Call Center Outsourcing Tutorial Series
Module 1

Why Outsource?

by Jerry Tschikof, co-founder and former CEO of Center Partners

Send this page to a friend
Outsourcing resources index

This tutorial discusses some key reasons for making a decision to outsource and the implications of the decision.  Content is drawn from Centerserve's eToolkit, Call Center Outsourcing.  The eToolkit provides the process, guidelines, worksheets and templates needed to make a successful and profitable outsourcing decision.  For questions or more information about this eToolkit email the penguin:  penguin@centerserve.com

Introduction

Many companies consider outsourcing as a good way to augment or improve their service support. Outsourcing a contact center can be a viable option depending on the business model employed and your current business conditions. The tough part is often answering the question “Why Outsource?” This tutorial offers some thoughts to help answer this question and to make an intelligent outsource decision.

The Common Trap

Whenever outsourcing is mentioned as a customer support option, it’s inevitable that a strategic debate will follow. This debate lines up advocates and opponents who discuss the tactical pros and cons of outsourcing verses in-house service support. The interactions are typically informative but can be misdirected relative to a decision. This trap is created because the focus is often on tactical issues rather than on the business model and key business drivers. Some of the tactical items often at the forefront are:

Tactical reasons will not go away, but if they dominate the decision process the real reason for considering an outsource solution becomes confused. An evaluation should offer solutions to these issues but not let them drive the process. To avoid this common trap use the mission and strategies implied in the business model as the foundation for answering the “Why Outsource?” question. Tactical arguments are valid but often introduce an element of unwanted emotion that detracts from the primary objective.

The business model and strategy

A business model sets expectations, establishes courses of action and guides behaviors. It provides the high level framework for conducting business and influences major decisions such as outsourcing a contact center. Focusing on the business model and strategy rather than on the tactical issues will lead to the right decision.

Close examination of a business model will tell if a company is a good candidate to outsource service support. The mission and strategies coupled with certain decision drivers are the underlying fundamentals for good decision making related to outsourcing. These fundamentals will be primary considerations in a “Why Outsource?” decision, and therefore must be understood and accurately assessed. They will determine if a company is pre-disposed to outsource based on valid business considerations rather than only basing a decision on short-term tactical symptoms.

Mission - a mission statement and values are the guiding principals in the conduct of business. These statements can help answer the “Why Outsource” question. The principals will provide information on customer strategy, business preferences and constraints or inhibitors that effect service support. Careful review will tell if outsourcing makes sense.

• Customer strategy defines the level of connection with a customer. If the principals imply retention and relationship building, an outsource option may be difficult. If the intent is to be transactional by limiting the type of inquiry, then outsourcing may be a good option. The considerations in judging applicability for outsourcing are:
  • Type of inquiry expected
  • Value of information collected
  • Importance of lasting customer relationships

• Business preference is a deliberate choice that either emphasizes products or customers. A strong product preference implies rapid market saturation of new products with limited service expectations. Customer preference implies product penetration of an established customer base relying on continued contact for new sales. Of the two preferences, "product" would be the most pre-disposed to outsourcing.

• Constraints and inhibitors are considerations that flow from or conflict with the principals. Each constraint or inhibitor will have a bearing on the question or decision. The most common of these elements are:
  • Management focus - is service a priority or a by-product
  • Work force - capability to deliver service expectation
  • Technology - infrastructure to deliver expected service
  • Facilities - condition and space to meet needs
  • Tolerance for change - willingness to do something different.

Decision Drivers - are key business issues prevalent in the present environment. These drivers relate to economic conditions confronted in the conduct of business. Unlike the vision and mission analysis that sets organizational conditions, decision drivers are business realities. They impact bottom line and service performance and can be the overriding factor in an outsource decision. The drivers are:

Capital Investment

• Investment choice - is a contact center the best use of capital?
• Return-on-investment - does a contact center represent the best return?
• Availability of capital - will the contact center investment require borrowing?

Operating costs

• Variable cost structure - is the preferred cost structure a consistent cost per transaction?
• Fixed cost structure - can fixed costs be leveraged to reduce overall transaction costs with increased volume?

Core competency

• Market position - is the objective market share protection or growth?
• Available talent - are resources scarce or abundant?
• Product life cycle - is the life cycle short or long?
• Product distribution - is the distribution channel domestic, international or both?

Capacity

• New capacity timing - is the capacity available or created with investment?
• Available capacity - can facilities and infrastructure accommodate increased volume when needed?

Volume leveling

• After hours - can existing operations handle after hours work?
• Peak periods - will service levels improve with movement of volume during peak periods?

Making the decision

After evaluating the business model fundamentals the question of “Why Outsource?” should be apparent. This analysis puts in perspective the contact centers organizational importance and identified business issues that may prohibit desired performance. The main points that are clarified are:

• The contact center's role in delivering the results described in the business model.

• A contact center's need for capital and human resources compared to alternatives.

• The operating cost benefits realized from leveraging assets or derived from economies of scale.

• Ability to deliver service support expectations implied in the business model.

• The influence a contact center has on maintaining the customer and market position stated in the business model.

Conclusion

The choice to outsource or operate a contact center in-house is basically determined by what best fits with the business model and immediate business drivers. An intense focus on tactical issues confuses the evaluation process to determine if outsourcing is a viable option.

The business model establishes the organizational importance and economic parameters for a contact center. Review of the mission, values and decision drivers clarifies the role and the influence of outside factors. The conclusions drawn by carefully analyzing these fundamentals will determine if outsourcing is a good decision for your business.