Most call centre outsourcing deals fail to achieve target: cheaper

[LdyGuique]

A year ago when I lost my job to overseas outsourcing, Gartner was the most reputable analyst firm singing the praises of outsourcing and predicting its continued growth.

Well, he was only halfright -- it's not working nearly as well as they were claiming, although it has continued to grow.

Tuesday 22 March 2005



Many customer service call centres that have been outsourced to third-party suppliers are under-performing, according to a report by analyst firm Gartner.

Of the organisations that outsource their customer service and call centres - including the IT systems - 80% will fail to achieve their targets for costs savings, according to a Gartner report.

In addition, 60% of organisations that outsource parts of their customer-facing processes over the next three years will see customers switch to rivals and find hidden costs that outweigh any potential savings they derive from outsourcing.

"Our research has shown there are significant risks associated with outsourcing customer service," said Gartner research director Alexa Bona, speaking at the firm's Customer Relationship Management Summit in London earlier this month.

"Historically, outsourcing has been seen as a way to reduce costs by employing IT workers in cheaper locations, or with greater economies of scale to own the processes that are not core to the business.

"Companies are encountering problems with outsourcing because they do not approach this strategically. They usually lack the information to make meaningful cost/benefit analysis and focus on inappropriate or unmeasurable service levels and cost metrics," she said.

According to Gartner, successful outsourcing can achieve cost savings of between 25% to 30%. However, Bona warned that a poorly managed outsourcing deal can reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver cost savings.

She added that most companies fail to manage the customer service experience sufficiently and often lock the organisation into long-term outsourcing contracts without conducting appropriate pilot testing.

To ensure successful customer service outsourcing, Gartner recommended that companies create customer-facing processes. It said businesses should judge the supplier based on customer satisfaction or other quality metrics to measure and motivate outsourcers, rather than "operational metrics" such as the number of calls handled by the supplier.

Users should also not underestimate the management time required to make an outsourcing relationship or contract work, said Gartner.

Source: ComputerWeekly.com}[br /

[tubbacheez]

1. Not surprising given current sales strategy.

1). Over-promise and under-budget to get the contract.
2). Let initial start-up glitches absorb the blame for missed targets.
3). Provide service barely good enough to keep the contract going.
4). Skim money off the top while promising to fix the problems and finally deliver satisfaction.
5). Goto 3).

[Fovea]

2. Amen

I watched this paradigm develop in the 90's. And it soon overwhelmed I.T.

I have to say that in I.T. it all started with Visual Basic, and the 'kill the programmer' movement around '91.

From that point on, it had to be a ponzi scheme of ever increasing productivity, and ever smaller costs. There were whole generations of super tools and schemes to make information management a brainless, skill-less activity. Alas, they failed.

The myth of super productivity improving the economy is completely unreal, and will eventually be realized as it is already shrinking the American economy.

Outsourcing hid the collapse of the paradigm for a couple of years.
But it isn't cost that is killing business. It is too high of efficiency to make too much profit for the stockholders.

Companies routinely gut themselves now for enough quarters of profit to boost the stock, then the top executives bail as the company implodes.

Corporations need to pull harder at the wheel, and actually start producing worthwhile product, not stellar P/E ratios.

[tubbacheez]

6. I agree. Value has lagged, while margins were overhyped.

The rich get richer from profits.

But the larger society expands or contracts based on value of goods and services.

[TheFarseer]

9. this obsession with the stock market is ruining our country

And GW is trying to put even more emphasis on it! John Kerry said we need to put more emphasis on the job market and less emphasis on the stock market. Amen brother. Now just figure out how to do that!

[sendero]

19. Kerry....

.... should repeat that mantra every time he gets the chance. It is correct, and it works.

[tsuki]

3. I heard on Lou Dobbs that some software companies found their source

code was sold to competitors by the employees in India.

[Anakin Skywalker]

13. Wonderful! But Do You Think

they've learned a lesson? I doubt it.

[TheFarseer]

4. I will never figure out why

More companies don't move to the Great Plains. There's a good work force in Omaha, KC, Wichita, Oklahoma City, probably the University cities etc etc. You can pay lower wages because of lower cost of living. EVERYONE speaks English. Maybe it's something to do with taxes. If people spent half the time trying to make their business better that they spend on trying to avoid taxes, they'd probably see their increase in profits far outweigh any tax losses.

[Fovea]

5. Because the goal is not the revitalization of America

It is getting enough capital together to invest in the hot new markets.
We are old news in fly over America.

[spikesmom]

8. YES!!!

[LdyGuique]

10. Actually, Earthlink did/does outsource within the U.S. too

When Earthlink laid off half of its workforce and closed half of its call centers in early 2003, it upped the amount of U.S. outsourcing, especially for Customer Service and some tech support "light." There was a huge internal "hype machine" that travelled throughout the U.S. to energize all remaining employees and the Outsourcing employees. These included locations in San Antonio, Denver, Omaha, and Yakima.

