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The buzz is all about customer service and call center outsourcing, also known as BPO (Business Process Outsourcing). According to Gartner, the outsourcing market in Europe has grown with over 6%, BPO with 10%. The market for offshore outsourcing (to low wage countries) is growing with a whopping 40% this year! However, the subject of outsourcing is not without controversy. So what's it all about?

In the 90s, growth was the motto for organizations. Eat, or be eaten. Through the continual increase of stock value this could be easily financed. As a result, businesses were acquiring activities that are, on the surface anyway, only loosely related to the original business goals, and to each other. The demise of world economy and the burst of the Internet bubble changed all that.

In these days of tight budgets and heightened attention on ROI (Return on Investment) and TCO (Total Cost of Ownership), companies are taking a good look at what they are in business for, and what they are best in. This focus on the core business has lead to the selling of complete branches of companies. Now, businesses go even further by taking a look inward, in search of generic processes to outsource. Finance, Human Resource and Customer Service are now the focus of outsourcing, which was more or less the playground for IT support in recent years.

Outsourcing, the utilization of resources outside an organization, is not a new thing. Barter trading, the oldest form of trading, was in fact just that. One person traded a skill (or a product made through that skill) to get access to another person's abilities. In the old days, it made perfect sense to let an activity be done by the person most skilled. And old becomes new, as they say.

Benefits of Call Center Outsourcing

It makes sense that a company who's core business it is to organize and execute a call center, is more likely to do a better job at it (although that's not a given)! It's like hiring someone to put a floorboard in your house. You may be able to do a decent job yourself, but they are a lot quicker at it! So efficiency is a clear benefit.

Being in the call center business, call center service providers are more likely to be able to hire skilled and experienced personnel. And, since a service provider (usually) services more than one company, there is more support personnel to go around. This helps continuity, as your service isn't jeopardized if an employee decides to leave. Also, since the customer service reps are probably working for more than just your company, you can benefit of lessons learned from other contracts.

Ah, didn't I mention the money? The #1 reason for outsourcing is, of course, to lower costs. Outsourcing companies can have lower rates because of the greater efficiency, but also through economies of scale, which actually means that fewer personnel is needed for servicing the combined contracts than when each company would organize it themselves. Plus, they can easier mix more junior and senior staff, which is a near to impossible feat if you have just two customer service reps!

The money question is getting even more interesting if we take the possibility of off shoring into account. Outsourcing to low wage countries like India is bringing extra financial benefits into the equation (but also some pitfalls, as you'll see later!). The different work moral is also often viewed as a benefit. For example, in India, workers are very disciplined, and organizing a 24/7 service is easier than in Western countries.

Outsourcing Pitfalls

Outsourcing projects often fail on unclear expectations at both the customer and service provider. When considering outsourcing make sure you yourself have a clear image of what the level of service is that you are expecting. Be as specific as you possibly can. Pick out the elements that are most important to you and think about how this would best be managed. Measurable performance indicators are better.

Remember that outsourcing is a game of trust as well as money. If, when negotiating service levels, you feel that you have to stamp out every eventuality in a contract, I'd advice against outsourcing. I would, however, put an opt-out into the contract, in case trust is lost between the outsourcing partners. Believe me, no partner would want to get stuck in a contract between two distrusting partners. For the rest, focus on measurable Key Performance Indicators (KPI's) and a clear payment scheme to protect your bottom line.

Anxiety for outsourcing is often fed through the loss of operational control. Remember, you no longer handpick customer service personnel, and you are much more limited in directing the service. Also, you may have to fit in the standard approach of the service provider. But the trade-off for the loss of operational control is more managerial control. But this trade-off only happens if you negotiate your service levels properly, as mentioned earlier.

And then off shoring... With the advent of off shoring, a lot of vendors are now operating the market. But if you're selecting a partner, don*t rely on the reputation of the vendor alone, but do make sure that you deal with the people who will be managing your service. Take special attention to the level of experience of these people.

The cultural differences can be enormous, especially when outsourcing to India. Don't make assumptions, but be very specific in your business needs. And India, although the buzz is all about it, is not the only low wage country in the world! You could consider outsourcing to low wage countries that are not so far away, for instance Spain or Mexico.

Another element to take into account is this: if your business is adding only minimal value or profit to the service provider, you risk receiving substandard service levels. If this is the case, it's probably safer to steer clear of off shoring.

Conclusion

Looking at both the benefits and pitfalls of outsourcing call centers and customer service, it is clear that there are clear opportunities for reducing the level of costs for organizations. However, do not downplay the risks. If an organization is inexperienced in managing customer service, the risks for failing are very real, as tight management and KPI evaluation is very important. But in the end, it's all a matter of trust. Ask yourself: do I trust a partner, this partner, with a piece of my business?