CALL CENTER - Do's and Don'Ts of Contact Center BPO - How To

Gartner Outsourcing Summit 2005 Matthew Goldman

46 April 2005Westin Century Plaza Hotel & SpaLos Angeles, California

Dos and Donts of Contact Center BPO:How To Make It Work

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Dos and Donts of Contact Center BPO: How To Make It Work

Page 1Matthew GoldmanC9, STD8, 4/05, AE

2005 Gartner, Inc. and/or its affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission isforbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as tothe accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in theinformation contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials toachieve its intended results. The opinions expressed herein are subject to change without notice.

Understand the Impact of YourOutsourcing Decision

Warning: Outsourcing can dramaticallyimprove your efficiency

but at what cost to your customers?

The appeal of improved efficiency meaning improved cost structures lures organizations to consideroutsourcing options for different business processes. In most cases, this desired goal is achievable. Whatorganizations tend to overlook in their efforts are the upstream and downstream effects of the outsourcedprocesses. Especially with regard to customer-facing processes, or processes that drive or are driven by customerinteraction , it is essential to develop not only an understanding of what the organization desires and can achieve,in terms of cost structure and operating performance, but how these decisions will affect customers.By applying a customer-centric view during the planning and execution of outsourcing decisions, organizationswill retain a better understanding of how to drive operational results while adding to, or at a minimum,maintaining the value perceived by customers.Action Item: Evaluate your outsourcing decisions from both an operational perspective and a performanceperspective, regardless of your desired goal.




Three key issues often surface when an organization considers outsourcing customer-facing processes.1. How can an organization determine whether to outsource its contact center operations?The starting point for many organizations often asked as How do we know if this is right for us? is acritical question because the answer will influence subsequent decisions regarding the evaluation, selection andtransition processes. To help answer the question, develop a baseline understanding of the market and the coreelements and decision factors often involved in the evaluation. It is helpful to be aware of why otherorganizations have chosen to outsource contact center processes because it might influence whether you decideto outsource.2. How do organizations focus on core competencies while ensuring a customer-centric view?The next step is to determine how you maintain awareness and preservation of your customer-centric businessmodel. Its important to understand what you consider to be your core competency and your customersperceived value of that interaction.3. What are the costs, benefits and lessons learned by organizations that already have outsourcedcustomer service?The third component to consider is the cost, benefits and lessons learned by other organizations, including waysto navigate the myriad of decision inputs and options, and effective planning for risk mitigation.

Client Issues

1. How can an organization determine whether to outsource its contact center operations?

2. How do organizations focus on core competencies while ensuring a customer-centric view?

What are the costs, benefits and lessons learned by organizations that already haveoutsourced customer service?




Worldwide Market Size and Growth Estimates forCustomer Service and CRM BPO

(five-yearCAGR:10.7%)

U.S.$ in Billions

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$7.1

$3.8

$7.7

$4.5

$8.3

$5.0

$9.1

$5.7

$10.2

$6.2

$11.4

$6.8

2003 2004 2005 2006 2007 2008

Customer Service BPO Sales & Marketing BPO

$10.9$12.2

$13.3$14.8

$16.4

$18.2

Gartner Dataquest estimates that the worldwide market for customer service business process outsourcing (BPO)in 2004 was $7.7 billion, growing to $11.4 billion by 2008. If sales and marketing BPO are included, the 2004CRM (or demand management) outsourcing market is an estimated $11 billion market, growing to a $18.2billion market by 2008.Note that this is just CRM BPO. It does not include other business processes fulfilled in a contact center (forexample, finance, human resources or IT help desk). It also does not include managed services for infrastructure,application and network services where there is no BPO component.Despite all the hype about offshore outsourcing, the U.S. governments attempts to restrict offshore contracts andsome of the bad press in the United Kingdom, we believe that about 2 percent of BPO is conducted offshore and,through 2008, less than 5 percent of all customer service agents will be offshore.Action Item: The market for customer service and support (CSS) BPO is growing, but the offshore component isstill small. Consider starting by outsourcing onshore and plan over time for portions of some processes to beconduced off-shore; however, be wary of outsourcing entire end-to-end customer service processes offshore.

Client Issue: How can an organization determine whether to outsource its customer serviceoperations?




