How to Select an Outsourcer

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I got my first taste of offshore outsourcing in my junior year of high school. While planning college visits with my mother, I called Expedia.com’s toll-free number to book airplane tickets to Boston. After going through a few touch-tone prompts, I was greeted by "Heidi," one of the company’s agents. I noticed that while Heidi sounded American, there was something slightly off in her voice—a deeply ingrained accent lingered, and I could tell she was consciously struggling to keep her speaking tone even and slow. I booked the tickets and was then transferred to "Jacques," another agent who confirmed my trip details.

At the time I remember wondering how Expedia managed to hire such an international and diverse staff—Heidi had to be German, and Jacques was definitely French. Both, however, had the same accent: a combination of English with detectable traces of song-like, lilting intonations. I hung up, and asked my mom how Expedia did it. She looked at me and said, "Have you been living with your head buried in the sand? All those people are in India. They’re outsourced."

Outsourced contact center agents continued to grow in popularity throughout my college years—the early 2000s—as places like India and southeast Asia provided cheaper labor and, with the help of various time zones, kept U.S. companies’ help desks open around the clock. The impact of economic forces like globalization kept the market afloat, but as companies began to change how they viewed customer care and business strategy, ideas about outsourcing began to change.

"The [outsourcing] marketplace is evolving," says Tom Smith, senior manager of interactive voice response (IVR) and speech product marketing at Verizon Business. "Many customers were very focused on cost savings a few years ago, and they have learned the lesson that cost savings at the expense of a good customer experience is not a wise trade-off. We see enterprises that had previously offshored their entire contact center applications bringing them back onshore. They’re responding to the customer backlash and letting customers know they’re providing service [within] the U.S."

Once viewed only as a means to save money, the primary reason to outsource today is much different: It’s strategic. With the continued acceptance and growth of speech technologies within the contact center, some companies have realized that innovative technology, not cheap labor, is a better way of differentiating themselves from a crowded theater of competitors. In addition, areas such as customer relationship management (CRM) and business and speech analytics have gained increased prominence within overall business strategies. Today, outsourcing can mean anything from physically moving the location of a contact center’s agents to purchasing hosted solutions, or using software as a service (SaaS). Whatever a company’s choice, today’s theory remains the same across the board: Money is part of the picture, but strategy is what sets the stage.

Core Questions
Now that outsourcing is no longer just a numbers game, it can make the decision to hand over business operations to an outside vendor all the more difficult. In addition to financials, a company must consider a bevy of questions before it even begins checking out the vendor landscape.
According to Paul Watson, general manager of multichannel self-care at Convergys, the phrase "core competency" must be the starting point for any outsourcing discussion. Defined as any process or service at which a business excels with in-house efforts, core competencies should almost always stay a company-run endeavor.

"If it is not a differentiator or core competency, then it looks like a candidate for outsourcing," Watson explains. Further, he says companies should ask whether a service is something they do well and if they provide a service that gives them an advantage over competitors. If the answer to these statements is no, outsourcing then enters the picture. A core competency can also include any endeavor in which a company knows it will continue to invest time, money, and staff. If the project is long-term and expected to grow in importance, an outsourcer may not be the answer.

Of course, even though a company or one of its departments might want to develop the service over time, it must thoroughly examine whether it can provide the necessary staff and capital needed to execute its goals. An IT team may not always be able to gauge a company’s budget and future development—this is when an organization’s C-level executives step in. Though perhaps not as in touch with the technology or contact center infrastructure, business stakeholders can give valuable insight into outsourcing; they are aware of overall company goals and directions and can help provide important information in the decision-making process.

"All the business leaders will have a better idea about the direction of the organization and will know more about the company’s goals for three to five years down the road," says William Maurer, research vice president at Gartner. "[Outsourcing] has everything to do with perspective and not just a compartmentalized IT perspective."

Keeping executives in the loop also helps companies remember that outsourced projects are not just tactical; above all else, they’re strategic. In outsourcing speech projects in particular, companies must think holistically. Rather than stating that they want to provide a speech application, they must also think about how using speech technologies can help achieve their overall organizational goals. In other words, is the company using the outsourcing project for a single channel (speech or Web), or as part of a comprehensive package for the organization encompassing self-service, agent evaluation, and customer care?

Of course, without the necessary staff or money to deploy a project within a reasonable time frame, a project’s fate of outsourced versus in house is clear: It’s time to hand it over to the pros.

