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Over the last 20 years (since 1982), we have been the champion among
industry publications in covering the progress and the status of
teleservices outsourcing companies.
To create greater visibility and awareness of teleservices companies,
in 1985 we pioneered a number of tools to measure the performance, growth
rate and quality of teleservices companies. Over the last 20 years, we
have been the sole publication to provide such in-depth and verifiable
information about this rapidly growing industry as well as to provide
guidelines for readers on how to successfully outsource to enterprise
teleservices companies.
The Teleservices Outsourcing Boom Began In The Mid 80s
In the mid 80s, shortly after this publication began ranking teleservices
companies in such categories as the Top 50 Outbound, Top 50 Inbound, MVP
Quality Award winners and Rising Stars (fastest-growing companies within
the teleservices industry), corporate enterprises began to become more and
more aware of the value of the services these companies provide. Thus, the
growth curve of teleservices companies based on billable minutes
(the basis for our Top 50 rankings) began to soar significantly. The rapid
growth of teleservices companies began to get an additional boost from the
enterprise sector as companies began to focus more and more on their core
competencies and outsource other functions, such as customer service,
customer care, customer relationship management (CRM), as well outbound
sales support and pure sales functions.
New Technologies Provided Added Incentive For Outsourcing
As technology became more and more sophisticated and advanced, corporate
America had more reason to outsource. The advent of new technologies
offered vast choices in hardware and software that required extra special
expertise in order to conduct teleservices functions within enterprise
companies, therefore, the outsourced teleservices boom took off.
The 90s Witnessed Faster Acceleration
In the 90s, corporate America became more and more aware of the existence
of teleservices companies and realized that to be competitive, they needed
to run lean and mean and outsource services that were not within their
core competency. At the same time, teleservices companies were producing
outstanding results for their customers, and the growth of outbound
teleservices accelerated at a staggering rate. In fact, billable
minutes, which is the most effective way to measure the growth rate of
this industry (as determined annually by this publication based on
verifiable reports received from long-distance providers), grew from a
little over one billion in 1994 to 3.874 billion billable minutes in
the year 2001 for outsourced outbound teleservices companies. This
staggering growth rate, which, by the way, was consistent through 1999,
was simply unprecedented to a point where teleservices companies became
the darling of Wall Street and many companies were taken public, as I have
described in previous editorials (see, for instance, the March
2000 Publishers Outlook).
Investigate Before You Invest
As it is widely known in financial circles, it is always prudent to
investigate before you invest. Like anything else in life, there is a
right partner and a wrong partner for any business. Choosing a
teleservices partner is no different: you are making an investment in your
business future. The only way you can find the right business partner
or strategic alliance for your company is to inform yourself as much as
possible.
Since savvy business executives are well aware of the above facts, in
the mid 90s we were bombarded by hundreds of phone calls from various
readers and Wall Streeters alike about the nature of the teleservices
industry, so we decided to publish a booklet entitled, Telemarketing
Service Agencies Everything You Always Needed To Know. This concise
booklet provides answers to their 25 most commonly asked questions. If you
are new to the industry, I strongly urge you to obtain a copy of this
booklet for a cost of $10 by calling Shirley Russo at 203-852-6800, ext.
157 or e-mail at srusso@tmcnet.com.
This booklet is only 14 pages long, but it contains many significant
factors you need to consider before you outsource. The booklet was
published in 1995, but really the only part of it that needs updating is
the response to the question, What are typical costs per hour for
agency services for: outbound (b-to-c and b-to-b) and inbound (b-to-b and
b-to-c)? In this section, readers are advised to update themselves on
todays prices (which are significantly different from 1995) by calling
teleservices agencies you are interested in. (Please see this month's
listing of the Top 50 Outbound and upcoming
April issue for our listing of the Top 50 Inbound Teleservices Agencies).