Strategic Planning Assumption: By 2007, the worldwide market for BPO of CSS processes willhave grown from $8.4 billion to $12.2 billion (0.7 probability).

Customer Service Outsourcing Market:Drivers and Inhibitors

Drivers Increasing competition, forcing

reduction of costs in noncoreprocesses

Budget pressure (perception thatoutsourcers can do it for lessbecause of scale)

Desire to access best-in-classprocesses and skills

Challenge of integration of CSStechnologies and processes

Contact center consolidation Global deployment needs Hype of offshore outsourcing IT verticalization

Inhibitors Perception that customer service

must be a core business process Fear loss of control Immaturity of the market Bad internal measurement of

service costs Lack of vendor industry process

expertise Risk of high-profile offshore

failures

We define BPO as the delegation of one or more IT-intensive business processes to an external provider thatowns, administers and manages the processes based on defined and measurable performance metrics. Thisexcludes the outsourcing of specific CSS technologies or the underlying infrastructure.Drivers: Increasing competition means companies have to focus on core competencies to drive competitiveadvantage. For industries where service is not a core process, significant capital can be freed up and distractionsoffloaded to concentrate and invest in what differentiates the business. Outsourcing CSS can accelerateintegration of processes and technologies.Inhibitors: A traditional belief is that processes that touch client relationships must be core and, therefore,shouldnt be outsourced. Also, some executives are uncomfortable with the concept of outsourcing as it may adda layer of separation between the company and the customer. Due to the relative immaturity of the CSSoutsourcing market, there is significant consolidation, and many organizations are struggling to stay afloat, giventhe do not call legislation.Action Item: When evaluating whether to outsource CSS ask yourself the following questions: If I were to buildmy business from scratch would I build this process or buy it? (Is this core?) Am I so good at executing thisprocess that other people might hire me to do it? (Is it a key competency?)




Why Outsource Contact Center or CustomerService Processes?

Explore decision inputs and evaluate available options.

Desired outcomes are possible, and errors areavoidable, through effective planning.

Issues

HobsonsChoice

Partial/FullOutsourcing

Re-engineer/Automate

DoNothing

Options Outcomes

Operations &Security

Staffing

Costs

Strategy

Risk

BusinessPerformance

OperationalEfficiency

UnintendedConsequence

Many of the drivers for the CSS outsourcing market are key pain points in CSS, including cost pressures,keeping up with advanced technologies and integrating with legacy systems and processes. Outsourcing is onlyone option to satisfy these challenges. Organizations can also re-engineer processes and invest in newtechnologies themselves, use an external consulting firm or simply eliminate the process or technology.In some cases, an organization may not have a choice when it comes to making the decision to outsource.Business issues, changes in the market and mission-critical events can force action without options. This type ofdecision making, sometimes called a Hobsons Choice, doesnt afford an organization the luxury of time orflexibility in considering outsourcing options. To address these types of critical events, organizations can be leftwithout much of a choice. The upside to this situation is that there is a way to combat market forces perhapsnot in the way you prefer, but effective nonetheless.Action Item: When considering outsourcing certain customer service processes, look beyond pure costconsiderations to issues such as the strategy, purpose of operations, security, staffing and risk. This in an effortto make an informed decision that will achieve desired levels of performance or operational efficiency andminimize unintended consequences.

Strategic Imperative: Organizations that have no experience with outsourcing should start byoutsourcing small processes instead of large, multi-process engagements.




Strategic Planning Assumption: By 2007, vertical process knowledge and the ability toeffectively cross-sell and upsell from a customer service environment will be two of the topthree objectives of contact center outsourcing initiatives (0.7 probability).

