Contact Center Outsourcing

The Pros and Cons of Contact Center Outsourcing

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Twenty years ago began a shift to contact center outsourcing to offshore locations, especially the Philippines and India, and away from the local market where customers on the other end of the phone were located.

Brands had a very clear business case to cut contact center labor costs by outsourcing to lower-cost offshore locations. First generation ACDs (Automatic Call Distributors) plus significant global telephony and Internet build-outs of the dot-com age made this technically feasible.

I’m old enough to remember all the hype and hyperbole that all contact centers would be offshore by 2010. Clearly the pendulum had swung too far in one direction, and a total focus on cost reduction led to some notable hiccups in customer satisfaction and retention for early adopters.

Fast forward to today and the outsourcing pendulum has settled in a much more balanced place.

Brands recognize the competitive advantage of delivering a great — not only low cost — customer experience (CX) and are taking a much more holistic approach that can balance both and combines multiple strategies for their contact centers: outsourcing offshore, nearshore or work-from-home outsourcing, insourcing the contact center fully in-house, or a hybrid approach that uses outsourcing to cover peaks or off-hours.

Definition of Contact Center Outsourcing

Before we jump into the pros and cons of outsourcing your contact center, let’s level-set on a what this means. With help from Wikipedia, here is a useful definition:

Outsourcing is an agreement in which one company hires another company to be responsible for an existing internal activity. Outsourcing sometimes involves transferring employees and assets from one firm to another.

Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring (relocating a business function to a distant country), or nearshoring (transferring a business process to a nearby country). Outsourcing is often confused with offshoring, however, they can be distinguished: a company can outsource (work with a service provider) and not offshore to a distant country. Financial savings from lower international labor rates can provide a major motivation for outsourcing or offshoring. There can be tremendous savings from lower international labor rates when offshoring.

PROs of Outsourcing Your Contact Center

  1. Cost reduction: Outsourced contact centers to BPOs are able to spread fixed costs like facilities, technology and training across multiple clients. In lower or less predictable volume scenarios, BPOs can share agents across clients for further efficiency.
  2. 24×7 coverage: Agent attrition is always a challenge, especially in a tight labor market. By partnering with an outsourcer, especially one that can deliver service from multiple geographies, it can be much more cost effective to staff 24×7 without paying large shift premiums. It also lets a third-party expert handle hiring, training, and retention efforts.
  3. Temporary or overflow traffic: Sparing yourself the challenge of hiring and downsizing to match seasonal peaks or short-run projects or volume spikes is another big advantage of an outsourcer. By averaging across multiple clients, they easily can balance your volume changes.

CONs of Outsourcing Your Contact Center

  1. Lack of specialized knowledge: Outsourced agents are not your employees and may not be dedicated to your business. They might not be able to represent your brand as consistently as internal employees and may not have the focus to develop specialized knowledge of your products or services.
  2. Consistency vs. continuous improvement: Many outsourced contracts are designed to deliver a minimum level of customer service at a fixed cost. Predictability and consistency is good, but this approach may miss opportunities to differentiate on improved customer experience or further reduce costs in the future.
  3. Missed opportunities from customer insights: Customer insights from the contact center can be a goldmine to improve your products and services, identify root causes of dissatisfaction, or even spot new business opportunities. Without access to interaction analytics or call recordings from the outsourcer, your business may miss these key customer insights.

Considerations for Managing Outsourced Contact Centers

Whether you chose to outsource, insource, or a combination of both, you are ultimately on the hook for making sure that the customer service agents represent your brand and deliver a great customer experience. Here are a few management considerations that need careful attention in any option.

Operational efficiency KPIs: Ultimately you need to hit your budget and make sure that your operations are as efficient as possible while still delighting customers. Depending on contracts with your BPO, these may managed inside the ‘black box;’ however, keeping a pulse on overall contact volume, mix and efficiency is still helpful for longer term planning.

Consolidated routing and reporting: ensuring you have agile and scalable cloud contact center software to manage multiple sites, including work from home agents, is critically important. The right technology to support your contact center can be a key differentiator in selecting a BPO that you’ll use in a hybrid operating model.

Customer satisfaction: Holding your internal or outsourced contact center BPO to the highest standards for customer satisfaction and retention is a must.

Make sure your internal and outsourced teams not only report on these metrics, but have continuous improvement programs that combine voice of the customer feedback, agent quality monitoring, and speech and text analytics.