A friend of mine who works for a large insurer recently told me her employer (company name withheld) is going to outsource large chunks of its phone-based customer service to India to cut costs. I'm not an MBA, but I question this decision, especially considering that many of the calls will come from older clients with fairly complicated questions about their Medicare coverage.
While offshoring call centers is a common cost-cutting tactic, it's one that can end up costing companies more than they'll save, as I've written several times in the past. I shared 2004 data from consulting company ContactBabel that showed British agents could answer 25 percent more calls per hour than their Indian counterparts and resolve 17 percent more problems during an initial call. Not only that, but ContactBabel estimated that the total savings from shifting 1,000 call center jobs from the UK to India could easily vanish if the move led one-third of 1 percent of a (hypothetical) company's customers to take their business elsewhere.
I attended an event in 2008 where a VP of a large U.S. retailer described how droves of customers complained about poor service when the company outsourced its call centers to India, prompting it to switch to a different Indian provider, then to Canada, before moving customer-support positions back to the United States. Cultural and language issues associated with offshoring can obviously present customer -service challenges. But outsourcing to U.S. providers may create problems as well.
Also in 2008, I interviewed Jonathan Whitaker, an assistant professor of management in the Robins School of Business at the University of Richmonith, who along with two academic peers studied the offshoring and outsourcing activities of 150 U.S. companies and business units from 1998 to 2006 and analyzed the implications of those activities on customer satisfaction. Somewhat surprisingly, they found similar declines in satisfaction for companies that offshored customer service and companies that outsourced customer service to domestic providers. Whitaker told me:
While we find that customer satisfaction declines with offshore customer service, the decline is similar to the decline with domestic outsourced customer service. This suggests that there may be other reasons why customers are dissatisfied with outsourced customer service, and these reasons may be common to both offshoring and domestic outsourcing.
It's somewhat telling that a recent Detroit News article relating the story of Burroughs Payments Systems, a Michigan company that decided to return some of the call center jobs it had offshored to India to its headquarters in Plymouth, Mich., plays up the offshore angle. But in reading the story, it's obvious the Michigan-based employees provide better service not because English is their first language, but because they have deeper knowledge of the products they discuss with customers. Burroughs staffs its call center with employees who have actual hands-on experience with its products.
Since the switch, customer-satisfaction levels have risen sharply and fewer units are being returned for repairs. Plus engineers are not being dipsatched to fix problems in the field nearly as often. Says Burroughs CEO Alan Howard:
Customers prefer to talk to people who know what they are talking about.
Howard also says Burroughs' cost savings is "greater than 10 times" what it could achieve with offshore customer service. I think this is impressive and hope it encourages companies to quantify their supposed cost savings and qualify any other benefits before moving business functions offshore.
However, I'd venture to say most people don't really care where assistance comes from, as long as they get it. Whether a call is answered offshore or on, the key to satisfaction appears to be resolving customer problems during an initial call. That's what Dell found when it shifted focus from keeping calls short, a common call-center metric, to resolving customer issues. While the average time of a technical support call increased from 22 minutes to 32 minutes, the number of incidents resolved on the first call rose from 44 percent to 65 percent. It took some time for the move to pay off, but it ultimately did, because total call volume fell, said Dick Hunter, Dell's former VP of global consumer support services, during a September DataInfoCom webcast.
While employing folks with deep knowledge of products and services to staff call centers is a logical approach, it won't be scalable or cost-effective for many companies. Call center metrics are tricky, as I wrote in December, with a need to balance quantity vs. quality and cost vs. effectiveness, among other factors.