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Publisher's Outlook
March 2002

Nadji Tehrani Enterprise Teleservices Outsourcing Strong And Well

Part 1 - Outbound


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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.


Nadji Tehrani
TMC Chairman, CEO and
Executive Group Publisher

[ Return To March 2002 Table Of Contents ]

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 ]

Congratulations To The Top 50 Outbound Teleservices Companies

I am proud to extend my sincere congratulations to the 2002 winners of our industrys coveted Top 50 awards as determined by Customer [email protected] Solutions magazines editorial staff.

Seventeen years ago, Customer [email protected] Solutions magazine pioneered this great institution known as the Top 50 inbound and outbound teleservices award program. Our goal was, and is still, to give due recognition to a group of hard-working people who create sales and service customers, and thereby not only bolster our economy, but also protect and/or create hundreds of thousands of jobs in corporate America. We know how difficult it is to hire, train and retrain multitudes of people and help them develop great careers, and also how difficult it is to service scores of demanding customers in a highly competitive environment. We salute you for a job well done. We stand in awe of your well-deserved growth. It is a pleasure to work with you on a daily basis.

Nadji Tehrani

[ Return To March 2002 Table Of Contents ]

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