-
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.
-
Dos and Donts of Contact Center BPO: How To Make It Work
Page 2Matthew 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.
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?
-
Dos and Donts of Contact Center BPO: How To Make It Work
Page 3Matthew 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.
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?
-
Dos and Donts of Contact Center BPO: How To Make It Work
Page 4Matthew 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.
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?)
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 5Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 6Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 7Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 8Matthew 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.
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?
-
Dos and Donts of Contact Center BPO: How To Make It Work
Page 9Matthew 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.
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.
-
Dos and Donts of Contact Center BPO: How To Make It Work
Page 10Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 11Matthew 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.
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?
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 12Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 13Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 14Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 15Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 16Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 17Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 18Matthew 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.
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.
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Dos and Donts of Contact Center BPO: How To Make It Work
Page 19Matthew 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.
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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