Call Center Outsourcing
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Balance benefits, risks before outsourcing your call center to offshore provider
By Bradford Adrian
Businesses in many industries have shipped their customer call center operations to offshore service providers, primarily lured by the promise of lower costs. Although the financial services industry tends to be more conservative than other sectors in the use of outsourcing, the appeal of offshore call centers is, nevertheless, strong.
Financial services providers (FSPs) weighing whether to offload their call center operations to an offshore service provider face a variety of decisions and must balance likely benefits against potential drawbacks.
The rationale for offshore call centers
The offshore outsourcing route offers FSPs clear opportunities to save money, deliver adequate customer service, and concentrate on their core competencies. The cost savings afforded by offshore outsourcing is attractive to enterprises in many industries; however, because of the drastic need for cost reduction in the increasingly competitive financial services industry, some FSPs are wondering if the offshore option is their greatest hope for cost savings.
These savings stem from:
- Personnel savings—Clients of "nearshore" outsourcers save an average of 8 percent on per-hour call handling at call centers in Canada and 10 percent with centers in Mexico. However, personnel costs in offshore locations such as India and the Philippines can be as low as 40 percent or less of local costs. For example, the fully loaded per-agent cost in a U.S. call center averages $40,000 per year; in India, it is only between $5,000 and $10,000 (depending on the type of work done). Savings in other geographic regions, such as Eastern Europe, Ireland, and Scandinavia, are not as significant as those in India or the Philippines, but they are still attracting the attention of some FSPs.
- Reduction/elimination of technology investment—FSPs opting to outsource their centers offshore can greatly reduce their need to invest in new or upgraded facilities and technologies. Investment may be required in technologies for integration with offshore outsourcer systems and process reengineering, but overall technology upkeep and upgrade can usually be greatly reduced.
- Affordable 24x7 coverage—Around-the-clock coverage can be expensive, although essential—especially as once-separate economies and financial services continue to converge into a global marketplace. The time difference between India and U.S. and European markets—nearly 12 hours for the United States and from six to seven hours for Europe—facilitates 24x7 operations. This lets FSPs take advantage of lower-priced evening voice and data traffic rates for calls initiated by U.S. customers phoning during their daytime hours.
Beyond these cost savings, though, offshore outsourcers also offer FSPs additional benefits, including:
- Educated workforce—In some offshore countries, call center jobs are highly sought after and are filled by primarily college-educated representatives; the result is that the level of professionalism and ability to handle a variety of call types may be higher than in local centers. Call center agents in India, for example, are typically college graduates, which makes centers in India particularly attractive. Even so, the primary benefit of education is enhanced communication skills, which shouldn't be construed as an inherent ability to handle complex, relationship-focused calls.
- Strong technology infrastructure—Countries that have made significant inroads in providing call center outsourcing often boast new telecommunications infrastructures. This is especially true for countries that until recently had very little telecommunications capability; building the infrastructure as recently as within the past five years guarantees that in many ways it is newer and more sophisticated than at local locations. For example, landlines are often newer and use fiber optic technologies, instead of outdated copper wire.
- Quality of customer service—Call centers in most successful offshore locations operate with high standards of customer care, often offering service commensurate with, and often exceeding, that which is typical of local outsourced call centers. It is increasingly possible to find providers whose agents have accents and speech characteristics amenable to most local clients, so there are no language barriers detracting from the care being provided.
- Enhanced disaster recovery and business continuity— Multilocational and multivendor outsourcing can allow better disaster avoidance and recovery and greater business continuity for mission-critical services than might be possible when all call center assets are centralized.
Even though savings can be great, the vast majority of FSPs are unwilling to send any call center operations offshore. Through at least 2005, fewer than 5 percent of large North American-based FSPs will use offshore call center outsourcing (0.8 probability). This low prevalence stems from some important issues that are especially important for FSPs:
Types of call center functions
- Offshore outsourcing is not suitable for all types of call center functions. The types of calls not amenable to offshore operations are those that:
- Require highly sensitive customer information; the risk involved in making detailed customer data available is too great. As a result, functions such as inbound account maintenance should not be sent offshore.
- Are highly complex and nonrepetitive; these are the types of interactions that are critical to establishing and maintaining deep customer relationships and must remain under the tight control of the FSP. For example, inbound calls requesting financial planning assistance or advice should not be outsourced. Because of the difficulty in classifying inbound call types, most types of inbound calls are not good candidates for offshore outsourcing.
- Are key to real-time processing; the challenges and risks of real-time information sharing to distant locations make batch-type work better offshore options. For example, outbound fraud intervention calls probably could not be administered in a timely fashion through an offshore center.
Examples of call types that meet these criteria are outbound credit card collections, outbound marketing presentations, inbound claims status inquiries, and inbound technical support for Web pages.
Regulation of call centers and financial services activities in foreign countries can add another layer of intricacy to the management of offshore activities. Local legislation can pose problems, too. For example, some U.S. states have enacted legislation requiring that only U.S. citizens or legal alien residents can be hired to work on state contracts, so all call center work for government-affiliated credit unions or financial management must be performed locally.
Data integrity and security
Strong telecommunication capabilities notwithstanding, some offshore regions may lack essential safeguards to protect against data theft. This challenge is not unique to FSPs, but the potential loss stands to be greater than for other types of enterprises.
Need for transparency
As with all forms of outsourced call center functions, customer trust hinges on the FSP's ability to project the appearance that the centers are absolutely controlled and operated by the FSP; the challenge to present such an image is heightened when offshore providers are used. Anything giving customers the impression that the call center agent is not working locally—such as a lapse in connectivity, language misstatement, or cultural embarrassments—can undermine customer trust.
There are also other risks uniquely associated with offshore outsourcing, including geopolitical risks.
- FSPs considering offshore call centers should stress the quality of the customer calling experience. Customers are, understandably, less tolerant of information mistakes and language misstatements that are made regarding financial services; FSPs must insist on carefully prepared service-level agreements that address measures of call efficiency and effectiveness.
- Make sure you have the ability to identify and segregate the types of calls that are needed and carefully select the type of applications or calls to be outsourced. Because of the potential for language miscommunication and data misappropriation, avoid tasks that require considerable account troubleshooting or detailed account knowledge. Instead, choose calls that minimize the risk of misappropriated information and take advantage of limited data exchange—for example, outbound marketing follow-up calls, outbound credit card collections, and inbound insurance claims tracking. For all but the most-simple call types, demand rigorous proof of expertise and ability to handle more complex calls.
- Select offshore providers carefully. Minimize uncertainty and risk by selecting providers that have financial services experience. Consider international providers that have local offices and centers distributed across geographies. Look for synergies with other processes that are, or may be, outsourced to other offshore service providers, such as outsourcing outbound insurance claims calls to the same provider also handling claims-processing services.
- Understand and quantify the risks of offshore outsourcing. Make sure that the offshore decision is a key factor in your enterprise risk analysis; any problems with your offshore call center will harm your operations and, especially, your public image as a trustworthy financial services partner.
What you need to know
Even though the cost savings from offshore outsourcing of call centers can be significant, financial services providers must carefully weigh the associated risks and challenges before relinquishing any call center activities. Because of the security, quality, and legal implications involved, FSPs should consider offshore providers only for low-level, simple, or batch call center functions.
Gartner originally published this article on June 18, 2003.