Top Five Reasons for OutsourcingContact Centers

Improve Service Quality

Improve Customer Care

Reduce Cost of Service

Acquire Capacity on Demand

Leverage Process Expertise ofOutsourcer

Gartner Survey (n=76): 1 is not important and 7is extremely important

1 2 3 4 5 6 7

6.3

1 2 3 4 5 6 7

6.17

1 2 3 4 5 6 7

5.67

1 2 3 4 5 6 7

5.32

1 2 3 4 5 6 7

4.87

Average Scores

In a Gartner survey, we asked respondents to rate the importance of certain objectives in their contact centeroutsourcing initiative. The number of respondents was 76. Improvement of service quality was the objectivewith the highest score. In order of importance, the next most important objectives were improve customer care,reduce cost of services, acquire capacity on demand and leverage process expertise of outsourcer.In the past six to eight months, we have seen increased interest from our clients in the outsourcers ability toleverage customer-oriented analytical capability, such as real-time profitability analytics or event-based analyticsto drive scripting for upsell and cross-sell. Many organizations are finding this extremely challenging to dothemselves. We, therefore, believe that this objective will become more important in the coming years whenevaluating customer service outsourcing decisions and suppliers.Action Item: Recognize that decisions surrounding outsourcing customer service are shifting from a pure focuson operational efficiency to value generation as organizations begin to apply more customer-centricconsiderations to their outsourcing decisions.




Strategic Planning Assumption: Through 2007, 80 percent of organizations that outsourcecontact centers for CSS with the primary goal of reducing costs will fail (0.7 probability).

The Myths About CustomerService Outsourcing

We will absolutely save money if we outsourcethe contact center.

Customer satisfaction rates will erode if Ioutsource.

Contact center outsourcers are better at agentretention than I am.

Outsourcers have better contact centertechnology then we do.

In-house contact center agents provide moreinnovative, effective customer service.

With the interest in contact center outsourcing increasingly blended into broader discussions about BPO or goingoffshore, questions about the potential benefits of outsourcing for CRM activities are common. Some companiessee it as a great way to offload their problems. Others approach it as a way to improve quality. More see it as anopportunity to reduce costs. Conversely, other organizations are staunchly against outsourcing their perceivedcrown jewel the customer asset. In reality, many of these drivers and inhibitors are based on fallacies,myths perpetuated by outsourcers looking to sell solutions and managements uneasiness about losing control ortheir jobs.One of the most-common myths is that contact center outsourcers have better agent retention rates becausehiring, training and retaining agents must be a core competency. This is not true. The average attrition rate of in-house contact centers is 19 percent to 25 percent per year, according to Gartner benchmarks. In outsourcedcontact centers, attrition is typically 35 percent to 70 percent per year, and we have seen cases of it being morethan 100 percent a year in outsourced operations. When asking outsourcers about employee churn rates,understand when measurement of churn starts.Action Item: Specify that the measurement period starts from the time the agent signs the contract to work as theoutsourcer, and pick those with lower churn rates.




What to Outsource: Value vs. Process

Core

Value

NoncoreProcess

High

Low

Explore cost-benefit of outsourcing Monitor customer perception Determine internal/external scalability

Explore Outsourcing Alternatives Evaluate impact on service levels Seek operational improvements

Pursue process automation Leverage/grow internal skills Apply industry best practices

Outsourcing Opportunity

Insourcing Instance Sourcing Dilemma

Process Problem Identify changes in preference Evaluate internal skills Improve customer perception

This value/process framework serves as a high-level decision tool to categorize your situation and suggestactions for consideration. The y axis represents the value continuum and the x axis represents the processcontinuum. The four sectors on this framework illustrate distinct categories of process types.Beginning with the top-left sector, core processes that are perceived to be high in value by your customers haverarely surfaced in outsourcing discussions. To improve in efficiency or service level, consider automation, whereappropriate, leveraging/developing internal skills or applying best practicesIn the bottom-left sector are core processes that are perceived to be low in value by your customers. Outsourcingisn't immediately going to fix the problem. This situation begs examination of what is affecting customerperception (for example, changes in wants/needs and alternatives in the market).In the bottom-right sector, noncore processes that are perceived to be low in value by your customer represent anoutsourcing opportunity. It is still important to assess the impact on your customer base (What changes will theybe asked to accept? Are these trade-offs acceptable?).In the top-right sector are noncore processes that are high in value, according to the customer. Processes that fallinto this category force a more thorough review of your own capabilities to support and grow this capability ascompared to an outsourcers capabilities.

Client Issue: How do organizations focus on core competencies while ensuring a customer-centric view?




