When businesses begin to consider offshoring customer support functions, the conversation is typically driven by a desire to lower costs. With highly-educated English-speaking agents available at a net cost of 30-50% less than onshore operations, the savings can be quite meaningful, even for companies with modestly-sized call centers.

It would be cliché for an offshore BPO to say simply that cost alone should not be the only determining factor in a business’ decision to offshore, or in the final selection of an offshore partner. It sounds like a convenient way for the BPO to justify a higher rate than its competitors, or at best a hollow sales pitch.

I would suggest a different way of looking at the issue. Cost savings is the single most important factor when offshoring, but one must look at all drivers of cost related to the offshoring program, beyond the simple savings achieved through a lower hourly rate. The difficulty is that many of the key elements of the cost equation are not often measured, which leads customers to ignore them when planning their offshoring projects. This is particularly true for Quality – i.e. any measure of the actual quality of contacts that the offshore partner provides. While Quality tends to be included among the key metrics as a threshold that the partner must meet, it is rarely quantified in the analysis that leads to the decision to offshore – and select an offshoring partner - in the first place, and that is a mistake.

The challenge, then, is how to quantify to true cost of poor quality, as well as the true financial benefit of improved quality. There are several elements to consider:

• Vendor Management & Escalations - Clients whose BPOs struggle with quality, often find themselves burdened with unexpected overheads and management costs. For example, additional, unplanned management staff may be needed to track and manage vendor quality issues. This staff may also be needed to deal with internal management escalations that result from quality issues, errors, or mishandling by the vendor. Depending on the extent of quality issues and the size of the customer support operation, the cost of this additional staff can quickly eat into the expected savings achieved by moving work offshore
• Training costs - In theory, all Quality issues should be addressed quickly and efficiently by a BPO’s internal Quality Assurance team. However, if a vendor does not excel at QA, clients will encounter persistent, uncorrected quality issues that ultimately will require more hands-on training. This can result in unplanned hard costs related to international travel and even hiring of additional training personnel
• Customer Satisfaction - A surprising number of large and successful companies do not explicitly track their customers’ satisfaction (and its major components, such as agent satisfaction, overall satisfaction, and first-timer resolution) with customer support interactions. However, it is not difficult to imagine the direct impact that a change in customer satisfaction could have on a company’s bottom line. Customers who feel they have been treated poorly will walk away with a negative opinion of the company, making them less likely to transact again in the future, and also more likely to share that negative experience with their friends and colleagues. By the same token, a pleasant customer support interaction will help cement loyalty and increase future revenue-generating activity. Traditionally, the direct bottom line impact of changes in customer satisfaction has been difficult to measure, but it can be done. For example, the Net Promoter methodology (see www.netpromoter.com) classifies customers as Promoters – i.e. willing to recommend a business to a friend or colleague – or Detractors – i.e. those who switch to the competition and actively warn others against using a particular service. A company’s Net Promoter Score – the ratio and relative strength of Promoters to Detractors – has been shown to correlate directly to future revenue growth

These are three clear ways in which a vendor’s Quality can directly impact the financial benefits of offshoring customer support operations. Note that this runs in both directions – not only can poor quality increase cost in unforeseen ways, but quality improvements can provide measurable incremental financial benefit as well. Companies that identify these cost risks, quantify them, and factor them into their overall offshoring analysis, including vendor selection, will be much more likely to enjoy sustained financial benefit from their offshore programs.

Karl Wiley
The author is President, US Operations, Motif, Inc. He is an ex-eBay executive and is responsible for Sales and Marketing, Key accounts management, Corporate strategy and M&A at Motif. Motif, Inc. is a knowledge based services provider in the space of customer support services, back office transaction processing and research and analytics.
(www.motifinc.com)

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