When Outsourcers…Well…Outsource
1 May, 2004
By: Daniel EnthovenThere’s a funny trend going on in the contact center world these days. Outsourcers are outsourcing. But far from being a contradiction, it just goes to show how powerful a business model outsourcing is, and why the outsourcing industry is exploding.
To understand the trend, it’s best to start with the call center, or as it became known in the late ‘90s, the “contact center.” The call center used to be the primary way that customers could interact with remote enterprises. Questions about your bank balance? Wanted to know when the package shipped? A toll-free phone call to the call center was the way to find out.
With the advent of the Web, the number of choices that people had for how they could interact with their bank, airline, or utility company exploded. Along came Web sites, e-mail and chat. Call centers started adopting new technologies ranging from speech recognition and in-network routing to live chat and automated e-mail response. Over the last decade the rate of technological change in customer service accelerated radically, and the number of technologies the contact center was expected to support grew as well.
This became a huge headache for contact center managers. They wanted to provide a broad range of access channels for their customers and stay up to date on the technology. At the same time, their resources and dollars were getting spread too thin. Managers were stuck on a treadmill of constantly updating the new technologies they’d purchased while evaluating new technologies on the side. Additionally, the risk of technological adoption had gone through the roof, as companies tried to balance being on the leading edge with being on the bleeding edge. Managers who invested in the wrong technology found that they’d wasted time and resources.
This all changed when companies realized that outsourcing was a way to obtain the best of both worlds. They could easily add new technologies and access channels just by finding the right outsourced service provider. And if a service provider fell behind the curve in terms of cost or quality, there would always be another ready to take its place. At the same time, managers found that their costs became significantly lower as well as more predictable. As Ian Marriott, a Vice President at Gartner, explained, “The potential cost advantages are so persuasive that companies that don''t consider it seriously risk doing their shareholders a disservice.”
But the more important benefit of outsourcing was that management now had more time to focus on the content and quality of their customer service because they weren’t stuck in its plumbing. Ian Marriott predicted that businesses that don’t outsource will be “put at risk due to loss of competitive advantage and inability to focus on growth through innovation."
These benefits have led to an explosion in outsourcing as more and more companies turned to this model. Major corporations including AT&T, Merrill Lynch, Verizon and Qwest found outsourced service providers to manage various functions for them. Companies like IBM, Accenture, EDS and Sykes have seen their outsourcing revenues explode in recent years, and they have developed businesses around providing aggregated outsourced services to very large enterprises. Agents, IVR, data center maintenance, even printing and mailing became part of their service offerings.
Ironically, as enterprises took themselves off the technology adoption treadmill, they forced their outsourcers to step onto it. Outsourcers that had gotten into the business of taking over everything in the contact center found that they were in the same pickle their customers once had been. They had to find a way to provide a myriad of complex technologies, from Web chat and e-mail response to voice recognition and speaker verification.
The result was described in a recent report by Forrester Research: "Large players like ACS, EDS and IBM, as well as offshore firms like Progeon, stumble trying to master all of the required BPO competencies." How best to get off the technology treadmill? Outsourcing, of course. The same Forrester report pointed out that “a set of smaller [outsourcing] specialists build out deep capabilities in a single segment.”
Those large players now look to focused technology companies to provide very specific types of services. There are companies that handle just bulk e-mail and e-mail response. There are companies that focus on telephone call automation using speech recognition. The more complex the technology, the more value these focused outsourcers can provide. Describing this aspect of the market, Linda Cohen of Gartner said, "Smaller vendors, especially, will have new opportunities to compete in specialized niches."
At the end of the day, the benefits of this trend are remarkably broad and deep. Companies are reducing their costs significantly by taking advantage of the economies of scale and business efficiencies that outsourcers provide. Aggregated outsourcers are finding that they can provide cutting edge and complex technologies without getting caught on the treadmill their customers escaped. Focused outsourcers are able to focus on what they do best.
And the end consumers? They may be getting the biggest benefit of all. What this chain of outsourcing has enabled is far more focused and dedicated resources studying and enhancing the customer experience. Five years ago, the contact center focus was just on the technology. Now it’s on the customer care experience. Five years ago, call automation systems were designed by the IT staff. Now they’re built by human factors experts with years of experience doing just that one thing.
Outsourced service providers will continue to help enterprises lower their costs significantly while improving the customer experience. And the great thing for enterprises and consumers is that this isn’t a temporary trend, but a permanent change to the competitive landscape. Because, if any outsourced service provider fails to do both these things, there will always be another company waiting to step up to the challenge.
