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Outsourcing CRM: The pros and cons

Is your organization considering outsourcing CRM? Alan Earls discusses the pros and cons of contact center outsourcing.

Increasingly, CRM has become a bedrock capability for many companies. In a customer-focused world, customer relationship management builds loyalty and strengthens brands.

Good customer service is often the difference between a satisfied customer who promotes a company's brand and an angry customer who vows never to purchase from the company again. Call center interactions are oft-cited in defining customer service -- and often when companies use call center outsourcing, as well.

But the many facets of CRM, especially labor-intensive call-center operations, can be challenging to design, deliver and implement, spawning an industry of outsourcers. For organizations unsure about their ability to "do it all," the decision of whether and what to outsource -- and how -- is complex. In the best of situations, outsourcing CRM works well and saves money, but not all situations work optimally.

Kate Leggett, an analyst at Forrester Research in Cambridge, Mass., co-wrote a report on the subject, which cited research that showed CRM implementations at nearly half of companies, along with outsourcing of customer contact centers either implemented or being considered at 20% of the more than 500 companies surveyed. Nonetheless, Leggett warned, outsourcing may not always save money and can require considerable management attention.

Some of those concerns -- and others -- are on the mind of Peter Perera, founder and customer and data management expert at the Perera Group Inc., a consulting firm that focuses on CRM. "If you buy the popular notion that CRM can be viewed from a people, process, technology and data perspective, then [those topics are] probably a good place for any organization to start tallying the pros and cons on 'CRM outsourcerers,'" he said with a laugh.

Evaluating contact center providers

Perera said there are three elements to the "people" part of the CRM outsourcing equation -- namely, the company's own people, the outsourcer's people, and customers or prospects. Regarding the company's people, Perera said that if you are considering outsourcing, first ask why your company isn't doing this work itself. Is it because of a skills shortage, seasonal demand variations, or because it isn't a core competency for your business? If it's due to a skills shortage, you need to be diligent in assessing the outsourcer's talent pool, ensuring you can judge its capabilities accurately. Of course, not every company can be great at everything, so perhaps, in some cases, it makes sense to consider outsourcing contact center functions. Regarding the outsourcer's people, Perera noted, if it's possible and appropriate, it's a good idea to have the outsourcer "perform" whatever it is you want the provider to do for customers and prospects. Then you can determine whether you are getting the capabilities you need and the value you are paying for.

"Weigh how much technical and product skill is required to do the job," Perera said. And regarding the company's own people, he noted that outsourcing does not absolve the company of responsibility. Finally, he warned, assess the impact of using a third party to manage the customer relationship. After all, he noted, "the C and R are two thirds of CRM."

In evaluating CRM activities, there are four processes at issue. The first is the customer-interfacing process; the second is behind-the-scenes sales, marketing and service operational processes; third is the data management processes that undergird automation; fourth, and most important, is the customer journey process.

Having a customer journey map is useful for launching an outsourcing discussion, Perera explained. "Look at it and ask, 'What points in the customer journey do I want to outsource, while probing the [logic] of outsourcing?'" Then, look at the impact their service will have on the entire customer journey.

As you wind up your evaluation, assess the technology the outsourcer uses. Make sure it supports the nature of the work you want the outsourcing provider to do; ask how secure it is; verify the outsourcer has competent backup and disaster recovery practices.

Regarding data, Perera said it is important to probe what technology the outsourcer uses to see whether data integration will be an issue. "You want to bi-directionally send, sync, [and] receive data with as little trauma as possible. I would also inquire about data quality practices, so when you exchange data with the outsourcer, you can rely on its value and usability." Of course, it's important to inquire about safeguards to protect your company's data and the privacy of the customer's data, he noted.

Beyond those "best practices," there is the question of the extent to which CRM outsourcing is being adopted. Based on his organization's studies of global adoption trends, Peter Ryan, practice leader on the services team at London-based Ovum, a consulting firm, said that since 2008, despite the recession, the growth of outsourcing -- particularly to locations beyond the U.S. -- has continued unabated.

One reason for the prevalence of outsourcing, he noted, is that overseas providers have much lower rates of personnel attrition, which typically hover around 100% per year in the U.S. "Working in a call center is not seen as something with much career potential in the U.S., whereas in other countries, people with university degrees, or even Master's degrees, see call center work as a chance to get a foot in the door and build experience working with customers and working with technology," he said.

In fact, said Ryan, the skills acquired, whether deployed in the U.S. or elsewhere, have proven valuable. "I have seen many instances of people rising into management roles from a start in a call center," he noted.

Keeping contact centers in-house

For most companies considering contact center outsourcing, Ryan said that option will almost always be less expensive than developing and managing them in-house. "These are companies that live and die on their ability to deliver customer service to your organization and your customers -- they know what works and how to train people and use technology," he said. "For them, it isn't an overhead activity, it is their business," he added. Indeed, according to Ryan, call centers are often misperceived as low-tech and low-maintenance activities. Instead, he said, the good ones stay at the cutting edge and invest in training, quality and the technologies needed to support multi-channel interactions, including email, telephone and SMS. "Our surveys show that most companies have flat budgets for call centers; if you aren't spending that on innovative, cost-effective delivery, you will not get good results," he added.

While still generally favoring outsourcing to quality overseas vendors, Ryan said a trend emerging in the U.S. may favor domestic suppliers or even home-grown call center development. That trend is home-based call centers -- where the workforce is virtual and there are few overhead costs. "That model has been remarkably successful; the turnover is lower and the workforce is happier," he said. While companies are wrestling with management and security issues, Ryan said he sees most of those issues as minor relative to the potential benefits.

The bottom line, however, Ryan said, is customers have growing expectations for service. So, whether developed in-house or outsourced, call centers need to support CRM and deliver a high-touch experience. "It's what people expect," he added.

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