Outsourcing to Save Call-Center Costs

I’ve always been a proponent of in-house call centers, especially as a former manager of one. But times are tough … and changing. Every company today is looking for ways to save money without hurting sales and customer service. As the pressure on businesses to dramatically reduce costs intensifies, look to domestic or offshore outsourcing of some or all call-center and data entry functions as a way to improve your bottom line. Companies can outsource these functions to avoid using capital for new order management and telephone systems.

One of our clients recently outsourced 300,000 phone calls offshore, resulting in a substantial reduction in costs. How substantial? This client’s fully loaded internal cost per minute was 72 cents, while a fully loaded offshore cost per minute is 42 cents — and most of the customer service remains in-house. Additionally, the client’s 90,000 mail/fax orders cost only 15 cents per order: scanned, transmitted to Asia, keyed overnight and available online for picking and customer service the next morning.

Clearly, you need to look at the potential savings of offshore outsourcing. How should you approach doing this type of study? Here are some points to consider.

1. Know your internal costs. In order to compare your internal costs to outsourcing, you need to identify your fully loaded internal costs. “Fully loaded” includes direct and indirect labor, occupancy, and telecommunication costs. This needs to be converted to a cost-per-minute basis, which is how outsourcing will generally be proposed and invoiced. You may say that you can’t control occupancy costs, however, there may be other uses for that space if the call center is outsourced.

2. Competitively bid out to multiple vendors. It goes without saying that you need to competitively bid the potential project to a short list of qualified bidders. This is the only way to get the lowest costs.

3. Formalize a request for proposal (RFP). This should include:

* a pro forma for your business, meaning the types and volumes of transactions (actual and multiyear forward projections);

* required services;

* service level standards for total call length, abandonment rate and average call;

* a request for references and a boilerplate contract; and

* details about order management systems needed, systems integration (including your e-commerce site).

4. Decide what to keep in-house. Keep your customer service internal. This gives you a way to monitor the service levels of the outsource company.

5. Ask other critical questions. Among the things you’ll want to know:

* How will training regarding your product(s) and company policies be conducted?

* Is the provider PCI credit compliant and certified?

* How will you monitor your customers’ calls?

* Who are the company’s references? Come up with standardized questions to ask each of the references so you can compare their responses.

Domestic outsourcing has some advantages over going offshore. Here are a few I feel are important:

* There may be an advantage in the area of the English language. However, I’m greatly impressed with how well customer service reps in the Philippines have performed for some of our clients.

* Shorter travel distance means you can visit more often.

* A better understanding of the U.S. culture.

* Keeps jobs in the U.S. This may or may not be as much of a factor for you.

Of course, domestic outsource providers’ costs will be higher than offshore. But it’s not necessarily a dead end. We have one client, a major nonprofit with a high average order value, that outsourced 100 percent of its direct orders domestically while keeping customer service in-house. It was able to successfully renegotiate with its domestic outsource provider to make the costs comparable.

Tocky Lawrence is vice president of F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory and benchmarking. Learn more online at www.fcbco.com.