In the yah-boo world of politics, offshore outsourcing has become something of a political hot potato. In the recent US presidential election, Democratic Party candidate Senator John Kerry was outspoken about the offshore shift, and announced plans to end tax breaks for companies that send jobs overseas.

Meanwhile, in the Economic Report of the President – an annual report written by the chairman of the US president’s Council of Economic Advisers – N Gregory Mankiw backed offshore outsourcing. “When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically,” he wrote.

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Cost may well be a factor, but successful global sourcing of contact centres concerns much more than the bottom line – an opinion that was reflected at the Offshore Customer Management International Conference held in Cape Town, South Africa, in November.

A question of risk

Risk management starts when an organisation begins investigating the possibilities of migrating offshore and continues through the decision making, integration and post-implementation quality management phases.

Mike Harvard, managing director of CM Insight, a customer management consultancy focused on the contact centre business process, explains: “Start with a blank sheet of paper and map out how offshoring could enhance your business. Don’t focus entirely on the cost issue. Think of this as an opportunity to enhance your customer experience delivery and do things you might not otherwise be able to afford, as well as strip out cost.”

Enhancing customer experience delivery was important for the UK’s The Black & White Group, which operates call centres in central England, Scotland and South Africa for its mortgages, loans, insurance and commercial finance business. When the group needed to expand its capacity, a decision was made to look at offshore destinations, including India, eastern Europe and South Africa.

“We eventually opted for South Africa because it was in a similar time zone to the UK, which was a major factor,” says Thomas Reeh, CEO of The Black & White Group. “It has a close cultural alignment with the UK and English is spoken as a first language by the majority of the population. The technology available, the country’s appetite for new business and its work ethics were also important factors. Finally, cost benefits were a consideration – but these were last on our list.”

In April 2004, the company began outbound calls focused on lead generation from its new location in Cape Town.

“We have plans to aggressively grow the team in South Africa,” says Mr Reeh. “We are building to 50 seats in the next six months, and inbound calling 24/7 will start before the end of 2004. During 2005, we are aiming to introduce general insurance into the mix of services from South Africa, and we aim to have 150-200 seats in operation by the end of 2005.”

Fair play

The UK’s National Rail Enquiries, which is run on behalf of the train operating companies operating through the Association of Train Operating Companies, began live operations in India in May 2004. This followed a procurement process that had to comply with the Official Journal of the European Communities – a process laid down by the European Commission to ensure fair play.

The company used a customer management consultancy to evaluate the potential of offshoring and review the company’s entire contact centre strategy.

“We asked the consultancy to meet a three-fold challenge,” Chris Scoggins, CEO of National Rail Enquiries, explains. “First, we needed to develop a new model for outsourced contact centre services that would win the support of the train operators based on its ability to reduce costs and improve service standards.

“In addition, the model had to be implemented through a rigorous procurement process, minimising the risk of operational failure or deterioration in service quality as change was implemented. The final challenge was to safeguard the quality of future service provision by including a robust means of quality monitoring and control in the new model.”

Following the procurement process, National Rail Enquiries chose two winners: BT and its partner, Client Logic, both existing suppliers to National Rail Enquiries in the UK that had extended their operations into India; and Ventura, a new choice with operations in the UK and India.

Where to go

The experiences of both The Black & White Group and National Rail Enquiries show that organisations that are undergoing a risk management process need to consider their business culture, goals and customer perception when choosing a location. Mr Harvard says: “India has dominated the offshore scene for some time now but other locations are emerging that offer very different service propositions and cost models and they may be more appropriate.”

Suresh Gupta, a partner at Capco and managing partner at The Paaras Group, agrees. During his presentation at the conference, he examined the top contender areas for the US, which include India, Canada, China, Ireland, eastern Europe, the Philippines, Malaysia, Africa, Brazil and Mexico.

“Canada has the advantage of being English-speaking, closely aligned to US culture, values and business framework, and is part of the North American Free Trade Agreement,” says Mr Gupta. “Added to this, federal and provincial government incentives are in place, many US-based established outsourcing companies already have a presence there and there’s an excellent infrastructure, which is seamless for US businesses. Finally, it has the most compatible legal system to the US and its time zone maps completely to US requirements.

