Foreshore: A Vision Of CRM Outsourcing
By Richard M. Earley,
Covansys Corporation
Over the past decade, and especially in the last five years, many U.S. and
European companies have turned to global outsourcers for technical services.
Some of these companies have achieved tremendous success, while the results for
others have been disastrous. As in so many cases, the devil is in the details.
Companies that haven't experienced the outcomes they hoped for might benefit by
taking a closer look at the way they have structured their outsourcing
agreements.
CRM is a prime candidate for outsourcing. A holistic CRM strategy has become a
necessity for every company, now that even the most solid brand no longer
secures lasting consumer loyalty. But in order to survive, companies must
contain the costs of implementing their CRM strategies.
Outsourced CRM services range from routine e-mail response management and
inbound and outbound teleservices to enterprise application development,
implementation, and system maintenance and warranty. But just because a service
can be outsourced doesn't mean it should be outsourced.
What To Outsource
When you are deciding which services to outsource, consider what is suitable
for your organization. It is possible to outsource too much or too little.
Outsourcing all non-core functions can leave a skeletal organization that does
little more than coordinate outsourced services. At the opposite extreme,
maintaining functions that are not business critical or that can better be
handled by experts may produce a bloated and wasteful organization. By combining
outsourcing with in-house operations, a business can find the middle ground
where it operates effectively and profitably.
For example, when you are outsourcing application development, you can begin by
selecting an application where the requirements and design for each phase are
well defined before development begins. Applications where requirements are
refined while development is proceeding, such as in an iterative methodology,
are more challenging because they demand more contact between development and
design teams; you can outsource such projects successfully once your level of
comfort has been established with an outsourcing partner.
Onshore, Offshore, 'Un-shore'
Every passing year brings more options to choose from. Onsite, offsite,
onshore, offshore, nearshore, and all the variations offered by technology and
consulting companies seeking to ride the bandwagon can leave you 'un-shore' what
to do.
In addition to outsourcers who can work at or near your facilities, you can
contract for technical services in Canada, Mexico, South America, Ireland, the
Philippines and India, to name only the most significant players in this market.
It's even possible to bring offshore workers temporarily to domestic locations,
using the H1B visa process.
According to Gartner, between 150,000 and 200,000 contact center workers are
employed in India, the Philippines, Ireland and other emerging destinations.
India is the destination of choice for many companies seeking to outsource
technical functions. A Gartner survey found that 70 percent of businesses with
plans for large-scale outsourcing were planning to outsource to India. The Giga
Information Group expects outsourcing to India to grow by 25 percent this year
alone. Indian outsourcers have been cited for both cost and quality benefits.
A 'Shore' Strategy: Foresight
The disappointing outcomes of many forays into CRM outsourcing are often the
result of approaching outsourcing in an ad hoc manner. Outsourcing doesn't mean
handing off a function and forgetting about it, or parceling out projects one by
one to low-bid vendors. To be successful at outsourcing, it's important to
develop long-term partnerships with no more than a few providers. In a
partnership, the two parties are clear about each other's needs and
expectations, and work together toward a common goal.
Choosing an outsourcer demands all the care and due diligence you would put into
choosing any other critical partner. Of course you will want to look for
technical expertise. Capability Maturity Model (CMM) and People Capability
Maturity Model (PCMM) certifications are good indicators of expertise, with
Level 5 ratings indicating the most mature software and workforce processes.
Another important factor is favorable cost. But it's equally necessary to find
out whether the outsourcer has a strong management team, understands your
industry and can work collaboratively with you. The company you select should
have a successful record of completing projects similar to yours; you may even
want to test them on a small, non-critical project before entering into a
long-term agreement with them.
It's also a good idea to select an outsourcer that maintains an office
accessible to you. Although you'll be visiting the offshore worksite (more on
this later), you'll want to have account executives available to meet with in a
more convenient location.
Finally, make sure the outsourcer intends to do the work itself, in its own
facilities, and not to turn around and re-outsource it to another provider.
Structuring The Agreement
One benefit of outsourcing is that you can negotiate a more formal and
accountable relationship than you can with your in-house staff. You should take
advantage of this by specifying your expectations in detail. Spell out exactly
what the outsourcer is expected to do, how well they are expected to do it, how
the process is to be managed and how you will pay for it.