For operational or performance benefit, organizations maychoose to outsource all customer-facing processes

Partial outsourcing is often used to address noncore processes

ContactCenter

What to Outsource: Full or Partial Options toCRM BPO

Customer

Market Segmentation

Campaign Design

Lead/Opportunity Management

Telesales

Inquiry Handling

Field Service Support

Customer Data Analytics Cross-sell/Up-sell

CustomerAcquisition

Data Analysis

CustomerExtension

CustomerRetention Problem Resolution

Telemarketing

Customer Selection

As you identify what processes may be candidates for outsourcing, keep in mind that you need not outsource allrelated processes or subprocesses to achieve specific benefits. Partial outsourcing may be a viable option as youconsider the need to scale certain components.Additionally, consider the distance between the process and the customer. Some demand management processesthat are candidates for outsourcing do not immediately require interaction with the customer. Some processes,such as customer selection and customer extension, can be outsourced in a way that doesnt put any distancebetween your organization and customer. In the case of customer selection, organizations such as Harte-Hanks,D&B and Acxiom provide services to support marketing functions, but generally dont interact with yourprospects or customers.Improvements in technology, services, resources and many lessons learned contribute to a market of suppliersoffering flexible solutions that appeal to a wide range of outsourcing services from the risk-averse to the moreaggressive to meet your specific needs. The onus, however, is on you to determine the course of action, whichincludes review of key decision inputs and stated desired outcomes, and incorporates customer-centric thinkinginto your end-state goal.

Strategic Imperative: Organizations that have no experience with outsourcing should start byoutsourcing small processes instead of large, multi-process engagements.




If You Dont Know What You Want to Do,You Are Not Alone ...

N=109 (Organizations with 1,000 or more employees)

Eighty percent of large organization respondents haveno plans to outsource

Decision requires thorough analysis, clearly statedobjectives and appropriate metrics for evaluation

If you still have not decided what your organization should do, you are not alone. A recent Gartner survey askedrespondents from large organizations (those with 1,000 or more employees) about their current and future plansfor outsourcing. With regard to demand management, roughly 80 percent of respondents have no plans tooutsource.Is this surprising? Perhaps not. Amid all the hype around outsourcing and the seemingly endless supply of pressclippings announcing new, 10-year contracts wins (and cancellations), there remains a significant number offirms that remain undecided on the value proposition of outsourcing their customer-facing processes.Outsourcing is a nontrivial decision for any process. There can be significant upstream or downstreamconsequences for poorly planned, poorly executed or simply wrong sourcing decisions.




Top Mistakes in CustomerService Outsourcing Expecting cost savings before measuring your current performance

Going ahead without executive buy-in

Locking yourself into a long-term contract without an exit strategy

High outsourced agent churn rates

Inadequate processes for knowledge management

Not managing the customer experience appropriately

Inappropriate or unmeasurable SLAs

Failure to map customer-facing processes (from thecustomer perspective), and no management of theintersection between the outsourced and retainedprocesses

Underestimating management cost and time required,especially to make the transition and manage an offshorerelationship

There are many challenges and pitfalls to be aware of in CSS outsourcing. The most significant include: Mort organizations struggle to understand the total cost to service customers internally. The decision to undertake CSS BPO requires executive buy-in, because it will have a significant impact on the

business. Also needed is buy-in from all the managers down the executive chain. Outsourced agents can lead to process knowledge dilution and loss of control over the process, because much

of the knowledge required to resolve customer issues is held tacitly in the minds of the agents. Companies often develop service outsourcing contracts focused on operational metrics (for example, number

of calls handled or average handle time) and priced on a per-seat basis. This creates a direct conflict betweenthe companys objectives and the outsourcers goals. The outsourcer maximizes profit by increasing the agent-handled calls.

Action Item: When crafting outsourcing contracts, dont just pass on your traditional operational metrics andmeasurements, but rather ensure that the metrics you select to measure and pay your outsourcer encourage theoutsourcer to improve and innovate the process.

Client Issue: What are the costs, benefits and lessons learned by organizations that alreadyhave outsourced customer service?




Strategic Planning Assumption: Through 2008, 60 percent of organizations that are outsourcingparts of the customer-facing process will encounter customer defections and hidden supportcosts that will cost more than any savings they derive from outsourcing (0.8 probability).

