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Contact center outsourcing can save you 25% to 60%

Contact center outsourcing can save you 25% to 60%

Outsourcing is one of the hottest topics in the contact center industry. Over the last few years, many companies have taken advantage of the cost savings from migrating customer service functions to offshore vendors. But now the outsourcing market is going through a transition. Foreign vendors are beginning to feel some of the same financial pressures as their North American counterparts. At the same time, North American outsourcers are recognizing the need to compete with offshore centers and are now offering competitive pricing and value-added services to complement their well-established core functionality. What this means for end users is that US and Canada-based outsourcing options that might have been bypassed before are now worth serious consideration.

Contact center outsourcing can save you 25% to 60%

Offshore outsourcing is one of the few single initiatives that can reduce contact center operating expenses by as much as 25% to 60%. Many US-based businesses have opted to shift their contact center operations to the Philippines and China to take advantage of these savings. As the foreign-based contact center market matures, however, offshore vendors are beginning to experience some of the same challenges that have affected US-based operations. Agent attrition and increasing salary demands are beginning to be felt in India, the most advanced of the foreign markets. This is creating upward pricing pressure, resulting in less cost savings than end users might originally have anticipated.

Offshore outsourcing is complex

For all of its advantages, offshore outsourcing is also fraught with challenges. Selecting the right partner abroad is a complex process. A cultural mismatch between the business and the outsourcer can cause customers to defect. Similarly, an offshore firm must share the same work ethic and outlook on the long-term prospects for the outsourcing relationship in order for the partnership to succeed. Unless the cost savings of offshoring are at least 20%, the effort may not be worthwhile. It is also risky and expensive to move or bring back activities from abroad if a relationship is not ideal. The upside potential of offshore outsourcing is great, but the downside also requires careful consideration.

North American outsourcers respond to competitive pressure

In the meantime, North American outsourcers have not simply been sitting by and watching the migration of contact center business to foreign geographies. US and Canada-based executives are experienced, seasoned professionals who realize that they have to adapt and innovate or perish. To that end, they are adopting commoditized pricing, on par with their foreign competitors. They are also expanding their range of offerings, including business process optimization (BPO) and other professional services.

The North American outsourcing market has also strengthened through consolidation. This has resulted in a consolidated, stronger market. Most significantly, LiveBridge was acquired by ACS for $32 million in 2005, and its rumored that ACS may be acquired by a private equity firm for $8 billion in the next couple of weeks. In the near term, global outsourcing firms are also looking to buy their way into the Canadian and US markets. Overall, fewer than ten firms dominate the North American market, but over 80 contact center outsourcing firms offer services for businesses of all sizes and verticals.

Advantages of North American outsourcers

Partnering with a North American outsourcer has several advantages. For US-based firms, an on-shore outsourcer will likely offer a better cultural fit for customers. Also, management of the outsourcing relationship is generally easier when the contact center is culturally and geographically close. In response to the cost considerations that have driven many contact center seats offshore, pricing for US service has become much more reasonable. Vertical specialization and optional value-added services, such as BPO, have made North American vendors very appealing.

Outsourcing continues to present a compelling combination of cost savings and high-quality customer service. But outsourcing does not resolve all customer service and sales challenges; it also adds new ones. It’s important to continuously apply business process optimization to enhance all aspects of a company’s operations. Improving business processes can be easier and more effective when partnering with an outsourcing vendor closer to home.

Reconsider North American contact centers outsourcers

If you’ve dismissed the possibility of working with North American outsourcers in the past, it’s time to reconsider. US and Canadian vendors are a strong, innovative group, offering competitive pricing and a variety of services. The selection process can be complex, so if you’re considering an investment in contact center outsourcing, we suggest that you take a look at DMG Consulting’s new 2006 North American Contact Center Outsourcing Market Report. It contains a thorough analysis of the leading market vendors (ACS, arvato services, Convergys, ICT, SITEL, West and TeleTech) and provides pricing and best practices to guide you through the process of selecting and negotiating a partnership with the right vendor for your business.

Ask the Experts

I’m working in on evaluating the performance of a number of operating Telecom call centers. I review numerous KPIs and there is usually more than one way to compute a certain KPI. My challenge is in:

  • Cost / Call (which items to include from OPEX/CAPEX…etc.)
  • 1st Call/Contact Resolution

There are many ways to calculate each but I’m not sure which is the best and mostly used. I would appreciate it if you can share with me models, best practices or guidance for calculating these KPIs.

Thank You.

Multinational Telecom Company

Many key performance indicators (KPIs)/metrics have standard formulas, but cost per call and first call resolution do not. Calculation of both of these KPIs depends upon specific corporate issues, including how your shop is configured and the availability of data.

When measuring cost/call, the first issue is to decide what types of calls you want to evaluate – options include agent handled, interactive voice response, and web-based. The second issue is to identify the appropriate cost pool related to the call categories that you are measuring. You want to include all direct costs, such as direct labor costs (agents, supervisors, management, quality management staff, training and technical support), communications expenses and dedicated technology costs (capital depreciation and system maintenance). Even though it is more complex, you will also want to figure your fair share of costs for shared resources such as real estate, shared systems, human resources, the cafeteria, etc. The more difficult task is to decide how to account for “indirect” expenses, often referred to as “overhead.” These include allocations for executives, corporate functions, etc., that are often charged to your department.

If your budget is set based on your cost per call, you are going to want to make sure that this number includes all possible costs. However, most organizations do not establish their budgets based on this KPI.

First call resolution also does not lend itself to a simple, standardized approach, which is why it is almost meaningless to compare this metric across organizations. The challenge is to figure out if the customer’s inquiry was resolved during the first contact. And, please keep in mind that even if the agent provides a correct answer, this doesn’t mean that the customer will be satisfied and not call back to verify the information.

Organizations take a variety of approaches to calculating the first call resolution rate. Some companies program their support system to check if a customer calls more than once in a specified time period, such as two to three weeks. If the customer calls back, it’s assumed that the issue was not resolved during the initial call. Other companies ask their agents to use an after-call wrap up code to indicate when they believe calls were completed during the initial contact. However, asking agents to indicate if the call was “one and done” is not an effective approach and often results in inaccurate data that can hurt a contact center. Still other companies ask their quality management (QM) team to determine if the call was resolved during the initial inquiry – this is part of the process of evaluating calls. As most QM organizations evaluate only two to five calls per agent per month, it’s very difficult to accurately determine the first call resolution rate from such a small sample.

Generally, when measuring KPIs, the objective is to create a process that is good enough to generate “directionally accurate” numbers that can be tracked over time in order to evaluate the performance of the department. If the cost per call increases or the first call resolution rate decreases, it is fair to conclude that the department is not moving in the right direction. These metrics do not have to be perfect, so long as they are calculated consistently and revised as circumstances change and more data becomes available.

DMG Consulting LLC is a leading independent research, advisory and consulting firm specializing in unified communications, contact centers, back-office and real-time analytics. Learn more at