Outsourcing your contact centre: A poke in the eye for your customers?

3rd Aug 2004

With the increasing – and highly visible – flow of call centre jobs to offshore locations such as India, the Philippines, Mexico, South Africa, it’s evident that major organisations are finding it hard to resist the siren-call of significantly lower costs resulting from dramatically lower salaries, says Edify's Andrew Shaw .

For many organisations, the question now seems not to be just whether to move offshore, but rather when, and how soon can we get started? But the question of offshore outsourcing isn’t that simple. And it isn’t just about low labour rates.

Behind the commercial issues relating to call centre outsourcing there’s a broader political debate, revolving round the question: "Is it right to allow so many jobs to go abroad?" The answer, of course, depends on perspective.

From one point of view, it isn’t a major issue. A recent study commissioned by the Department of Trade and Industry said that despite concern that the UK call centre industry was shrinking, the sector was healthy and would employ more than a million people by 2007, four times more than in India.

From another angle, it’s just the way the world works. “Globalisation is here to stay – there is no point fighting that, but instead find ways to work it to your advantage”, says Kiran Karnik, President of Nasscom, the association of Indian technology companies.

And, perhaps more surprisingly, yet another take suggests that outsourcing might actually, in the long run, have a positive effect on domestic employment levels. A recent study commissioned by LogicaCMG suggests that, while 500,000 UK call centre jobs could be expected to move offshore over the next five years, the positive effect on the domestic economy would be such that over 600,000 new jobs would be created to more than offset the loss.

That, needless to say, is not a view subscribed to by most trade unions. And, in making the case for keeping call centre jobs in the UK, David Fleming (the national secretary of Amicus) broadens the argument to include other key issues: “Services will suffer, cost-savings will not be transferred to the consumer, poor business decisions will be made in pursuit of short-term cost savings and company brands will be damaged by outsourcing.”

In the United States, there are already signs of government intervention. In December 2003 the State of Indiana cancelled a contract with an Indian software company in order to protect jobs at home, and analysts Ovum report speculation that the US government could offer tax breaks to companies keeping staff in the United States, and even penalise those who outsource offshore.

Back in the UK, the DTI and unions alike will take heart from the recent decisions of at least two serious call centre players to reject the offshore lure….

Britain’s largest building society, Nationwide, has backed up pledges to stay in the UK with plans for a new call centre in Sheffield, expected to employ 180 people within three years. The society is also in the process of completing major refurbishments to existing centres in Swindon and Northampton which provide jobs for 775 people.

Similarly, call centre operator RHL – whose clients include BskyB, ScottishPower and the Student Loans Company – is to create 450 new jobs in Glasgow after a conscious decision not to outsource the work to India. RHL is investing £2.8m in a new call centre in Clydebank, which will provide 225 of the new jobs, and in improvements to its existing centre which will accommodate the other 225 new posts. David Murray, RHL’s owner, believes firmly that: “Contact centres have a future as a world-class business built here in the UK.”

Clearly, then, there’s evidence that outsourcing isn’t necessarily as obvious an option as it might sometimes seem. In the rest of this paper we look at some of the issues which might influence the decision-making process.

Overwhelmingly, the main reason organisations consider moving their call centre operations offshore is to save costs and, where cutting agent costs is the key criterion, offshore certainly seems to make a lot of sense. At a recent FT Conference on Outsourcing to India, the top three reasons given for doing so were cost, cost and cost.

The main cost-saving area is staff, with average agent starting-salaries in India, for example, of just £1,500 per annum. And, according to research from ContactBabel, that’s a staggering 88 per cent less than their UK counterparts!

However, that doesn’t mean that outsourcing is 88 per cent cheaper overall, and many companies, mesmerised by low labour costs, have overlooked the broader contact centre infrastructure that they’ll need to support an outsourced operation.

The truth is that when additional costs are considered – associated, for example, with training, management overheads, technology infrastructure, networking and parallel provisioning – offshore savings are likely to work out nearer 20 per cent or 30 per cent.

