Approach to Strategic Outsourcing from large, evolved brands.

Date 17-01-2018

Sourin Buragohain

Head of Pre Sales, iSON Xperiences

What is the best approach to be used by organizations who has taken the strategic outsourcing decision for their non-core business processes – like back office, clerical activities, customer services and care activities, retention and outbound campaigns, KYC and customer on-boarding solutions, documentations, data entry, verification works, customer contact centers, digital care, social media solution etc. As is a well-established fact, the overwhelming advantages of outsourcing speak for themselves. More companies are drawing up plans to outsource work. Many companies now base their entire business plan around the delegation of functions to external service providers. According to some experts outsourcing is not simply a way of cutting costs; it is now a business model. Now that the organization has taken the outsourcing decision, the business group will liaise with the procurement team to release an RFP or if there is service providers who meet the eligibility criteria as specified in the RFP, invite them for submitting technical and commercial proposal.

Without going too much into the pricing models, which in itself are huge subjects of deliberation, lets jump directly into the stage where in the commercial proposal has been submitted by the service vendor and the core / RFP / Tender committee at the client organization is reviewing the proposal for its financial viability. Let’s assume here that the Outsourcing is being proposed for complete contact center outsourcing – in a non-hosted model, meaning fully outsourced model – where in the service vendor will provide for premises, office space, IT and non IT infra, desktops, LAN/WAN wiring, cabling, facility, admin, manpower, supervision, management, CCT applications, hardware, sever etc and all associated infra. In this model, the biggest advantage for the client organization is that there is no heavy capex investment to start the contact center operations for provided world class customer experience, as the service provider is doing the investments and converting into an opex model, which is payable through the process of monthly invoice / billing system. Let’s assume, for the sake of simplicity and easy understanding, the pricing is on the Per FTE Model – (Full Time Employee – FTE). In other words, this denotes the number of hired resources or manpower or full time employee (standard is 8 hrs of productive login per day) required to handle the forecasted volume of work. Hired FTE includes the total number of full time employees including shrinkage – planned and unplanned absenteeism, week offs, national holidays etc.

Let’s also assume the pricing Per FTE proposed by the service provider is USD 1000 per Hired FTE Per Month. This is an overall pricing which includes all the above mentioned set up costs – like premises, facility, ICT and Non ICT infra, manpower or agents, supervision, Quality and Training, Management, HR, Legal etc costs. All these set up costs are summed up and divided by the number of hired FTEs required for the forecasted volume of work, assuming an industry standard of 85% efficiency ( 85% of the login time of the agent, the resource will be occupied or productive). Now that the client organization knows the Per Hired FTE costs of outsourcing to a specialized service provider, they need to check and assess internally, to quantify the amount they are spending on their current captive contact center set up, on very specific itemized line items like:-

  • Cost of CCT – ACD, CRM, applications and licenses, Telephones for call handling, Server administration, CCT IT set up, AMC etc. This can be provided by the company IT Head / Manager.
  • Cost of Non CCT Infra – systems, desktops, LAN/WAN, wiring, cabling, data access, projectors, server rooms infra , etc . This can be provided by the company IT Head/Manager.
  • Costs of Contact Centre facility – seats, tables, chairs, premises, admin, maintenance, power, back up, conference room facilities etc. This can be shared by Corp Admin/Facilities Dept.
  • Costs of Manpower – Agents salary, supervision and management salary, welfare costs, medical insurance, transportation, incentives, bonuses, other benefits etc. This has to be taken from the HR Head or Manager.
  • Costs of Shared management – Costs of shared resources in IT / Admin / Facility / Management / HR depts. etc which gets devoted to the entire management of the captive, in house contact center. This is to be taken from the HR Dept.

The no. of hours spent by each of these cross functional management resources should be calculated for the month. Let’s say the management team spends 40% of their time and energy in the running and management of the of the in house contact center operations. Then the method of arriving at the shared management costs should be 40% of the monthly CTC (Cost to Company) of the concerned shared management resources.

Once you have all these line item wise costs and totaled it, divide by total no of hired agents you have in the captive contact center operations, you will get an idea of entire captive contact center operations costs on per Hired FTE basis, which will be required by you to do an apple to apple comparison.