Personnel and financial constraints aside, outsourcing can also help a company stay ahead of its competitors. Some companies make the mistake of viewing an IVR as straightforward and simple, when in reality it requires constant tuning and updates and must reflect the needs of a company’s customer base. As customer care continues to help organizations differentiate themselves, the ability to rapidly optimize contact center technologies to meet customer demands is crucial.

According to Verizon Business’ Smith, quickly updating the company’s technologies and making a strong sales pitch for outside help has become somewhat easier over the years. Customers once simply aware of speech technology are now accepting it.

"We no longer have to spend a lot of time giving the sales pitch for speech technology," Smith says. "Most customers are correctly viewing speech as something that can supplement their agents and call centers."

Dealing with more complex applications, however, also means being willing to maintain them. A company might develop a great system initially, but needs to stay abreast of improvements as new technologies come forth.

"We see customers who develop a project in house, and it becomes stale because they don’t know how to feed and nurture it as client needs change over time," notes Kevin Kammer, vice president of West Interactive. "When your competitors are deploying speech capabilities, what is it going to take your company to get up to speed on the technologies, and can your company compete with someone who has the staff, knowledge, and capital to do the same projects?"

One of West’s clients, satellite television services provider DirecTV, undertook such a project when it speech-enabled its pay-per-view ordering service and service installation processes. Though DirecTV’s existing dual-tone multifrequency (DTMF) system worked well, the company wanted to make its customers’ ordering process faster and easier. Faced with increased competition from other satellite providers and cable companies, DirecTV needed to fix its IVR quickly to keep its competitive edge. In addition, the company needed to streamline the process by which its employees installed its services in customer homes. Installers use natural language speech technologies to dictate information such as manufacturer names, serial numbers, and other data needed for successful installations. Using speech, the company saved an estimated $1.2 million annually with its pay-per-view application and $8 million annually with its  IVR for service technicians, chiefly because live agents were no longer needed to intercept employees’ calls.

By allowing West, which was recently named the 2008 North American Contact Center Outsourcing Company of the Year by analyst firm Frost & Sullivan, to take the helm of its IVR, DirecTV could also reap another benefit of outsourcing. It put its attention back to its core competencies, none of which involved speech recognition.

Pick a Partner
Once the decision to outsource has been accepted by the higher-ups, the real challenges begin: choosing an outsourcer and maintaining a solid working relationship with that partner.

The contact center market is crowded, to say the least. With vendors hawking everything from automatic call distributors to text-to-speech, there’s enough technology in the market to make anyone’s head spin. Lucky for customers, however, these developments have spurred increased competition among vendors. Faced with more competitors, vendors must distinguish themselves through expertise, price, and services. Partnerships between companies have also helped to enhance the contact center industry. For example, Nuance Communications not only sells its own speech solutions, but also brings partnerships with companies like ClickFox and HollyConnects to the table, meaning companies can sign on with Nuance and still have access to other services or products in the future.

Still, the vendor-selection process should not be rushed or downplayed in its importance. Gartner’s Maurer recommends taking a "who’s who" approach to vendor selection: researching the industry, using analyst and consultant reports, and focusing on trusted names.

Alex Halikias, CRM service line leader at EDS, also notes that one of the most important steps in the selection process is reference-checking. "You’re looking for competence and evidence of [the outsourcer’s] real benefits from customers," he says.

Bruce Pollock, vice president of professional services at West, echoes Halikias’ sentiments. "One of the most important things is whether the vendor has bona fide, provable experience," Pollock states. "Can it provide a list of customers, case studies, and referenceable clients?"

Speaking in depth with a vendor’s clients can not only help gauge an outsourcer’s experience and ROI capabilities, but also can give customers valuable insight into the verticals the outsourcer serves best and how it maintains vendor-client relationships.

Even further, Maurer suggests taking additional steps in the reference-checking process when drafting vendor requests for proposals. "You need to get a very specific process established for checking references, and you need to go about that process in a very systematic way," he says. "You need to have the right questions, talk to the right people, record that conversation, analyze it, and score it."

The selection process should also take the company’s financial history into account (for example, how much capital it places back into its systems), as well as its ability to provide state-of-the-art technologies and innovative solutions. For most organizations, however, a vendor’s experience in a particular vertical market remains of paramount importance. A vendor’s understanding of verticals like retail or transportation can help customers in those areas undergo a smoother deployment because the outsourcer speaks their language and has often created applications built with that industry in mind. In addition, customers must remember to compare the vendor’s company culture with their own.

"The organization of the [vendor’s] culture is important because you want it to be compatible with your organization," Maurer explains. "You don’t want an outsource provider that has a very stringent and technical approach working with an organization that is very loose in how they do things."