Two additional cost areas in particular were identified by RHL when they were comparing India and UK based call centres. One was transport: because of the difference in time zones, agents in India typically have to work a night shift to handle calls made from the UK – so employers can be faced with hefty costs for bussing staff in to the centre when public transport is unavailable. Another cost area was staff training and recruitment: RHL found that staff turnover in typical Indian centres was more than twice as high as in their own UK-based centres.

As well as actual costs, of course, it’s obviously important to consider value-for-money, and balancing service levels against service quality will be a key challenge for companies adopting the offshore model. When companies currently measure their call centre service level they tend to base their assesssment on quantifiable factors – such as speed of response or how many calls an agent answers during a given period. These are the most obvious measurements, and ones that are fairly easily achievable in offshore locations.

Smarter companies, however, understand that service should underpin a company’s whole brand offer – it’s not just a cost. Field leaders such as Microsoft now concentrate instead on key issues such as the quality of a call, customer satisfaction and first time call resolution.

But what about the customer? A recent survey by investment bank Merrill Lynch showed that 75 per cent of those IT directors who had taken the offshore outsourcing route were satisfied with the service they were getting. But that’s hardly surprising, given that the perceived benefits were all internal – low cost, ease of management, timely project delivery.

From the user perspective it’s a little different…. According to new research from the UK Oracle User Group, Oracle’s decision to outsource telephone support to India has caused satisfaction levels to drop from 49 per cent in 2002 to 39 per cent in 2003. And, in the United States, IT vendor Dell has started to divert support queries from its call centre in Bangalore back to Texas after corporate customers complained of poor quality service. Clearly, there’s a difference of opinion somewhere!

To date, the general consensus has been that most people who have experienced a call that has been diverted out to India have found the quality of the transaction low, with second-language speakers, unfamiliar accents and cultural differences often proving a barrier. For example, offering directory enquiry services from India is all very well, but will the agent know that Old Trafford is in Manchester or that Aston Villa is in Birmingham? “The cultural differences are still a major issue for us”, observes Alex Taylor, Head of Resource Management at BT Exact. “Even after 10 years we are still struggling with them.”

For the consumer there’s nothing more infuriating than waiting in a queue for ages, getting to the front and then finding that the agent can’t handle your enquiry…. Unless it’s having your call answered with admirable promptness by an agent who then has to redirect the enquiry because they can’t resolve it! In these circumstances, many customers are going to feel they are being short-changed on customer service.

The ability to offer first time call resolution in an efficient, customer-focused and customer-friendly manner is fast becoming an important differentiator, and any organisation considering offshore call centres needs to ensure that they address this issue.

One solution, for instance, might be to keep key areas such as training and quality of service delivery in the UK, and to deploy a system which ensures customer enquiries are matched to an appropriate agent.

In any case, smart companies will be prepared to invest in a contact centre and service infrastructure that ensures quality of service is not affected – while at the same time taking advantage of any real cost-savings that offshore locations can offer.

Despite the financial attractions of moving contact centre operations overseas, many major organisations are still unsure about just how to integrate offshore resources into their contact centre strategy.

Suppose that the goal of an offshore operation is to allow an organisation to provide its customers with 24x7 support, ‘following the sun’ with contact centres and support operations ready to take customer calls whatever the time of day or night. If that’s the case, there are a few points that merit serious consideration.

India, for example, is 10.5 hours ahead of the Eastern US – so Indian programmers or support staff can work while their American counterparts sleep. However, call centres and back-office operations offering real-time service need peak staffing in the middle of the Indian night. The question has to be asked: Does India really have enough trained staff? There are reports that many Indian service providers are already struggling with their own contact centre agent churn among their recent graduates and are starting to look at more rural Indian locations and older agents to get round this problem.

Other reported issues include difficulties in remote management, communications, confidentiality and data protection. India’s data protection regime is much more lax than in Europe or the US, and, indeed, this was one of the factors that dissuaded RHL from outsourcing to India.

So, should you outsource? The answer, of course, is: It depends. You need to be clear as to why you’re considering an offshore approach in the first place, and what the balance is between cost and customer service is in your list of business priorities.

If you’re driven by the quest for quality service as much as by cost-savings, it’s worth investigating the suitability of your call centre environment for the deployment of automation technology. It may be that, rather than going for the offshore option with all its problems and complexities, you should first question the extent to which you really need live agents for your customer service actions.