The company started an aggressive "hold the call times down" approach in Tech Support and a "Burn the Churn" program in Customer Service. If a customer wanted to cancel service, they were immediately transferred to the Churn group and these people were put onto quotas -- my daughter was fired in late November 2003 for failing to meet the quotas, as were many others.

Meanwhile, throughout the summer and fall of 2003, there was an increasing number of complaints by customers about not being able to understand the previous rep that they'd tried to talk to. Turns out all of these were Indian Reps (not particularly common in Omaha). The rumor mill went into high gear by November when an internal email was missent and an employee active on an anti-Company website published the details: Project Yukon would be announced in January and the remainder of the Corporate Call Center closed.

Sure enough, we all were given notice on January 3rd. Technical support was going to a combination of India and the Phillippines. And, our final day was March 16th, 2004.

Over 3,000 employees were laid off and the majority of jobs went overseas, with some remaining with Onshore Outsourcing companies.

[spikesmom]

7. Outsourcing - A Great Way For Companies To Lose Customers

I am less likely to want to buy a product or do business with a company that outsources. When corporations see their customers jumping ship in high numbers, they will get wise and make changes.

[scarletlib]

11. I don't wish the poor people overseas who tool these jobs

ill will but I hope these things fail miserably. Jobs needed here for people here. Corporate greed needs to backfire bigtime.

[megatherium]

12. I'm hoping outsourcing (offshoring) is yet another management fad

that will soon run its course, just like the "rightsizing" fad of the late 80s and early 90s ran its course. In that instance, when the recession of the early 90s ended, businesses found themselves woefully understaffed to take advantage of huge new business opportunities. So the Clinton era enjoyed high job growth as businesses corrected their error.

As far as offshoring goes, there are software shops in India and elsewhere that aggressively market their services to American corporations, who often find the sales pitch irresistible. But often they find the results less than successful. American corporations have been treating their employees with unusually low respect and absolutely no loyalty for quite some time; I'm expecting that soon good examples will come to light of businesses who crush their competition by treating their employees as valuable assets. Then the outsourcing fad will collapse.

[Gin]

14. I heard on NPR that the higher educated people in India took the

call center jobs. They are now leaving in droves because of the time difference/ fights with customers/ the language differences and they gained weight sitting all day.

Some call center jobs are going to the Philippines.

Now..the less educated with poor English skills are taking the call center jobs and the others are doing back office jobs that have no interaction with customers. Imagine the industries that would accommodate. That will be the new wave of outsourcing...back office work...it's probably already happening.

[Digit]

15. I was so fed up with my prior mortgage company ...

They had obviously outsourced and all the reps could do was repeat a canned script. I was able to do a "rate reduction" without the refi if I had stayed, but I was disgusted.
So, I ended up checking around and refinanced with another mtg company.
When they sent a letter asking why, I let them know EXACTLY why I switched.

[Deja Q]

16. It's all about the money. Worse, why don't people figure out the truth?

Our corporate 'leaders' also knows the future's end is near and they know it.

[interupt]

17. Ahh Gartner

In Australia I have heard of Gartner mainly first hand experience of their digusting practices of obtaining information by stealth and so-called "suveys."

Working in IT helpdesk and Desktop Support, I have to deal with calls enquring about who the IT manager, not having return phone numbers and attempting to wheedle out information about our systems. Considering I have worked in two state government departments with mission critical systems, I have repeated told them to back off and complained to their management to the point I have been rude, with approval of my IT manager who actually said he is not being paid large sums of money to do surveys.

I would recommend a book called The Art of Deception to see how social engineering is done to a tee.

Here is how I usually handle this crap

EXAMPLE CONVERSATION
Me: Helpdesk...
Gartner: Good Morning, we are updating our contact details and require the name of your IT Manager
Me:...I'm sorry but you are?
Gartner: Uh...X from Gartner Research.
Me: Yes and what contact do you have at the moment?
Gartner: We don't have a contact.
Me: I see, and this is in regard to?
Gartner: Well we are doing some a survey into what systems you deploy within your organisation...

{usually the person will change tack realising Ive figured this operation out}

Gartner: Can I ask what security systems you deploy?
Me: Excuse me but this is a government department so I cannot divulge any information in regards our systems. Can I take your name and phone number so I can get my manager to call you? {wink}
Gartner: I am afraid that we do not have direct numbers..
Me:{Cutting conversation off} I see well I will notify my manager of this call and if he wishes to participate I will pass you though next time you call.
Gartner: And your IT manager's name is?
Me: I am sorry I cannot divulge that information at this time. Thankyou.

Twice they have slammed the phone down mid sentence. Once I heard a swear word. Makes my day sometimes....hey I work helpdesk I deserve a break!

Sorry if anyone who reads this works for Gartner, but I have been distinctly unimpressed with their business practices as a whole, and the company parading they are a "premiere analyst"

[LdyGuique]

18. You gave me a major smile and chuckle, interupt :)