When it comes to outsourcing, let the numbers and clients speak for the company’s ROI abilities, and remember the importance of the vendor’s and client’s company cultures. Committing to a vendor is much like proposing to your partner. Don’t jump into a long-term arrangement with someone you hate waking up to every morning.

Thinking of a vendor as a spouse carries over into the meat and potatoes of an outsourcing partnership. Even if your emotional bond stays strong because of your similar personalities, you still  have to protect your assets with a contract. Think of it as the prenuptial agreement. But while a prenup deals chiefly with cash and property, a contract delves into other partnership issues: provisions around termination, breach, renewal terms, liability changes, or even the number of audits necessary. Of course, it’s important to go into the partnership confidently, so companies obviously should not choose a vendor they think might take advantage of them later. A strong contract will be tight and narrow in its statements but also leave room for flexibility, given that projects will inevitably change focus, staffing, and budgets.

Shawn Alborz, program manager at EDS, recommends that customization and vendor-client partnership play a prominent role in drafting service agreements and contracts. "You may want to look at the standard contract," he says, "but you may want to develop one based on your own business needs. It’s one thing to come up with an agreement, but another to actually share it."

Once terms are settled, it’s time for both parties to start working together. And because today’s outsourced projects mean more than just saving money, the vendor-client relationship should remain tight-knit throughout development and deployment stages. Convergys’ Watson says the key to deployment-stage success is "communicating requirements early and verifying with feedback." Without discussions and check-ins throughout the development stages, success is less likely.

"A lot of organizations will throw the project over the wall, wipe their hands, and say, ‘Gosh, I’m glad I’m done with that problem,’" Maurer says. "[These companies] don’t put in a good governance model to manage the [outsourcing] process."

Who should be a part of the outsourcing management team? It depends on the type of project, but the guidelines are usually similar: The people most directly impacted by the new system should be constantly kept in the loop; members from the marketing department need to be present if the service will change the way a company conducts a part of its business; C-level executives need check-ins to evaluate the project’s progress; and human resources must be notified of any rebadging or staffing changes.

Maurer also suggests that companies assign in-house employees to manage the outsourcer. This person or group of employees needs the right skill sets to do so, and Maurer recommends managers know "the contract’s details, the organization’s IT department and system architecture, and how to manage service levels."

Once development begins shaping up, most vendors agree that a soft launch of a prototype should happen as soon as possible. Having a test to show stakeholders and members of all departments involved helps prevent problems later.

"Some sort of demo of the product as early as possible yields better results in the end game, so well before all the dialogues are completed there’s an understanding of what will be delivered," Watson says. "That way there are no major surprises."

The Calm After the Storm
As any company with outsourcing experience knows, tuning is not an option. It must be done. Within the IVR or contact center space, regular testing and updating helps keep a system running smoothly and allows a company to stay on top of customer feedback. But before a launch, a company must develop its baseline for measuring progress. Without one, it’s nearly impossible to measure an application’s impact.

EDS’ Halikias says getting the best ROI from a project often involves keeping track of two types of metrics: business and operational. The most commonly used of the two, operational metrics, are the numbers that show call completion rates, call handling times, and opt-out figures. Business metrics measure customer satisfaction, agent performance, and cross-sell and upsell data.

"Tuning is an ongoing process that requires intensive focus, attention, and expertise," West’s Pollock says. "It’s important to ask the outsourcers how often they conduct tuning. A lot of things that can be happening with an application in three or four months that are left untuned can cause customer problems later."

Following tuning and the collection of metrics, EDS’ Alborz suggests then taking this data to a C-level executive and stakeholder team, presenting the information, and allowing them to complete a satisfaction survey. Why? Because "the way a project manager sees success is different than how other departments see success," he says. And because the higher-ups make the ultimate decision, project managers must work to show that their outsourced project was not only a necessary but worthwhile company endeavor.

Of course, the definition of "worthwhile" from a customer standpoint has considerably shifted in recent years. Once a simple cost-saving method, outsourcing has now become a way for businesses to not only simplify their processes but also to streamline functions creatively. Whether differentiating a company from a competitor or leading the way in innovation, outsourced projects can help a company simultaneously bolster its customer satisfaction numbers and save money.

"Even though saving money is important, the real sweet spot is the overall relationship-building with the customer, especially with speech," Watson notes. "[Outsourcing] is changing from a cost-only project to something that has ... a financial, organizational, and customer impact."

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