Outsourcing Surge

"Sometimes, companies find that it's not a core competency to manage a call center," says Katrina Menzigian, program manager for CRM and call center services at research firm IDC. In those cases, "it's more expedient, and in some cases, less expensive, to outsource." Firms from Fortune 500 companies to dot com darlings to budding businesses are relying on vendors to service some or even all of their telephone, e-mail and Web customer contacts.

SITEL, a leading provider of call center services to large companies, has seen tremendous growth in the 15 years since they began operations. According to Director of Investor Relations Jim Jacobsen, the company employs roughly 18,000 agents who serve over 400 clients from 75 centers in 18 countries. And the workload of those thousands of agents has shifted dramatically over the past five years. When SITEL went public in the mid '90s, their call volume was dominated by telemarketing engagements. Today, some 60 percent of their total call volume (both inbound and outbound) consists of customer care contacts.

Despite promising growth and growing enthusiasm, the outsourcers have not yet displaced the traditional call center. Paul Kowal, president of teleservices consulting firm Kowal Associates, estimates that "barely 20 percent" of all teleservices are currently outsourced, while Menzigian doubts that the number is even that high. Firm numbers on which sectors have developed a taste for call center outsourcing are elusive, making it difficult to draw conclusions. However, the banking, financial services, insurance, telecom and utilities industries head the client lists of a number of outsourcing specialists.

These companies are generally not dismantling their entire in-house call center operations overnight and switching to fee-for-service telephone support. At the same time, many call center providers prefer to specialize their services, rather than provide soup-to-nuts, telemarketing-to-tech support service. It's more common to find companies adding an outsourcer for a particular new product line, or a new category of customer such as a rewards or loyalty program.

Often, the pressure to seek help from the private sector is coming from the expansion of e-mail and Web customer service needs. What may have started as a lark four years ago, with the company webmaster answering three or four customer e-mails a day, has for a number of companies turned into a flood of online customer contacts that need professional care. The more aggressive your "dot com" strategy, the more "dot com" your customers expect the relationship to be.

"At the beginning, everyone wants to keep [e-customer contact] in-house, protectively," says Eyal Rimmon with WiredEmpire, a developer of online customer service management tools. "Then they do the math and realize it's almost always better to outsource it." WiredEmpire customers, such as call center provider TCIM Services, are finding a great deal of demand for specialized e-commerce support solutions, leading TCIM to launch a division dubbed interactioncenter.com to manage the new business.

"In some cases, outsourcing can allow you to implement technology more quickly than if you were to build the call center up internally," says IDC's Menzigian. Call center outsourcers, who compete amongst themselves to offer the best and broadest services, are well motivated to implement technology that works and to train their employees well.

To be truly prepared to negotiate with a call center provider, you need to understand your customer service needs right down to how many rings and how much hold time you want your customers to endure. You also need a solid understanding of internal call center operations and capital costs in order to make an educated conclusion about the pricing being offered by outsourcers.

Industry data suggests that a dedicated service rep through a third party can cost from the low $20s to the high $40s per hour, with technical support and quality assurance tasks ranking higher on the scale. Incoming telecommunications (customer calls) tend to be charged at about 10 cents/minute, not counting toll-free charges. Expect additional costs, such as monthly account maintenance and the necessary IT integration, to put your CRM databases online at their site.

The consequences of being unprepared could resonate far beyond simply not getting the best deal on call center services. "The provider has more experience and more education, and they're going to start telling you how to run your marketing programs and your customer service programs," says Chris stanvick, a consultant with Kowal Associates. "That's the start of a bad relationship, because you are no longer in control of your own destiny."

Part of that preparation includes a fairly clear idea of how you want new technology to work for your customer service. A potential outsourcer may have the latest in Web chat, Internet telephony and interactive voice response (IVR) automation available, but Menzigian recommends that companies resist the urge to automate huge portions of their customer contact without a deliberate plan. "The long-term costs [customer dissatisfaction] are not going to be attractive," she says.

By entrusting an outside vendor with your customer contacts, and by extension, your image, you place the health and well-being of that relationship outside your direct control. Whether your outsourced call center will handle telephone or e-mail contacts, mistakes, miscommunications and misunderstandings can and likely will happen. Companies need to be acutely aware of the risks, and ensure that their partners are prepared to accept risk and responsibility for the actions of their agents.

Menzigian recommends that rather than settle for a flat fee-for-service contract, call center service agreements should include a "risk and reward" component. The teleservices company then has a direct stake not just in answering the call or e-mail in the most expedient fashion, but in the quality and satisfaction your customers get from the experience.

Chris Gongol, senior V.P. of business development for call center provider Telespectrum, recommends that you ensure that your potential partner has a pedigree in your industry and has had success helping other companies achieve the same sort of customer service goals you have. Your research should include client references, which need to be rigorously verified.

Creating the detailed service level agreements necessary can be an arduous task--not only to identify the right balance between service and price, but simply to make sure as many potential pitfalls are covered as possible. Kowal's stanvick points out that emergency plans are potentially more important for your call center service than you might think. "If a call center loses power, that's going to affect your program," he explains. "There are a lot of call centers in Florida because of the labor market there, and there are also a lot of natural disasters. You want a way to either transfer the business, or receive some sort of credit," especially if your call center goes offline the next time a hurricane shuts down the southeastern U.S....."