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CRM outsourcing attractive in recession

CRM outsourcing, both customer service and application management, is getting a closer look as companies seek to cut costs amidst the recession.

The sub-prime mortgage fiasco and subsequent global financial meltdown have left many organizations scrambling amidst budget cuts, layoffs and corporate reorganizations. When it comes to IT, the recession is suddenly making outsourcing CRM and other functions more attractive options, according to analysts.

"If anything [the recession is] increasing the focus on spend," said Phil Fersht, research director, global business services and outsourcing with Boston-based AMR Research Inc. "Companies aren't going to be spending more money on IT and services. They're trying to get more with less, and that means exploring avenues that take advantage of lower-cost delivery. There will be more demand for outsourcing services that have immediate cost impacts on the business and not a heavy initial investment."

Before the economic meltdown, outsourcing was already on a strong growth path. Gartner Inc. is still predicting 60% growth in offshore IT outsourcing in the U.S. in 2009 and 40% growth in Europe. In addition, The Hackett Group, a Miami-based consulting firm, is predicting that a quarter of IT jobs at Global 1000 companies may be moved offshore by 2010.

The financial crisis has proven a boon for at least one outsourcer. Cincinnati-based Convergys Corp. recently signed a new five-year agreement to provide customer support to the Federal Deposit Insurance Corporation. The contract stemmed in part to a significant increase in calls to (877) ASK-FDIC by consumers concerned with developments in the banking industry, according to Convergys.

CRM outsourcing in particular is not expected to see a huge increase in interest, however, partly because organizations have been using business process outsourcing with contact centers for years, and there's less room for growth. Also, with application outsourcing, CIOs and CTOs are not necessarily shopping for CRM service providers specifically but instead are looking for broad support of business applications of which CRM is a part, according to Dana Stiffler, research director with AMR.

"Companies are looking at outsourcing a bigger chunk of their operation, like the infrastructure operation," Stiffler said. "You could probably be pretty opportunistic about CRM, especially with offshore service providers that would be happy to take you up on something as narrow as sales reporting or analytics."

In fact, that is just what the Serene Corporation is doing. The Santa Clara, Calif.-based systems integrator and consulting firm recently opened an offshore development center in Pune, India.

CV Therapeutics, a Palo Alto, Calif.-based biopharmaceutical company, has been using Serene to run its Siebel sales and marketing reports for a little more than a year.

"Our strategy for information management is outsourcing the day-to-day, repetitive operational tasks so we can free up internal resources to do project management and business analytics," said Dave Kuo, CV's senior director of information management.

Kuo has fewer than 30 people on his IT staff, so human resources are precious. Serene runs reports for Kuo on CV's Siebel 7.7 system so its sales department has better insight into how doctors are prescribing the company's drugs on a weekly basis. Serene also takes out the data that Sales enters into Siebel -- such as which doctors were contacted, and how many -- and pushes them into CV's data mart.

The weak economy hasn't affected CV's outsourcing plans, though. Rather, the company identified strategic outsourcing as an option early on and has no plans to change.

AMR, which serves mainly retail and manufacturing clients, has seen a lot of interest in outsourcing as a result of the recession, according to Stiffler.

"With global delivery, they're even more resolved to get good at this and get better at working with different services partners," she said. "There's still so much uncertainty out there, I don't know if it's speeding up [contract] signings, but it certainly hasn't had a detrimental effect on outsourcing."

CRM outsourcing has dovetailed with broader outsourcing deals recently, according to AMR's Fersht. For example, EDS (which was acquired this year by HP) has a partnership with Microsoft to deliver contact centers using the Dynamics CRM product. Similarly, SAP and Siebel customers are looking for outsourcers that can take on call center processes offshore but also take on some of the application management.

Regardless of the state of the economy, CRM outsourcing can save organizations money, and firms shouldn't be too worried about making quick decisions in down times, analysts agreed.

"We still think there's room and capability available on the sell side that makes it a safe bet for customers exploring application outsourcing," Stiffler said. "We don't believe there's a risk associated with thinking about that and pursuing that sort of strategy."

For those that do make the shift, Kuo offers some advice. Make sure there's a specific, named point person at the outsourcer to be a primary contact. CV Therapeutics has a weekly operational call with theirs.

"The one key piece that we are mostly happy about and very keen on making sure of is that the outsourcers have a single point of contact -- a person who is dealing with us," Kuo said. "The offshore outsourcer has to be very accountable and task oriented, so he or she can manage that piece rather than have us dig into details and say what's going on. Interview that person and make sure who the vendor provides is the person we want with the skill set we're looking for. Accountability really is key."

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