The scope of the agreement must be very specific. If the outsourcer is
developing or maintaining software, do their responsibilities include stress
testing and documentation? Who builds and tests the interfaces with other
applications? If they are handling phone calls, which subjects can they escalate
and which do they have to handle? Who provides the scripts and templates for
agents to follow? What data should they be collecting about callers?
Performance goals are also crucial. How quickly do you want the outsourcer to
turn around programming requests, and how error-free do you expect the code to
be? For a contact center, what service level must they provide and what customer
satisfaction scores must they achieve? If the outsourcer is hosting your
application, what are the target response times? And most important, if they
don't achieve their performance goals, how do you assess and collect damages?
Enforcing a contract with an offshore service provider is somewhat easier if the
provider is actually based in the U.S.
Management processes should be included in the agreement as well. How do you
want the outsourcer to structure its organization? What kinds of management and
progress reports do you expect to see from them, and how often? Do you want to
set goals for management objectives that affect you indirectly, such as employee
turnover? Do you need to require the use of naming conventions or call
categories consistent with those used by the rest of your organization? Change
control processes should also be spelled out. What are the procedures for
putting new programs or procedures into production, and who has to sign off on
them?
Finally, your agreement should specify how the outsourcer is to be paid. When
you're not there to oversee the operation, a time-and-materials contract can be
risky and uncontrollable, and will lead to arguments about how many resources a
task should have taken. You're better off with a contract that specifies a fixed
price per item ' whether that item is a programming module, an enhancement
request or a call handled. Even paying a fixed price per week or month can work;
enforcing your required service levels will ensure that the outsourcer devotes
adequate resources to the job.
Partnership Is A Two-Way Street
The service level agreement is critical, but it isn't enough. Any agreement
will run aground unless you hold up your end of the bargain, too. Problems and
issues will arise in the outsourcing relationship, just as in any other
relationship, and you need to address them as they occur, before they affect
performance. Think of the outsourcer as if it were an arm of your own company:
You've got to make the commitment to support it and provide the guidance and
resources it needs to do a good job for you.
On your end of the partnership, you need both day-to-day management and
executive sponsorship. The day-to-day manager must be available to act as a
liaison to the outsourcer, transmitting instructions, resolving or escalating
issues and setting short-term priorities. This manager is also responsible for
monitoring compliance with the service level agreement ' for example, verifying
that error-free code is really error-free. By contrast, the executive sponsor
sets overall objectives and strategies, resolves high-level issues and commits
appropriate resources to the relationship.
Don't expect to manage the contract from the safety of your own office. In spite
of the wonders of modern communications, nothing beats face-to-face visits. You
should tour the outsourcer's facility before entering into an agreement with
them, then visit on a regular basis after the contract is in effect.
Both the manager and the executive sponsor should be sensitive to any
indications that the outsourcing relationship is not working. Just because the
outsourcer is meeting performance standards doesn't mean that everything is all
right. It may mean that you've left something important out of the service level
agreement! Listen to what your customers, internal and external, are telling
you. If the people who are interacting with the outsourcer have complaints, you
need to take these seriously and, if necessary, modify the service level
agreement to prevent them from recurring.
Be Prepared
Before entering into an outsourcing agreement, you should have realistic
expectations of its costs and benefits. For offshore outsourcing, labor cost
savings are the greatest benefit. You can expect to save as much as 80 percent
on labor costs. (While offshore labor rates may eventually be driven up, this
hasn't started to happen yet.) You may also save on training costs, if your
alternative was retraining your own staff on CRM technology. However, your
overall savings are likely to be in the 25 to 40 percent range. Some of the
labor cost savings will be offset by higher infrastructure costs ' for networks,
servers and communications ' and by the costs of managing the contract.
Since most offshore outsourcers are operating at an efficient scale, your cost
savings should be roughly proportional to the size of the project. In other
words, it's just as advantageous for you to use an offshore outsourcer for a
small project as for a large project. For a small project, however, you'll need
to be especially diligent in minimizing your contract administration costs.
Part of being realistic about costs is correctly estimating the resources needed
for the task. Pursuing cost savings doesn't mean doing projects on the cheap.
