technology that enables the customer to interact directly with the support team to get a problem solved. In fact what has happened is they have outsourced this to HCL who, in my experience, are struggling to gain the internal knowledge and share with the front line agents. My concern is that because of the low cost of agents in India, this type of problem will not generate a sufficient cost issue to justify the internal resources to streamline the process.

However, at least if this was a captive operation the organisation in India would probably feel greater ownership of the issue because it’s their own cost and they can use their own culture.

Ian Conway
i-Vantage Europe Ltd.

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