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May 2004

Losing Money By Spending Less
When Outsourcing Customer Service Doesn't Make Business Sense: A Case Study

Web.com is a medium-sized Web hosting and Internet services provider located in Brookfield, Connecticut. We've been in business since 1996 and pride ourselves on two things: offering flexible and customizable solutions and being a completely customer-focused organization. Due to the technical nature of our business (and often not-so-technical customers), our clients can require a lot of attention and personal care. One of our earliest decisions, then, was to offer live sales and technical support 24 hours a day, 365 days a year.

We take our customer service very seriously, whether it's for a $40,000 Web development project or for a $4.95 domain name, because we value the people with whom we do business, and we understand that one displeased customer can undo the work of 10 happy customers. However, taking orders from a thousand new customers every day is not something for the faint of heart or the ill-prepared. It requires time and patience, a tremendous devotion to service and a highly skilled team of professionals.

The Decision To Outsource
We wrestled with the decision to outsource our customer support for over a year. After reading numerous articles in industry publications, researching the subject quite extensively and spinning out cost analysis after cost analysis, we decided it made good sense from a business perspective. Let the truth be told, the primary reason was cost. In doing our homework, we learned that it cost only about $11 net per hour for customer service in India, versus $30 plus to run a call center in-house in the U.S. The decision seemed like a no-brainer, so we selected a company in Bangalore, India, gathered our 'best-practices' documents and began training the key personnel who were going to manage the program in India.

We thought we were off to a good start, but then came the technical issues. Even after the considerable ramp-up time to get phone switches purchased and correctly set up, many of our customers experienced delays when making calls to Web.com. The dirty little secret of undersea fiber is that, to Americans, 100 milliseconds is an incredibly long delay, especially since they are used to having their voices travel at the speed of light. We also found the physical distance and time difference to be a big problem. Because the Indian reps were not in shouting distance of our internal technical team and key executives, important issues were not being escalated in a timely and efficient manner.

Business differences emerged, as well. Traditionally, when we take a customer service call in-house, we expect and are prepared to talk as long as necessary to resolve the issue and ensure complete customer satisfaction. The key metrics that our Indian call center focused on, such as call times and abandon rates, worked against this approach. We quickly learned that the call center in India was less focused on our business and the important needs and objectives of our customers and more interested in meeting their pre-defined call center metrics. If, for example, they could make a conversation shorter or answer more calls per hour, they would do so and were then rewarded for it. As many of us are acutely aware, however, shorter call times don't necessarily translate into happy customers.

Another negative side effect that we experienced was what we've now coined a 'replicate fade,' meaning our service and best practices became a copy of a copy of a copy. The highly qualified and skilled people we trained for three months at our corporate headquarters were training people underneath them who were then training others, and so on. Because the effectiveness of our training program was being diluted, our customers were not receiving the stellar customer support that is the cornerstone of our business.

The greatest problem we faced with outsourcing our customer service, however, was the cultural clash. More times than not in our business, there's a communication gap between the support staff and customers; but take that misunderstanding and add to it a cultural gap, and you'll start to see some serious problems ' like we did. The word 'revert,' for example, means one thing in India and an entirely different thing to a customer in Oklahoma. In response to this, we attempted to 'whiteboard' the support process with 'yes/no' procedures, but the exceptions to every scenario left the board a tangled mess. We soon realized that if you can draw your customer support process on a whiteboard and definitively answer 'yes' or 'no' to any possible situation ' meaning you can predict and script every scenario ' outsourcing may be right for you. However, if there is a 'maybe' anywhere in the mix, you will likely find, as we did, that all of your problems will gravitate to that 'maybe,' like iron filings to a magnet.

These misunderstandings in language and technical jargon, combined with the ambiguous nature of customer support in the hosting environment, led us to eventually bring our support functions back to Connecticut.

Lesson Learned
Initially, we were optimistic about outsourcing, but in the end, we found we were starting to lose the quality customer service we had worked so hard to build. Now, our call center activities are once again in-house, in the same building as the administrators who run and monitor the network and servers on which our business depends. By keeping our customer support within the 'corporate domain,' we are able to maintain control of our business processes, build trusted relationships and keep customer care, training and brand management consistent. What's more, the communication across our different departments has dramatically improved. The staff receives continual in-house training on the products and services that we offer and our 'front line' of employees ' the people who talk on the phones with customers every day ' are in a position to provide constant feedback to our management team; this ensures we are always in tune with our customers' needs and requirements.

Outsourcing our customer support process may have resulted in a 3:1 savings in gross costs, but this was quickly negated when our customers began leaving in droves due to the lower quality of service that resulted (despite our months of training). In addition to customer frustration, reduced sales and increased cancellations, we witnessed on-going technological gaffes and a Sisyphean learning curve, to say nothing of the fact that we ignored a pool of highly skilled workers who live in, and contribute to, our community.

In leading Web.com's (www.web.com) growth, Will Pemble drives and directs all aspects of business, technology and service development. Having led three previous Internet companies through every phase of a successful business lifecycle, Pemble draws on two decades of diverse experience with Internet and e-business development.

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