Outsourcing Fundamentals

By John Bartholomew
May 2005

We've come a long way since the days of colonial America, where outsourcing meant having horseshoes forged by the village blacksmith while farmers tended to their core business of growing crops and tending livestock.  From clothing and car parts, to semiconductor chips and LCD panels, outsourcing has become a way of doing business, and it is accelerating at a rapid pace.  According to market research firm Meta Group, offshore outsourcing is expected to grow nearly 20 percent a year through 2008.

A combination of factors – a burgeoning global economy, a robust telecommunications infrastructure, and market forces that emphasize 24/7 customer service – combined with lower prices have contributed to making outsourcing widespread in today's consumer-driven world.  In the modern economy, outsourced work has expanded beyond manufacturing processes to include many business functions such as human resources, payroll, marketing, technical support, and customer service.  Recently, retail fast-food giant McDonald's announced plans to outsource its drive-thru order taking to a call center, in order to serve customers more efficiently.  The next time you order French fries and a soft drink, your may be talking to an agent in a call center.

While the latest presidential election race shined the spotlight on the practice of offshore outsourcing, most providers generally agree that the three most important outsourcing choices are onshore, near-shore, or offshore.  Each of these outsourcing options have specific benefits and challenges.

Onshore outsourcing is work conducted here in the United States.  Services performed in neighboring countries (such as Mexico or Canada) are near-shoring examples.  The close geographic proximity of these locations allows for easier travel, better communications, and cultural similarities.

Offshore outsourcing means exporting work from the United States to an alternate country – often overseas – such as South America, the Philippines, or India.  The rapid growth of offshore outsourcing is due to a number of reasons, including 24/7 global customer service capability, specialized technical skills, multilingual ability, and lower costs due to less expensive labor markets.  Globalization, or the economic integration of countries, is a natural result of the world's technology advances and undoubtedly plays a significant role in the expansion of offshore work as well.

Outsourcing frees up time and resources to allow a company to focus on its core business.  Hiring an expert saves time and money.  Call center companies have expertise in specific industries such as telecommunications or technical support, making them industry experts and providing tremendous added value.  Today's modern call centers use innovative technology such as sophisticated software-based knowledge bases that enhance the ability to provide speedy, top-notch customer service

Outsourcing companies also provide access to a multitude of people, resources, and capabilities and are therefore able to ramp up quickly to handle immediate needs, such as a large increase in the volume of calls to meet market demands.  Some call center companies offer specialized services such as consulting or professional services and can even help with site selection and design or provide advice on offshore strategy and management.

Perhaps the most important business decision to make after deciding to outsource is the decision to select a business partner that understands how to avoid common pitfalls and has experience you can trust.  To evaluate your choices, be prepared to ask some detailed questions.

Questions to Ask Outsource Partners: Choosing the right call center outsourcing partner is essential to success and helps to ensure a successful vendor-client relationship.  It's up to your service provider to prove its competency and to have solid, knowledgeable answers.  The following questions will help provide some important guidelines.

• How do I know if outsourcing is right for my company?

• Why do companies choose to outsource to you?

• Which specific professional or specialized services do you offer that set you apart from your competition?

• How would you manage project implementation and the transition of my business?

• If I'm going to hand over my customer interaction to you, my brand and reputation are vulnerable.  How can you guarantee a seamless transition and how will you demonstrate commitment to my brand and company?

• Will the outsourced services be transparent to my partners and customers?

• How will you adhere to my company's values and maintain a high level of quality and service?

• Explain your agent-training process, including acculturation and accent training if you use offshore agents.

• What are the specific metrics used to gauge success and how often will I receive performance updates?

• Will references be provided?

• Tell me about your business continuity and disaster recovery plan.  Is there a workable system in place that ensures ongoing business operations and minimal disruption to customers in an emergency?

• How will you keep confidential data secure?

• How do you make certain you're in compliance with regulations and laws, particularly those initiated by Sarbanes-Oxley or Health Insurance Portability and Accountability Act?

• What is the exit strategy if I'm dissatisfied with your service?

The most successful call center outsourcing relationships are a result of clearly communicated goals and expectations, for which both parties are held accountable.  As you move forward, you must recognize that your outsourcer business partner deserves and expects the same level of attention you would provide to your own employees.

John Bartholomew is an executive Vice President at LiveBridge, a global call center services company headquartered in Portland, OR.  Call 800-783-6000 for more information.

Benefits of Offshore Outsourcing

• Inexpensive labor markets.  Companies move part or all of their operations to other countries to take advantage of inexpensive labor.

• Lower overhead and infrastructure costs.  Cost reduction can be considerable when the outsource partner is handling business operations, facility and staff maintenance, and technology upgrades.

• Higher agent education.  In other countries, such as India, there is a tremendous availability of highly skilled and educated people who welcome the opportunity to work in a call center.

• Multilingual capabilities.  Mexico, Central, and South America each have a large population of bilingual workers who can converse with customers in Spanish.  They also understand the nuances of culture that allow them to build rapport with customers.

• Global reach.  Offshore outsourcing provides global reach into new areas.  If a company does a lot of business in overseas, having a presence in that country to serve that client base is vital.  Global clients need global call center agents.

• Maintenance of a global network.  By outsourcing, a company doesn't need internal global resources to implement a sophisticated worldwide network.

• Capacity for 24/7 customer service and operation in real time.  The advantage of multiple time zones allows for multiple shifts that can operate around-the-clock, getting U.S. work completed overnight.

Challenges of Offshore Outsourcing

• Logistical challenges.  It's imperative to have a firm grasp of labor laws and local regulations in different countries.  In India for example, a company may be required to provide transportation or meals to its employees.

• Language barriers/accents/acculturation.  A call center agent in New Delhi, India or Cordoba, Argentina may not have been socialized to interact in the same way as someone in the United States or Canada.  Acculturation coaching and accent training is a necessity.

• Hidden costs.  Companies need to consider the additional time and expense associated with international travel.  Telecommunications and other costs could potentially be much higher overseas.  While outsourcing generally saves money on labor costs, a company might be less efficient than it first anticipated.

• Legal ramifications.  International trade law is more complicated than U.S. law and more difficult to enforce.  Labor laws can also vary.  It's the responsibility of the call center partner to understand these regulations.

• Enhanced security for operations and sensitive data.  Personal privacy is paramount and extra resources may be required to appropriately secure customer information.

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