Understand the Total Customer-FacingProcess (Outsourced and Retained)

CRM

ERP

SCM

Prospect to Cash Process (Customer Acquisition)

1. Log Activity

2. Log Opportunity

3. Check for Contract

4. Check Inventory

5. Check ATP/CTP

7. Quote Customer

8. Create Quote9. Generate Order

11. Plan and Produce

12. Send ASN

13. Ship

14. Invoice

6. Determine Price

10. Check Credit

EAI

EAI

Most organizations elect to outsource some customer-facing processes, but not all of them. For example,telecommunications companies might choose to outsource debt collection on late bills, but not the billingprocess. There is nothing wrong with this approach in principle; however, when doing this, most organizationsneglect to map the entire customer process and, particularly, the intersection between the parts of the processthat are outsourced and the parts that are retained, often resulting in horrible customer experiences and,sometimes, customer defections. Therefore, the cost savings of outsourcing were not as promising as originallythought.Careful planning, integration and management of outsourced channels, functions or processes, where theyremain a portion of the companywide strategy for customer service, are the recommended path. A huge base ofthis knowledge of how to execute the process from end to end resides with the clients themselves, rather than adocumented manual.Action Item: To build successful solutions, clients and outsourcers must understand the entire process, clearlyarticulate where they enter and where they exit, determine how they will integrate their solution and ensure thatnothing falls through the cracks.




Strategic Planning Assumption: Through 2008, 70 percent of businesses will entertain thenotion of business value-based contracts (such as revenue sharing) for outsourcing ofcustomer service processes, but 50 percent will be unable to negotiate these contracts becausethey lack the measurements needed to determine success (0.8 probability).

CSS Outsourcing Contract Types:Measuring Risk and Value

4High% of profit orrevenue

HighHighBusinessBenefit

3LowFixed feepertransaction

HighLowTransaction

2LowFixed rateLowHighFixed Price

1MediumFixed fee &component

Medium/HighHighPerformance

5LowPer agentper hour

HighLowSeat

UserPreference

UserReward

PaymentTypes

UserRisk

VendorRisk

ContractType

Contracting and pricing flexibility is increasingly important to users when structuring a CSS outsourcing deal.The most-common pricing models remain fixed fee and per-transaction fee, with variations. A number of pricingmodels exist, whereby the outsourcer is paid in proportion to the business value generated by the serviceprovided. These deals initially sound attractive to many clients, because the outsourcer has more skin in thegame; however, if the gains are significantly higher than expected, users may feel that they are giving away toomuch, and that the vendor is earning more than the fair value of its actual contribution.Despite claims, neither vendors nor end users venture much out of the traditional pricing methodologies. In arecent survey of BPO deals (including CSS; n=22), the newer equity payments and business benefit types ofengagements only constituted 10 percent of deals. The transaction- and seat-based deals are increasingly lesspopular with users; whereas, contracts in which full payment or parts of the payment are based on performanceof SLAs are more popular. SLAs have to be considered properly. If only efficiency SLAs are used in contracts(call abandon rate or first-call closure), then customer satisfaction and customer profitability may suffer.Action Item: Add metrics such as customer retention or profitability to the traditional SLAs used to measureoutsourcers and provide them with incentives.




Example: National Low-Cost Airline

Business issue Startup low-cost airline needed new customer interaction

capabilities Required time-definite availability from zero to go in 120 days

Customer interaction center for reservations, ticketing andcustomer service

Phone and Web access

Solution Engage eLoyalty, CRM service provider Leverage VoIP solution to prioritize, route and

queue calls according to type of interaction Outsource lower-value, noncore processes to off-

shore providers in the Philippines and India Retain high-value, core processes in Virginia

contact center

To illustrate some of the topics discussed, consider the example of a national low-cost airline. This carrier wasfacing increased costs as part of its relationship with larger airlines. The organization decided to fly on its ownand required a rapid, time-definite delivery of a Web and phone-based customer interaction solution (hardwareand software) that could manage reservations, ticketing and customer service issues including agents and ithad to be ready in 120 days.To develop a solution, the airline engaged eLoyalty, a CRM service provider that specializes in these matters.Together, they forged a plan that would enable the accelerated development of the system and quickly scale thecapacity to handle the anticipated call volume.The plan called for ticketing and reservation processes to be outsourced, using offshore providers in thePhilippines and India. The more-complex interactions, such as ticket exchanges, service issues, complaints andlost baggage, would be addressed inhouse by a smaller interaction center maintained by the airline in Virginia.To facilitate this approach from a technical standpoint, the airline looked to eLoyalty to design and implement aVoIP solution to prioritize, route and queue calls according to interaction type.