And while pay scales are lower in many developing countries, programmers and
customer service representatives there can't work any faster than they do in the
U.S.
One task that many companies tend to underestimate is system maintenance. CRM
systems, like other systems, don't maintain themselves. Upgrades and new
releases of software must be installed, bugs must be fixed and users demand
enhancements. When you upgrade other systems integrated with the CRM system, the
interface must also be modified. System maintenance usually requires a team of
several full-time programmers.
Managing The Project
For system development, the most successful approach is usually to hire a
small onsite team consisting of project managers, quality assurance specialists
and technical leads, and have them work with the larger offshore development
team. Since only the onsite team meets with users, and since you can't directly
oversee training of the offshore employees, you must send extremely complete and
clear specifications to the offshore development team. Most professional
outsourcers do not need a lot of time to get up to speed, as long as they
receive all the appropriate documentation, so with good management you should be
able to start realizing cost savings very quickly.
You can also take a hybrid onsite/offsite approach to system maintenance, with
an onsite manager and analyst setting priorities, controlling releases and
assigning tasks to the offshore programmers. Or, alternatively, maintenance may
be entirely managed offshore, with users submitting enhancement requests over
the Web.
For contact centers, you may be able to delegate management of the written
channels (e-mail, fax, snail mail, chat) to the outsourcer. Telephone service
tends to be more critical, and you will probably want to manage that directly.
With good communication links, you can request and receive real-time reports
from the telephone system, and you can monitor telephone calls to make sure
agents are following the procedures you specified.
If the project is large or complex, implementing it in phases is a good idea.
You can get used to working with the outsourcer and iron out all the kinks in
the relationship before charging full speed ahead.
For example, in a system maintenance project you might outsource the less
serious fixes first, keeping the more severe problems in-house until the
offshore team is up to speed. For a call center, you could phase in the work by
sending them e-mail first, then overflow calls, then weekend calls or a
particular queue, and finally all first-tier calls.
Culture Shock
With non-native English speakers, and sometimes even with native English
speakers, communication problems may arise. After all, misunderstandings occur
between members of the same household and co-workers in the same office, so it's
not surprising that people talking over long distances and across cultures,
without the benefit of face-to-face interaction, will sometimes fail to
understand one another.
You should be aware of the potential for misunderstanding, and take steps to
keep it from becoming a problem. Make sure the outsourcer you choose has trained
its staff in communicating with American and European organizations. Employees
who will be speaking to the public, such as customer service representatives,
can be trained to speak slowly and clearly, so that unfamiliar accents won't get
in the way of communication, and to use speech patterns like those of the people
they are speaking with. They can also be trained to follow the standards of
etiquette that prevail among the population they speak to.
You'll need to give specific instructions about how you want outsourcer
employees to answer the telephone and address customers or colleagues. There may
also be expressions or inflections you want them to avoid. In general, a
customer calling an offshore call center shouldn't have to think about where the
person on the other end of the telephone is located.
In systems development or maintenance, where fewer people are involved in
communication, accents and speech patterns tend to be less of a problem.
However, cultural gaps can still lead to misunderstandings. For example, people
in different countries may have different expectations about meeting deadlines.
'Tomorrow' can mean several different things in different places. You need to be
explicit about what your expectations are.
In today's difficult economic times, with businesses struggling to survive, you
need foresight in order to grow and thrive. But foresight alone isn't enough;
innovative measures are needed, too. While outsourcing CRM services isn't the
right choice for every company, it can add a powerful boost to productivity as
long as it is instituted, implemented and managed with care. Taking the time and
effort to fully develop your outsourcing plan before putting it into effect can
move you from foresight to foreshore.
Richard Earley of Covansys Corp. (www.covansys.com)
has been developing and delivering integrated solutions for over a decade and
has a history of experience in enterprise development, marketing, sales and
operations/practice management. Originally operating as a management consultant
for large call centers, he was then involved in the early adoption of CRM
applications and business telecommunications, developing and operating
customized programs for government, health care and call center markets. Earley
subsequently joined an international consulting firm where he has filled many
roles including director of the National CRM Practice and is the moderator of
the Any Answers discussion forum (www.crm-forum.com/anyanswers),
a source of information written by CRM professionals for CRM professionals.
The author may be reached for comment at
[email protected]
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