The Best Place To Meet Some Of The Top 50 Teleservices Executives
On May 14, 2002, the senior executives of the Top 50 teleservices
companies and MVP Quality Award winners will be honored while attending
the TMC-sponsored Communication Solutions Expo, to be held May 14-16, 2002
in Boston, MA. With prior arrangements, you should be able to meet with a
number of the CEOs in the exhibit hall at their booths to learn further
about your outsourcing options and conduct business with them. I encourage
you to plan to attend this extremely helpful conference where a
significant portion of the conference program is designed for call center,
CRM and customer interaction executives. Please visit www.csexpo.com
for more information.
Research Results
To better serve our valued readers regarding justification for outsourcing
teleservices functions, our editorial department has contacted several
leading Top 50/MVP Quality Award-winning teleservices companies and asked
them to offer their views in support of the case for teleservices
outsourcing. Following is what the experts say on why you should outsource
teleservices functions.
Linda Drake, CEO and founder of TCIM, asserts that, In todays
complex business environment, a great teleservices program is one of the
keys to success. However, managing that teleservices program is a
challenge that can drain your business of time and resources and damage
profitability. To do the job right, businesses spend time constantly
measuring, testing, evaluating and modifying their teleservices program to
improve results. They spend time navigating the sea of rules and
regulations that govern teleservices and privacy issues. They spend time,
energy and money recruiting, training, motivating, coaching and retaining
a professional customer care team and making sure they have the right
technology to do their jobs. A partnership with a teleservices agency
provides the client with the teleservices insights they need to be
successful, without draining resources, which adds real value to their
business.
Scott Kleinknecht, CEO of Protocall Communications, takes a direct
approach to the matter: Alright, teleservices isnt brain surgery.
But there is a lesson in, step away from the scalpel, see a surgeon.
Or maybe a conductor. If being the best cable or utility company is your
craving, why jeopardize brain cells reinventing the dial tone. If this isnt
your business, theres no business in worrying about the nuances of
queues and dialers. Topnotch CRM is an entitlement an expectation.
Virtuoso innovation and pricing is what motivates buying. Wrapping
telephone wire around your business only gags creativity and amuses
competitors. When you go to the symphony, you pay for the music, not for
the musicians and piano wire. Outsourcing is that way. Reps, dialers,
software, incentives, training and mentoring, under an outstanding
conductor, can hit the high profits, much better than you, and you dont
have to board them. Just applaud.
Dennis Finnerman, vice president, sales and marketing at Alert
Communications, stresses competency and costs: Many business managers
erroneously believe that they can in-source less expensively than
outsource. They fail to factor in important considerations such as
unavailability of expertise (especially in implementing new technologies
such as CRM), loss of focus on core competencies and total cost (not just
agent labor but all support elements and overhead as well). Successful
outsourcing requires that the business manager regard the outsourcer as an
extension of his company with a specific charter in mind and an expertise
to be exploited.
Dale Saville, executive vice president at SITEL Corporation, highlights
the benefits teleservices agencies can bring to their partners: By
leveraging their partners infrastructure and expertise, companies
additionally minimize project risks and improve time-to-market, helping
them achieve a competitive advantage. Operationally, an outsourced partner
would usually provide a comprehensive suite of services and technologies,
supported by best practices in human resources and operations management.
This results in companies achieving a tailored solution with tremendous
resource leverage. A teleservices agency that has a commitment to ongoing
technology and process innovation allows its clients to better control
their own capital expenditures, while still realizing decreasing costs and
increasing value per customer contact.
We also asked a second question of senior executives of Top 50/MVP
Quality Award winning teleservices companies, and that was to explain the
pros and cons of one of the industrys hottest topics, namely, pay-for-performance
vs. hourly payment. You will find their responses in the sidebar
within this editorial. I thank these busy executives for their
contributions, and urge all of you to explore the benefits of outsourcing
to teleservices agencies. As always, I welcome you comments.