Automated self-service could very well be a more cost-effective – or indeed, in absolute terms, cheaper – option than outsourcing. It may be that you’ve already examined the automation route. It may be that you have concluded that as many of your calls as possible are already automated, and that cost-savings on the remaining agent-handled calls are still desirable. However, our evidence indicates that many companies have failed to exploit fully the potential of speech recognition technology to provide high quality self service, and are consequently seriously underestimating the level of automation that is possible. In other words, the chances are that their decision to outsource will be based on a flawed model.

So, if this is a scenario that could relate to your organisation, it is quite possible that you have a very real opportunity to blend live service, assisted service and fully-automated self-service – thus achieving savings without sacrificing quality and without having to outsource.

On the other hand, in cases where agent costs are the key driver, offshore outsourcing is almost inevitable. Trade and Industry Secretary Patricia Hewitt acknowledges that this is a given, saying: “We cannot compete on low wages – and nor should we try to. Instead we have to keep raising our game, in call centres and every other part of the economy - ensuring that companies and their staff are continually upgrading their skills and technologies so that we keep employment here.”

Edify believes that there’s a lot that contact centre operators can do to take up this challenge – in terms of upgrading skills and technologies – at every stage of the customer lifecycle. But it doesn’t necessarily mean adopting a rigid attitude either against or in favour of offshore outsourcing.

The important thing is to achieve a synergy between cost-effectiveness and real customer service. Here are some tried and tested ways of moving towards that objective:

  • Use standards-based technology to get your implementations up and running quickly, and also ensure that you can integrate all your existing voice, speech and CRM applications.

  • Recognise that the contact centre is the heart of your customer service operations, and use it to manage every part of your customer lifecycle and integrate all your key customer-facing functions.

  • Aim for joined-up sales, marketing and customer service within the contact centre environment by combining advanced voice and speech technologies with specialist CRM applications.

  • Take advantage of the latest developments in advanced telephony functionality, by automating many of the standard functions that are traditionally considered ideal candidates for offshore outsourcing.

  • Automate relevant customer inquiries to give customers faster resolution and free up your expensive live agents for more complex customer requests.

  • Make sure your voice applications link to the latest speech and text-to-speech technologies to ensure that your customers get the most from ever-changing speech applications.

  • Above all, look for a high quality of service across all customer touch points – whether agents, self-service, assisted service, onshore or offshore. Only then can you achieve the customer satisfaction, retention and repeat business that will help drive your business.

    If you can genuinely achieve all that by outsourcing, then the cost-savings to be found offshore begin to look very attractive indeed. But if you can’t, those same savings could prove to be a dangerously expensive mirage.

    Indeed, the risk may well not be worth taking – as highly flexible knowledge-based CRM and voice self-service systems are now available to help you achieve all the functions and processes listed above. Properly used, they can be remarkably cost-effective – delivering enhanced productivity, attractive cost-savings and high levels of customer satisfaction while keeping the whole operation firmly under your own control.

    Despite all the arguments, it remains the case that the lower costs available offshore are a powerful magnet. And – in much the same way that the Internet boom dramatically reshaped the customer service sector, enabling the launch of a whole new generation of service companies such as Direct Line and low-cost airlines such as EasyJet – we can expect offshore and its new business dynamic to have a significant impact on the way we do business with our customers in the future.

    However, it’s important to note that Direct Line and EasyJet succeeded because they used the power of the Internet as a driver of service quality – not as a substitute for it. We believe that the next generation of customer service leaders will be those that take advantage of offshore economics without losing the quality and control that will enable service differentiation.

    So it’s not about simply closing everything in the UK or USA and moving to India or Mexico – or, indeed, of reversing the process and bringing everything back home.
    It’s about using a combination of smart technologies to ensure that – wherever the call centre operation is based – organisations retain that all-important control over the processes that support a more integrated customer lifecycle approach, with the positive effect on customer satisfaction and loyalty that can be expected as a result.

    Andrew Shaw is Director of Edify Corporation’s Speech Solutions Group. He is responsible for driving the development of Edify’s advanced natural language technology.

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