Partial Outsourcing Model ReturnsReal Results

Customer interaction solution in place ahead ofschedule

Consolidated outsourcing providers Initial Philippines provider had difficulty meeting

customer service expectations Quickly implemented additional outsourcer facilities in

United States and India for improved service andcapacity

Overall solution delivers high value,strong satisfaction and flexibility torespond to the dynamics of business

In less than the 120 days, the airline had its own customer interaction center in Virginia and two outsourcedproviders all handling interaction concurrently. The IVR solution proved critical in its ability to route to theappropriate agents, based on skills and availability. More importantly, it delivered customers to the right placefor assistance.The airline experienced some difficulty in that the Philippines provider was having trouble meeting servicelevels. Fortunately, the decision to apply a diversified sourcing strategy proved invaluable, because operationswere more easily transitioned to the India location.Often, organizations may not have the luxury or ability to contract with multiple providers. This exampleunderscores how to mitigate risk for critical noncore processes. Given that the India location was already trainedto perform the same tasks, as well as demonstrated an ability to meet service levels, consolidating was a sounddecision. This decision capitalized on the tacit knowledge accrued by the agents in India and accelerated theirability to quickly scale and meet the increased demand.The airline continues to receive high customer service marks from its clientele, is expanding its reach across thecountry and continues to evaluate, enhance and improve its interaction with its customers.




Strategic Planning Assumption: By year-end 2005, 70 percent of the top 15 Indian-owned BPOstartup companies with CSS services will be acquired, merge or be marginalized (0.8probability).

youll be forced to switch providers or re-insource.

Dont be left high and dry if your Indian CSS outsourcer sinks

2006: Massive Consolidation of Indian CSSOutsourcing Providers

Indian Outsourcer ChecklistSuccess in scaling serviceProfile and record of venture capital investorsFounders track recordMargin growth, not just revenue growthStable workforce strong workforce mgmt.CSS focus, not BPO generally Carefully worded exit clauses

Merger and acquisition (M&A) activity in the Indian BPO market began in 2002 and 2003, particularly forproviders with CSS services. In 2004, IBM acquired Daksh, and eTelecare acquired Phased 2 solutions.A number of large U.S. service providers are obtaining contact center outsourcing skills from India. Owners ofthese firms are keen to capitalize on the high evaluations this interest has caused. Indian BPO vendors havegrown aggressively, some even quadrupling their revenue during the last two years. This rapid growth isstraining or breaking their customer service processes, negatively affecting the companies culture and skill base.Some of the M&A activity will be driven by venture capital owners who are putting pressure on companies todemonstrate margin growth, and proposing mergers as one way to achieve this via scale. M&A will also bedriven by U.S. or Europe, the Middle East and Africa (EMEA)-based service providers that are shopping forIndian offshore CSS BPO capability to ramp-up their delivery capability from India.Action Item: Give proper consideration to exit management in case your startup Indian CSS outsourcer fails orexits the market.




Tactical Guideline: When evaluating offshore countries, organizations should look atqualitative factors such as government support, infrastructure, data and intellectual propertysecurity, educational system, software and hardware resources, language skills, politicalstability, marketing skills, availability of skilled resources, cultural issues and cost.

