The day-to-day management of your contact center operations is very important to maintaining great customer relationships. Unfortunately it can also be a very expensive endeavor that can erode the profitability you derived from those customers.
Sooner or later decisions will need to be made on whether to maintain your existing operations and reduce costs or outsource your contact center activities to a 3rd party.
The business drivers behind the outsourcing decision includes reducing costs, expanding resources (without adding internal fixed costs) and effectively managing business volatility.
Traditionally outsourced solutions are 10-15% lower cost than existing in-house operations. Outsourcing puts you in a much better position to deliver on technical capabilities because the resources will be dedicated to getting the work done. Outsourcing more effectively handles immediate business need fluctuations….they are built to handle ramp up much better than a traditional in-house center.
Before you reach an outsourcing decision it is extremely important that you properly define your “current state” costs. This analysis of costs should not be just what you paid in the last year, but what you will pay over the next 3-5 years.
Building an Outsourcing Business Case
Existing Operating Costs
Costs should include all labor, technology and service related expenses. Again not just what has occurred over the last year but what you expect your operating costs to be moving forward.
There are also hidden costs (anticipated inflation, foreign exchange, normal equipment replacement, moves, adds and change boundaries, project management fees) involved in managing the possible transition to an outsourcing model, thus you will need to factor in those costs into your business case.
Not every customer contact activity is a candidate for outsourcing, at least in the short-term.The costs to retain certain services (service desk staff/hardware/software, network costs on existing contracts, network voice charges, senior management involvement, outsourcer management costs, training & travel, routine projects) will also need to be calculated into your final costs.
Once the decision has been made to outsource your customer contact functions, management needs to take into account the transition costs involved (Severance, Retention Bonuses, Staff Assistance, Overlap of existing & new staff, training of outsourcing staff, project management time, dual network contracts, parallel testing of hardware/software systems and of course the consultants fees during the transition period).
Ongoing Outsourcer Management Costs
Just when you think you have all the costs covered…don’t forget about the ongoing oversight of your outsourcing partner. There are costs involved in making sure the outsourcer is meeting service levels, keeping track of outsourcer costs, making sure the outsourcer is paying close attention to your business, reviewing outsourcer to make sure they are doing everything that was agreed to in the contract and continuing with ongoing change management.
Now You Have a Sound Business Case for Making Decisions
After reviewing all of these cost components and putting them into your current state costing model, you should consider outsourcing if:
- Your costs > 15% above industry standard expenses
- You’re finding it hard to keep an excellent team and/or your service is continually below an acceptable level
- You’re willing to spend approximately 1 year making the change, including spending a significant amount of time defining your current and near future states
- You’re willing to spend more $100K or more on consulting fees
- You’re willing to impact the job status of employees and colleagues
- You’re willing to release control of a key functional area in your company
If the above mentioned items are answered with a “yes” and senior management is aware of “all” the costs then:
The Outsourcing Project Has a Much Better Chance of Being a Success.