Outsourcing just to cut costs will fail

Analyst predicts that four out of five outsourcing operations built on cost saving will not work

According to Gartner, the worldwide market for customer service outsourcing is set to grow from $8.4 billion in 2004 to $12.2 billion, but the offshore component will remain small. Despite the hype surrounding offshore call centres, offshore customer service outsourcing represents less than 2 percent of the worldwide market in 2005, increasing to less than 5 percent

Gartner reports that about 80 percent of organisations outsourcing customer service and support contact centres with the aim of reducing cost will fail. Despite these gloomy predictions, other analysts are predicting rapid growth of call centres in Asia Pacific. Frost & Sullivan foresees the number of call centres in 2006 to exceed 26,000, supporting 1.9 million-strong workforce. By 2011, it will mushroom to 40,000 manned by nearly 3 million agents.

Historically, a call centre is a competition-driven internal response to provide better service or generate new sales opportunities. As businesses streamline operations and identify core opportunities, call centre functions are outsourced to external providers for a number of reasons such as better utilisation of internal resources, reduction of per unit call cost, increased focus on core competency.

There are two main types of call centres: consumer transactional-based systems, which lend itself to a lower cost location (and therefore readily outsourced); and the more complex interaction contact centres such as those that provide technical helpdesk services, which are generally kept in-house.

However, as improvements in technologies and processes take shape, businesses are turning to external call centres to provide everything from over-the-phone technical helpdesk support to helping execute lead generation and tracking campaigns.

The primary sources of business for call centres are the US, Europe and Australian markets. Companies from these countries outsource to Asia because interaction, enabled by interactive voice response systems, is as important as a live interaction and requires just as much focus to ensure positive customer experience.

“For many enterprises, the customer experience is the basis of competitive differentiation and the call centre is at the heart of that experience. Empowered by IP-based solutions, next generation customer service practices are expected to undergo significant changes in such areas as matching the level of service to the lifetime value of the customer,” says Tom Cheong, managing director, ASEAN, Avaya.