June 2003

By T.J. Karklins, Avaya

Globalization is fundamentally shifting the status quo of contact center outsourcing; many firms are now considering outsourcing for the first time as not only an operational efficiency driver, but also a key globalization enabler. This trend is growing across a broad spectrum of industries.

While industry analysts and market research firms vary in their precise estimates, all agree that tens of thousands of contact center seats will be crossing national borders in the coming year, and that trend is becoming more pervasive over time. Some of the most portable are digitally enabled contact center positions that in many cases are leading the corporate charge to new emerging market operations and delivery locations.

What's driving this globalization? A compelling cluster of operational advantages is behind much of the movement. For example, globalization offers firms a way to 'follow the sun,' reducing their cycle times by establishing a round-the-clock business operation. This allows them to establish in-region support for an increasingly global customer base. It helps them reduce costs and tap into an extended pool of workers with strong skills required for advanced CRM applications. It also offers a way to manage risk by establishing global delivery networks for critical functions, ensuring the continuity of their operations should a problem arise.

While the globalization trend spans all industries, it is especially taking off among those with broad-based customer contact requirements ' including financial services and insurance, tourism and travel, information technology and software, and telecommunications.

Not only are increasing numbers of firms choosing to globalize their contact centers, but many are turning to outsourcers, some for the first time ever, to help them accelerate the effort. The reasons are pretty straightforward. Going it alone can prove daunting to firms without an international presence or experience, and the issues are complex ' from negotiating real estate deals and establishing labor rates to navigating the political and cultural landscape. Working with an outsourcer allows a firm to tap into an existing operation, leverage an outsourcer's experience and capital while getting a globalization strategy up and running more quickly. The result for many has been speed to market and the establishment of immediate cost and execution advantages.

As more firms are considering outsourcing and a new global services delivery paradigm, four key trends have emerged:

1. Outsourcing of higher-value applications

In the early days of outsourcing, companies considered moving primarily low-value work. Today, though, increasing numbers of businesses are considering a deeper role for the model. They are using strategic planning to determine what specific functionality to outsource to optimize business value. As they do so, many are finding it pays to move higher-value functions 'off books' and are turning to outsourcers to support functions previously viewed as core to their operation. Speeding this trend is the depth of advanced skill sets available in emerging offshore markets. Research, advanced accounting, financial product cross-selling and advanced technical support are examples of applications that are working in both an outsourced and an offshore context. Experienced firms are globalizing whole functions or broad cross-sections of work that extend up through their most valued customers.

2. Closer management of and partnership with outsourcers

The global landscape is littered with failed outsourcing relationships ' the result of firms naively negotiating service-level agreements that kept them at arm's length from their outsourcing provider, negotiating 'best price at all costs' deals and failing to commit senior management to the business transition process.

This trend must be reversed, particularly as businesses send higher-value applications offshore. Whether dealing with a large multinational outsourcing firm or a local provider from an emerging market, offshore outsourcing should contain a solid component of corporate cross-mentoring. This is what is required to bridge time zone and cultural boundaries effectively and to unlock large, new value streams for your firm.

Although outsourcers excel at transition planning, most businesses today are building solid, internal project management offices of their own to assist with the proper transition and execution of their outsourced work. If they lack sufficient internal resources, leveraging external transition assistance consulting teams to serve that role is a best practice. While building an internal management capability or buying support requires a commitment of resources, the economics of the offshore model leave significant expense flexibility to allow for proper staffing, mentoring and stewardship of global sourcing business partnerships. Those with successful offshore operations are finding that applying these techniques properly can pay off by delivering not only short-term cost benefit, but also long-term strategic value for their businesses.

3. Blended business models

To mitigate risk and establish the best skills mix and coverage around the globe, companies are turning to advanced business models that blend internal and outsourced contact center resources across domestic, nearshore and offshore locations. By doing so, they are able to achieve cost, skill and capital expense advantages through outsourcing, while maintaining the balance and control of critical operations.

How does this blended model play out? A typical U.S.-based financial services firm, for example, might joint venture its technical help desk in India to offer round-the-clock support and attract agents with the specific skills, while simultaneously outsourcing a third-shift Tier 1 customer service operation in the Philippines and moving internal check processing and Tier 2 customer service to Canada. A 50/50 mix of home market and cross-border operations could reduce this company's contact center cost base by 20 percent or more. Operational agility could also be improved across geography and through different control and ownership models.

These blended operations can take a number of forms:

Offshore direct. Partnering with and growing with a provider that is fully based in an emerging market can enable speed, cost savings and deeper understanding of new geo-political environments.

True value-added intermediary. In this model, a business establishes a 'transparent' offshore operation by leveraging the global delivery capabilities of a large multinational outsourcer.

Joint ventures. Some businesses are choosing to formally partner with selected outsourcers, systems integration firms and in-country strategic firms ' establishing joint venture firms that build, manage and profit-share for an emerging market location.

Build-operate-transfer back. Some firms are turning to outside entities (many times to outsourcers themselves) to establish a global contact center site and, once it is up and running for a set period, are transferring the facility back to in-house management.

Project finance carve outs. Businesses are finding a range of globalization of services finance options exist to help them build, accelerate and sustain their projects. In fact, the cost savings from global delivery models are solid enough to finance them effectively with current-day cash creation.

The artful blending of models such as these may serve to create incremental agility and value and reduce risk. As a result, increasing numbers of firms are giving considerable thought to the planning and execution of a sound strategy that allows them to migrate through and along such a business model continuum.

4. Use of technology to seamlessly link owned and outsourced operations

Contact center technology ' recently enhanced with high-scale IP connectivity, new communication applications and advances in server scalability ' is now a strategic globalization tool. In fact, businesses are finding that high-scale interoperability and functionality are increasing speed-to-market and helping reduce some of the risks of these complex ventures. Leading-edge outsourced and in-house operations are leveraging:

' Call-by-call cost arbitrage, global skills 'presence' and self-healing contact center networks that are a present-day reality.

' Global routing, reporting and quality systems that provide for critical managerial control of widely distributed operations. IP telephony is a powerful conduit of connectivity, but must be applied in concert with high-scale, globally designed CRM and contact center applications software for business model success.

' 'Flat' global contact center networks that scale up to thousands of agents, yet require only one integration point for workforce management, network call routing, multimedia queuing, etc.

Such technology tools and capabilities add important layers of flexibility, cost advantage, reliability and speed to globalization initiatives. The opportunity to integrate internal and globally outsourced resources seamlessly with off-the-shelf systems and software is now much easier to accomplish with reliability and scale.

Globalization of services delivery has begun to profoundly impact contact center outsourcing businesses and the firms that use them. The economic model shifts are causing significant and deep changes in the number, type, location and business models for outsourcing arrangements. For optimum success and to leverage current trends, take a new and broader approach to the outsourcing and globalization models; seek to build sustainable bridges to the emerging markets when your own customer relationships are involved; create true outsourcing partnerships instead of 'arm's length' vendor arrangements; and realize that contact center technology now supports improved global business agility, risk management and operational excellence.

T.J. Karklin is managing director of Avaya's Global Connect Solutions Group, a practice that supports businesses in their globalization efforts. For more on contact center outsourcing trends, visit: http://www1. avaya.com/enterprise/solutions/enterprise/globalconnect/defining.html.

For information and subscriptions, visit www.TMCnet.com or call 203-852-6800.

[ Return To The June 2003 Table Of Contents ]