Sincerely,
Nadji Tehrani
TMC Chairman, CEO and
Executive Group Publisher
[ Return
To March 2002 Table Of Contents ]
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Pay-For-Performance
Versus Hourly Payment
To keep you appraised of one the latest industry trends,
we recently solicited the views of some of the major teleservices agencies
on the pros and cons of the two ways they charge for their services, the
traditional hourly payment and a trend that is gaining popularity,
pay-for-performance pricing. Following are extracts from the copious
answers they were kind enough to provide us on the subject.
Derek Holley, president of eTelecare International, begins
the debate: Whats good for the client is generally good for the
outsourcer in the case of hourly versus pay-for-performance pricing. The
key to picking one system over the other is the program itself.
On an established program, pay-for-performance pricing
allows outsourcers to make informed bids on a process with a history that
is well understood. The likelihood of surprises is low, and the client
will have reasonable expectations for the level of performance they will
receive and how much they will pay for it. Structuring a contract for an
unfamiliar service around performance goals can backfire on the outsourcer
if the goals are difficult to achieve or it can backfire on the client if
the performance goals are too easily attained.
In addition, it is important to note that clients need
to be careful when structuring performance bonuses into a contract. An
outsourcer will focus on whatever is required to secure the bonus,
possibly to the exclusion of other, crucial aspects of the program. For
example, if a contract awards bonuses strictly on the basis of sales
generated, an outsourcer may do whatever it takes to rack up the required
sales and leave a trail of frustrated, dissatisfied customers behind.
Including incentives for quality customer service and repeat business can
help avoid these problems. In general, its fair to say that in
business, as in life, you get what you incent for.
We next go to Joseph Nezi, executive vice president,
Business Development, at TeleSpectrum Worldwide, for the pros and cons
from the clients standpoint: The pros for pay-for-performance
pricing are: There is less risk to the client if the outsourced provider
is not performing to an acceptable or competitive level; an incentive is
available to the outsourced provider to encourage better levels of
performance; and there is no budget risk if performance is not strong. The
cons from the clients perspective are: Many teleservices agencies wont
consider pay-for-performance work because its perceived to be a transfer
of risk; if no previous benchmarking has been done, teleservices
agencies will be resistant to working with the client; and
pay-for-performance programs may be seen as a shelf project versus a
core program because teleservices agencies will focus on their core
programs, which produce consistent revenue more readily. Blake
Wolff, president and CEO, Telvista, gets right to the point: For
hourly pricing, the pros are that the client can easily predict monthly
costs and budgeting is simplified. The cons are that instead of managing
the outsourcers service level, the client is forced to manage the
outsourcers ability to meet occupancy (agent availability), which is
established by the agreed-to staffing level and the number of hours
allocated by the client. For the pay-for-performance
model, the pros are that outsourcers are motivated to excel in
client-determined performance variables, while the cons are that costs are
not as predictable and budgeting becomes more complex. Last,
but not least, here is what Chris Eisdorfer, president and COO at Technion,
has to report on the topic: In pay-for-performance models, there is
extreme pressure to perform. In short, perform or dont get paid. We
believe these models are win/win for all concerned. The teleservices
provider earns a higher fee than they would on an hourly basis. The client
incurs fewer costs as they only pay for sales made. The employee earns
higher wages as they are provided sales incentives. These
models also establish a different type of vendor relationship. Since the
provider has skin in the game they are more than a provider. In
reality, they are a partner. Efficiency is the key to a
successful relationship. The teleservices provider must run an efficient
operation, as the client does not pay for unproductive agents. An
additional pro of hourly pricing for the teleservices provider is that
there is a guaranteed income stream. Poor performers can maintain their
jobs, as there is less pressure to perform. The client pays for
inefficiency. We hope you take the advice offered here
by the management of some of the leading teleservices agencies when you
next look to outsource teleservices functions.
[ Return
To March 2002 Table Of Contents ]
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