“On the other hand, it faces challenges such as higher wages than in Asian countries, a recently stronger currency, and its skilled workforce is concentrated in larger metropolitan – and more expensive – areas,” he says.

The Philippines offers an established infrastructure in selected locations, says Mr Gupta. It has a workforce with good English language skills, its culture is the most closely aligned in Asia to that of the US and it is a central location for

pan-Asian business centres. It offers well-established US multinational company centres as well as experienced outsourcing companies, and an education feeder system that is growing. And it has recently been getting government encouragement, he says.

Against these points, Mr Gupta cites the country’s political and economic challenges, which include terrorist threats, a small supply of senior level management and a time difference of up to 12 hours. The latter can be an advantage and a disadvantage.

Good to talk

The inclusion of stakeholders at every stage, from decision making to deployment and beyond, is essential, according to several speakers at the conference. Mr Harvard advises decision makers to share their thoughts with individuals in the business who would be affected by a move to offshoring.

Liz Barclay, presenter of BBC Radio 4’s consumer programme You and Yours, says: “You know what your reasons are for moving offshore. But it’s not going to be a popular decision with all your stakeholders: staff, unions and customers. However, if you keep quiet about your plans, the backlash may become public and may get picked up by the press and media. That will not do your reputation any good, no matter how well intentioned you are.

“You need to ask yourself: why are you moving services offshore? What are your intentions or ambitions? You’re running the business with a view to the long term, so there has to be something in the move for everyone involved. If there isn’t, you will need to go back to the drawing board. If there is, make sure they all know what’s in it for them,” she advises.

“Moving offshore may offer a short-term solution in that it cuts costs – but does it offer a long-term solution of better value for everyone? If that’s not your intention, don’t do it. If it is your intention to add value, you have a watertight case for moving – so let everyone know about it,” says Ms Barclay.

A long-term view

The long-term success of a global sourcing project requires the negotiation of contracts that create a direct link between the quality of the service provided by each supplier and the remuneration they receive.

In the case of National Rail Enquiries, profit payments to suppliers are governed by their performance on three key measures: the accuracy of travel information given (as measured by independent “mystery shopper” exercises), percentage of calls answered (a target of 93% must be met) and the quality of call handling and conversation between agents and customers.

The last measure is evaluated by Performance Insight methodology from CM Insight. This involves the use of behavioural science standards and techniques to evaluate the customer experience delivered by each contact centre. While most contact centre evaluation systems focus on productivity metrics, such as call duration and speed-to-answer, Performance Insight focuses on the quality of the conversations that take place between agents and customers, their persuasive strength, comprehensibility and the extent to which they reflect the client’s brand. Each of National Rail Enquiries’ new operations has been benchmarked using Performance Insight and remuneration is linked to continuous improvement in scores.

“This means that each supplier is motivated to focus on what matters most: call answering efficiency, information accuracy and conversational quality,” says Mr Scoggins.

Experience talks

“If you recognise from the outset that your move offshore is a long-term, strategic decision, not a short-term, cost-focused fix, your chances of success will be greatly enhanced,” says Mr Harvard. “And that is certainly the message that has emerged from the experience of the past five years.”

 

 

Offshore risk management in action

  • Think beyond the cost dynamic

 

  • Include all relevant stakeholders

 

  • Take a staged approach to migration

 

  • Consider guiding principles that will control any offshore move

 

  • Look at locations that suit the business

 

  • Consider the labour pool

 

  • Look at the telecoms and physical infrastructure

 

  • Find out about financial incentives

 

  • Consider how the supplier will cope with difficult circumstances

 

  • Examine the business style and culture of the country

 

  • Think of the costs associated with making a move offshore

 

  • Look at the various types of service provider available

 

  • Consider how you will evaluate proposals and performance

 

  • Ensure the offshore contract is motivational, enforceable and escapable

 

  • Ensure consistency and continue to benchmark performance after establishing an offshore base