Now let’s assume for example the costs per hired FTE of your current operations are USD “A” per Hired FTE. (Please note this is not the costs of salary of the agent employed, but entire end to end costs of the captive contact center, divided by hired FTE/agents)

This derived cost per hired FTE (USD “A”) is already provisioned in your current Annual Operating or Budget Plan (generally known as the AOP in most organizations), meaning itis already sanctioned for the current year, as you are incurring the same costs as actuals at present.

By now, you also know the service provider per hired FTE cost. The a stage is now set for the apple to apple comparison, on the costs or financial perspective.

Below decision making scenarios can be arrived at:

Scenario 1

USD “A” > USD 1000 per Hired FTE Outsourcing to a specialized Service provider is a must!! It will lead to better management of CC operations, bring in more efficiency and value, increase agent level productivity, improve CSAT and customer experience overall.

Best part is along with tangible improvements in productivity /efficiency, the decision to outsource will actually lead to substantial savings for your organization from the current AOP perspective.

Scenario 2

USD “A” = USD 1000 per Hired FTE. (Both the captive model and outsourcing costs are more or less equal – within 10% variance)

Outsourcing to a specialized Service provider is a must!! It will lead to better management of CC operations, bring in more efficiency and value, increase agent level productivity, improve CSAT and customer experience overall.

Outsourcing costs will be more or less equal to AOP costs, but bring more value by improved performance and delivery. You can focus on market and gain more share of revenues.

Scenario 3

USD “A” < USD 1000 ( More than 15% less, very unlikely) Outsourcing costs will be higher than captive model operational costs. Unless, the current customer experience of your organization is not a big concern, the Outsourcing decision can wait. It is suggested for organizations to carry out detailed comparison of all benefits of outsourcing vis a vis own, captive operations. Keep engaging with eligible and proficient service providers to see value additions of outsourcing. Customer care and experience is non-negotiable. You cannot afford to miss out on any customer voice or complaints. So, to manage the kind of scale and size of modern day organization and its growing customer base, proven experts in Outsourcing will be a must, sooner or later.

Key Value Proposition of Outsourcing to an expert global service provider would be as follows:

  • Providing an effective solution to any customer accessibility issues faced by companies and to achieve required levels of segment wise Service & Answer Levels by
    1. Creating an efficient world class IVR system which increases the IVR resolution %age.
    2. Deploying segment wise skill distribution in Call Centre to efficiently manage segment wise answer levels,
    3. Improve call handling capacity by improving Agent log in hour compliance, utilization and reducing AHT of calls through NVA identification/ reduction,
    4. Ensure a well-planned customer access strategy – through enhanced IVR / email / website / chat / social media channels – to ease call volumes at Call Centre and footfall at Showrooms
  • To bring down the Calls per Subscriber at IVR and Call Center level by:
    1. Efficient development and management of IVR to increase resolution %age at IVR,
    2. Increasing First Time Resolution of calls leading to reduced Repeat Calls.
  • Improve customer experience during interactions with IVR and Call Center by:
    1. Having a customer friendly and easy to navigate IVR menu,
    2. Ensuring the customer queries and complaints are adequately handled and resolved leading to decrease in Complaints/Tickets - leading to improved CSAT level.
    3. Reducing churn by effective service recovery and defect removal process.
    4. Having special language & communication skill trainings for Agents handing A & B category of customers,
    5. All the KPIs like SL, Abandon, ASA, AHT, FCR, Complaints %, SR Resolution, Quality scores, Fatal error etc. to be met and improved upon quarter by quarter.
  • Start inbound up sell for revenue generation on calls; deploy outbound campaigns basis real time analytic for O/B revenue generation – turning CC from cost to revenue center through these initiatives.
  • Improved ‘customer Experience’ and resulting improved ‘Customer Satisfaction’ leading to reduced churn, increased customer acquisition and market share.
  • Structured service recovery process to also lead to winning back of lost subscribers.
  • Entire capital investment required for all the above activities to be made by the service provider, so no heavy capex investments by the client organizations.
  • Outsourcing will eventually lead to substantial reduction in Total Cost of ownership of customer for the clients.