On-site/Off-siteOn-site/Off-site

MexicoMexico

CanadaCanadaIrelandIreland

IndiaIndiaPhilippinesPhilippines

New ZealandNew Zealand

AustraliaAustralia

Central/Eastern EuropeCentral/Eastern Europe

JamaicaJamaica

FijiFiji

Barbados/DominicanRepublic

Barbados/DominicanRepublic

GhanaGhanaSenegalSenegal

South AfricaSouth Africa

ChinaChina

MauritiusMauritius

ThailandThailand

VietnamVietnam

Sri LankaSri Lanka

MalaysiaMalaysia

SingaporeSingapore

IsraelIsrael

MoroccoTunisiaMoroccoTunisia

SpainSpain

Current PrioritiesSecondary Locations Aspiring Countries

New Countries Are Emerging asAlternatives to India

The chart above depicts a number of the countries, as well as longer-term prospects, for providing CSS BPOservices to U.S. organizations. The interest in nearshore options is strong, particularly from Western Europeanclients because of language requirements, but also in the United States because of the immaturity of the BPOmarket. For U.S. organizations, Canada and Mexico appear to be the most-likely nearshore options Canadabecause of the weaker currency and Mexico as a platform to serve the growing Spanish-speaking population inthe United States.When evaluating alternative countries, look at many qualitative factors: the country's government support,infrastructure, educational system, resources, political stability, marketing skills and cultural issues. Most of theoffshore contact center CSS activity for U.S. companies has been in India and the Philippines, with nearshoregrowth in Canada and Mexico (for the U.S. Hispanic population). With approximately 80 percent to 95 percentof total BPO revenue, India dominates, and it will continue to dominate. In terms of size and number of callcenter and IT professionals, no other country comes close to India in potential. The exception is China, whichhas a nascent market and is better qualified for Korean and Japanese support than for English language. Othergrowing offshore countries include the Czech Republic, Hungary and Poland for German-speaking customersupport, South Africa for the United Kingdom and Mauritius, and North Africa for the French-speaking market.To date, the interest and investments in these areas by CSS outsourcing firms have been more exploratory thandemonstrating real commitment.




Strategic Planning Assumption: Through 2008, vertical-industry process and the leverage ofanalytical CRM in the contact center will become some of the new CSS outsourcerdifferentiators (0.7 probability).

Contact Center Vendor LandscapeTop Global Contact Center Outsourcers by RevenueName CRM Revenue 2004* (CSRs)* FocusConvergys CMG $1,600 million 40,000 Customer care, tech. support, HRSRTeleperformance $1,160 million 40,000 Telesales, customer care, researchEDS $1,100 million 18,000 Customer care, tech. support, logisticsTeletech $1,050 million 33,000 Tech support, customer careWest Corp. $1,010 million 24,000 Telesales, customer care, risk mgmt.SITEL $ 870 million 19,000 Customer care, tech. support risk mgmt.Sykes $ 500 million 18,000 Tech support, customer careClientLogic $ 425 million 16,500 Customer care, logisticsStream $ 400 million 14,000 Customer care, tele-salesICT Group $ 310 million 11,600 Telemarketing, customer careTop Offshore Contact Center Outsourcers by RevenueName CRM Revenue 2004* (CSRs)* FocusWipro Spectramind $ 100 million 10,000 Customer careICICI OneSource $ 50 million 5,000 Customer careIBM (Daksh) $ 45 million 7,000 Customer care24/7 Customer $ 40 million 5,000 Customer care

*Gartner estimates, where public information is unavailable.

The contact center CSS outsourcing market has rapidly expanded during the past 24 months, with thedevelopment of the offshore contact center outsourcing market and the entrance of several consulting andsystems integration firms, such as IBM and Accenture, into the market. These players enter the market via workdone in BPO and strategic business consulting. Broadly speaking, the players can be categorized into: Those that grew up on prioritizing operational excellence in handling calls, driving efficiencies out of the

infrastructure to reduce costs and improve performance Those that grew out of industry process expertise, and have experience in broader BPO deals than just CSS,

but that often rely on partners or subcontractors to provide scale Pure-play offshore vendorsAlthough there is some level of convergence, if you already have best-in-class customer service processes inyour industry, and you are primarily looking for operational efficiency and proven ability to manage largecontact centers, then you would be better off looking at the players in the first group. If you are not sure whatbest-in-class processes are for managing customers in your industry and that is what you are buying through theoutsourcing arrangement, then you would be better off looking at big consulting firms such as Accenture andIBM. Yet, be aware that although they understand program management and best-in-class business processes inmany industries, they do not have years of experience in managing large contact center infrastructures, so theytend to come to market via partnerships and arrangements with other players.




Recommendations

Identify outsourcing objectives. What do your customers expect from you? Consider the process vs.value proposition.

Map customer-facing process end to end to understand and manage the intersection with retainedprocesses.

Develop contracts that require innovation in delivery to reduce ongoing costs (for example, flexibilityand diversification).

Leverage global delivery capabilities, but be careful about provider evaluation. Ensure that they havethe industry or business process understanding.

Establish well-defined metrics for vendor and process performance management. TA requirement tomanage and measure the outsourced relationship.

Do not underestimate the management time that will be required to make this work at least in thefirst year.

Evaluate and monitor changes in customer perception.

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CALL CENTER - Do's and Don'Ts of Contact Center BPO - How To

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