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From the September 2008 Issue
Offshoring long ago grew into a popular strategy for companies seeking every possible cost advantage. The easy target: payroll, one of the largest expenses for companies. The fix: tap labor markets with lower costs.
Developing countries in 2008 are much more advanced than in the early days of the offshoring movement. The fear with heading offshore, that quality would be a sacrifice, is now mostly gone.
Expertly trained call center talent, individuals taught to handle business from the U.S., is readily available in countries such as India, the Philippines and some in Central America.
"When people started offshoring, it was for price and price only and some of the services reflected that," says Jay Minnucci, vice president of consulting services at The International Customer Management Institute in Philadelphia. "The better operators have realized that by adding a bit to the cost, they are still going to do well compared with other options and they will have less of a negative impact on the quality side."
There are other advantages beyond cost for taking a call center offshore. Companies with a diverse client base might need offshore workers who can communicate in several languages. "We see a lot of this with companies that are tapping into the Hispanic market," Minnucci says. "There are companies in the Dominican Republic and Central America that are pumping up their call center industry to meet that need."
Chris Repholz, senior vice president at Zenta, an outsourcing advisory firm in Philadelphia, says the education level of employees in some popular offshore locations is high. "If you are doing collections in India, the Philippines or South America, chances are the vast majority of those collectors are college graduates," he says. "They wouldn't have been interviewed for the position if they hadn't been degreed. That's something that you just can't replicate in the U.S."
Despite the advantages, making the decision to offshore is not always easy. Do the savings outweigh the effort needed to build and maintain a call center offshore? "Taking a small process offshore very seldom makes economic sense, for example," Repholz says. "You are going to save some money but not a dramatic amount and the sweat equity that you put into it makes it counterproductive."
Oxford Management Services, a collection agency in Melville, N.Y., works with several near-shore and offshore partners. Peter Pinto, president and CEO, says "we look at it the same way a major creditor looks at doing business with us and what they would look for in our internal process as far as security, overall structure and technology."
With a growing number of offshore opportunities available, Pinto stresses that choosing the right partner requires U.S. companies to do their due diligence. "We are partnered with the creditor or we're partnered with their portfolio," he says. "These organizations are extensions of us. It's our reputation that we're putting on the line."
Consumers are more accustomed to conducting business with those not on their home turf but Minnucci says this could harm a company's image and the perceived level of importance they place on customers. This becomes especially touchy when clients learn that a segment of calls are being rerouted offshore, while another portion – very often 'VIP' and business-class customers – is served by a call center in the U.S. "People see that and they think, 'If I'm not a VIP in the company's terms, then I wind up getting sent someplace else,'" he says. "They equate that to getting less of a service experience, which is, of course, not always the case."
What's important, then, is for companies to clearly understand how the handling of a call will affect its relationship with the client not just in the short term, but in the future. "There is no question that some call centers are the image of the company," Minnucci says.
"With other call centers, it's closer to the back office and the image of the company may be better known through brick-and-mortar or through some other type of channel."
When developing offshore strategies, Minnucci favors a hybrid approach, where certain types of calls are serviced in the U.S. while others are funneled offshore. "A lot of companies, as they start to look through the segments of calls they receive may find some that aren't as high value. There are some that they might prefer go to self-service and others that might be critical for their business," he says. "The ability for a company to segment calls and be able to identify those possibilities is critical."
To determine where to route calls, companies must analyze call center data such as handle time, service level, first-contact resolution and revenue per call. "If you sent a good bit of your work overseas and you've done it at half the cost, but you find the revenue per call is off from what it is with the center that you have in the U.S., then you're not really saving," Minnucci says. "It's important to keep a piece of it at home – even if it's just a small piece – for comparison."
Investing in employee training is considered one of the most important decisions for companies going offshore. Agents need to be familiar with a company's procedures and, of course, any regulations specific to collections.
There also are cultural differences to remember. Some firms conduct accent neutralization to make customers feel at home, however there is much debate about whether this is effective. "I think it's unrealistic to expect an offshore center to sound exactly like one in the States," Minnucci says.
With both the U.S. and Canada attracting large immigrant populations, many agents working onshore have accents anyway - and customers have been accustomed to this for many years. "I'm a big believer that accents are not the issue," Repholz says. "There are a lot of people with accents in the United States and Canada. The issue is how well you speak and can converse."
This is where communication patterns come into play: not how employees sound but how they form phrases, and even know cultural references cited in normal, everyday conversations. For example, most individuals who have grown up in North America know when someone mentions "Big Blue," that they are talking about IBM. However, an individual raised at the other end of the world may not understand the reference.
This makes the daily interaction between the offshore outsourcer, the client back in the U.S., and that client's customer base much more formal. "You need to make sure that the meetings that you have and the decisions that are made are well documented and clear," Minnucci says. "There is more following up involved to make sure that there is understanding between your organization in the U.S. and the folks who are running the show wherever it may be offshore."
Keith Fiveson, CEO and managing consultant at ITESA, a consultancy based in New York, says this is "the difference between you hearing my voice and hearing the undertones and really getting what I'm saying, as opposed to just hearing the words and not getting the true meaning."
To succeed offshore, companies must build a solid backbone to absorb several variables that they do not run into at home, most notably work culture. Not all countries abide by a 40-hour week and national holidays differ.
U.S.-based clients must work closely with their outsourcers to learn how many employees they need to complete a specific amount of work.
"If the client tries to step in and starts talking about 40 hours a week and two weeks of vacation a year and tries to force those things into the equation, they are going to get an under-staffed center," Minnucci says. "A strong infrastructure between a client and an outsourcer would involve an understanding of those items and the ability to adjust them and treat them as variables."
If it takes 200 agents to produce a certain amount of work in the U.S., it may require 220 or 240 someplace else. "A well-structured client organization will understand that and, in the end, it shouldn't have that much of an impact on cost."
U.S.-based clients also must break down key performance indicators they are using to measure how well the outsourcer is doing the job. "Many times, when we put together service-level agreements and have key performance indicators in there, we tend to just throw a term out without defining it," Minnucci says. "If you are asking for a certain service level, you should define what that is, where the data comes from, what you expect the calculation to be and where those numbers will come from so that there is really no question about it when it comes time to report and evaluate."
Back at home, U.S.-based companies must communicate properly with their onshore staff so that valuable employees do not feel threatened about the offshore venture. "The big challenge is internal: you have to realize that from a communication viewpoint a lot of people are looking at an offshore play as a potential for them to lose their own jobs," Fiveson says. "Make sure internal communication is right so there aren't the jitters and so that you are not stumbling where you should be excelling."
One of the pitfalls for companies is that they do not account for the distance of any given offshore location. Minnucci says that when companies consider a location to be "remote," it may mean the nearest airport is 90 minutes away. In developing countries, "remote" sometimes carries a different definition. "If you are just shopping for price, you can go to an outpost in a remote part of the world that is very, very far from an airport that may or may not be as consistent as the kinds of airports that you are used to – and it may be really difficult getting transport to and from the site," he says.
This should not be overlooked because the U.S.-based part of the operation must have a presence at the offshore site on a regular basis – even if it is just once a quarter. At the launch, the presence should be greater: a couple of weeks leading up to it and a couple more afterwards to work out the kinks. "I do believe that if you are overseas – especially if you are somewhere where you are not really familiar with the culture, and maybe it's your first time outsourcing offshore, you should probably have more people there than what you might if it was someplace in the States or Canada," Minnucci says. CCR
