Why Outsourcing is no longer a no-go
12th November 2013
In my daily life, I often get asked why companies still outsource, as outsourcing seems to (still) have a negative side-taste. Outsourcing is probably one of the most discussed topics within the Customer Service world. Offshore, nearshore, onshore, all viable options that have even made it into the dictionary as verbs. And still, there is no single rule that will tell you which option is correct for your business. For each and every project I’ve worked on, there have been different business models, company sizes, target markets and costs involved. And in each of those projects, I have had to evaluate the situation again. The good side of this story is manifold:
- New companies offering outsourcing services get a chance to contend with well known players.
- Companies looking to outsource can find partners that have experience in (or with) specific areas/markets/segments/products.
- “Vitamin B”, a German term for using your network of colleagues and friends, becomes less relevant when making a business decision.
So does outsourcing have a bad reputation and is it a no-go? The answer to these questions aren’t simple, and we need to look at why outsourcing has been frowned upon in the past.
In the last 2 decades of the 20th century, companies that experienced rapid growth realised that Customer Service costs grow exponentially. Outsourcing companies offered a cheap and flexible option to minimise those costs and all of a sudden, a new business area appeared globally. And also grew. As growth continued to trend upwards, the minimised costs for outsourced services grew as well, and further options were necessary to increase the gap between revenues and costs (or in other words, profitability). And that is the point where things started to go wrong, in my personal opinion, for 2 reasons:
- Companies didn’t take into account what their customers would accept.
- A (completely incorrect) perception that handing over CS processes to an external partner means that this part of the business can run itself.
Good examples for the first point would be the general frustration in the UK in the 90s around the amount of companies that used external partners in the Middle East as opposed to local partners, and even more recently (2008 onwards), a large technology company that has even started proudly engraving their products with “designed in California”. Not only do customers and consumers have a more insightful view into local and regional businesses and services, they are also more supportive of this, and companies are in turn using this to their own benefit.
At this point, I would like to mention that I have worked with companies in both Pakistan and India, and I was sincerely impressed with their professionalism, motivation and dedication. Some European companies could indeed take a leaf from their books!
The second point needs a little more explanation. Especially in small companies that may not yet have a solid standing, Customer Service is generally a far cry from being a profit centre. As such, reducing the costs by using an external compay seems like a viable idea. What is often disregarded though, is the effort needed to ensure that the outsourcer is performing as needed. Note my use of the word needed, rather than expected. Let me take a step back here: What you need to understand when looking for an outsourcer, is that their business model is not the same as yours. While you may make your profits from selling a product/service or similar, your partner makes their profits from answering calls/mails/chats/letters/faxes from your customers. Don’t be scared of that, but make sure you understand that t is different, and you are the one responsible for ensuring that what you want (for your business and customers) is done, in the manner that you deem correct.
So, while you may have forecasted that you need 50 CS professionals for the coming year (based on AHTs, incoming call/mail volumes, subtraction of idle time, a specific percentage of work time spent on non-productive tasks etc) and are planning on placing 40 of these externally, don’t expect the 10 inhouse resources to be as productive as previously. And that is also a good thing, but we’ll get to that soon.
An external team does not have the same knowledge that internal staff do. They don’t have the contact to other teams within the company. They don’t have the same motivation as you to satisfy your customers. I realise that that all sounds negative, but believe me, it’s not, it’s just realistic, and if you understand that you can work with it.
So here’s the positive side of it: Those 10 people that you still have internally, are going to be your lever to make sure that the costs saved by outsourcing are “safe”. Your company needs to manage the external partner, both in terms of contractual duties, operational metrics (SL, quality, Availability, NPS etc.) as well as Information Management. Or to be more succinct: Those external staff members will and can only be as effective as you will allow them and you happen to have 10 people on your team that know your product/service extremely well, so they are predestined to take on a new role (staff empowerment and growth).
So, if your business model is successful, and possibly even support-intensive, you will at some point need to start thinking about outsourcing. It offers you flexibility in terms of staffing, lower costs than continuously building your team up internally, and if done correctly, even brings subject matter knowledge to your team. The days where outsourcing is frowned upon are most definitely over, and along with most tasks you will face within your business/career, it will be a benefit if the effort is put in at the beginning.