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Evaluate call center outsourcing costs and benefits

Outsourcing call center operations can take some financial burden off businesses -- depending on what partner they choose. But there can also be some drawbacks.

One of the toughest decisions for customer service leadership is whether to outsource their call center, but it can save businesses money.

Outsourcing is the business practice in which a company hires a third party to provide services or handle operations for a company. In the case of call centers, outsourcers provide the compensation and management for the agents who interact with a client's customers. A critical part of this primary responsibility includes hiring and training. In many cases, outsourcers provide significant pieces of the technology infrastructure and other support needs, such as workforce management and quality management.

Outsourcing is not an all-or-nothing proposition. Businesses may choose to limit outsourcing to specific functions of the contact center, such as the call center or back-office operations; selected days and hours; or specific products and services.

The purpose of outsourcing

The cost savings is the primary reason that many businesses choose to outsource call center operations. However, there are some other reasons, including:

The cost savings is the primary reason that many businesses choose to outsource call center operations.
  • Running a call center is not a core competency. Running a call center requires specific skillsets and technology. Some companies -- especially smaller companies -- may lack the size, resources or appetite to take on these additional functions and prefer to focus their resources and time on areas of greater strategic value.
  • High level of volatility in the call center. A call center may have significant peaks and valleys in call volume as a result of seasonality, the launch of new products and services, or other external influences. This requires quick changes in staffing levels -- both up and down -- which many organizations do not want to deal with.
  • Special business needs. A call center may have special business requirements -- such as hours of availability and language capabilities -- and businesses can't justify the cost to run it in-house.
  • Capacity limitations. An in-house call center may have limitations on capacity -- such as physical office space and software licenses -- and is not willing to invest resources to alleviate the capacity constraints.

Call center outsourcing costs and options

There are three primary geographic options for outsourcing:

  • Domestic -- within the United States
  • Nearshore -- such as the Caribbean, Latin America and Mexico
  • Offshore -- Asian countries such as the Philippines and India

As a general rule, domestic outsourcing is the most expensive option, with nearshore outsourcing coming in second and offshore outsourcing being the most cost-effective. If an organization has a goal of reducing expenses, domestic outsourcing may not help it achieve that goal.

Common outsourcing locations graphic

While outsourcing to an offshore call center may be the most cost-effective option, nearshore facilities do have their benefits, including:

  • closer proximity to home country for businesses that like face time with their partners;
  • similar time zones so business hours more closely aligned;
  • English skills are some of the best in the outsourcing world, so there are fewer language barriers; and
  • greater availability of Spanish-speaking agents.

There are a variety of call center pricing models that businesses can use when contracting with outsourcers, the most common being per-minute and hourly.

With a per-minute pricing model, outsourcers charge their clients a per-minute rate for the time an agent spends processing a transaction, such as speaking with a caller.

A per-minute model is most beneficial to organizations who are comfortable using shared agents. In this model, the outsourced partner is responsible for allocating staff on a real-time basis to maximize their efficiency while attaining contracted service levels. Here are the per-minute pricing ranges:

  • Domestic -- $0.70 to $0.85 per minute
  • Offshore -- $.35 to $.45 per minute

These prices may be higher if businesses require specific agent skillsets.

With an hourly pricing model, outsourcers charge their clients a per-agent hourly rate for the time an employee is logged into the telephone system available to perform work for the client.

Here are the hourly pricing ranges:

  • Domestic -- $25 to $35 per hour
  • Nearshore -- $12 to $18 per hour
  • Offshore -- $8 to $14 per hour

Similar to the per-minute pricing, these prices may be higher if businesses require specific agent skillsets.

An hourly model is most beneficial to organizations that require dedicated agents or for programs that require in-depth product knowledge. In this model, the outsourcer is less concerned with maximizing efficiency but is required to hit pre-agreed staffing levels.

A less common cost structure is the pay-for-performance pricing model. An example of pay-for-performance is when a business compensates an outsourcer for the number of calls they answer. But there is a risk that in this model; agents may rush callers off the phone and not resolve their issues in an attempt to maximize throughput for additional calls.

Another example is when a business pays an outsourcer for saving customers in a retention program. There is a risk that in this model, agents will annoy customers in their attempt to "save" the customer.

Regardless of which pricing model a business selects, the rate that the outsourced partner charges includes all of the costs of operating the call center, including:

  • salaries and agent benefits
  • agent and project management
  • training expenses
  • facilities
  • technology
  • human resources

Pros and cons of call center outsourcing

While the costs savings is certainly a benefit to outsourcing call centers, there are other pros -- and cons -- that businesses should consider before deciding to outsource.

Pros:

  • Flexibility and scalability. Outsourced call centers can usually react quickly, providing staffing flexibility and scalability to its clients when they are launching new products or planning for volume spikes.
  • Specialized industry knowledge. This is especially helpful if an organization is dealing with a unique business need that it is not familiar with or doesn't want to build the competency to address.
  • Expert management and support staff. Outsourced call centers understand how to run an effective and efficient operation because it is their business, and they have access to a broad set of resources and tools to assure the best operation.
  • Data collection and analysis expertise. Outsourced call centers have access to vast amounts of data in their telephony systems, which they can analyze and share with their clients for key decisions. And because these call centers work with a variety of organizations across many industries, they can identify and share best practices -- such as creative staffing and scheduling practices.
  • Access to latest technology. This enables clients to take advantage of the newest tools for interacting with their customers, such as a natural language processing interactive voice response system for handling calls and chatbots for handling chat interactions.
  • Employee management. Outsourced call centers eliminate the need for clients to perform many labor-intensive functions related to managing a call center, including hiring, training and employee relations.
  • 24/7 service. Outsourced call centers can provide expanded hours of operation during times when it may not be economically feasible for an in-house call center to remain open for business continuity.

Cons:

  • Communication gaps. English may not be the primary language of agents in an outsourced call center, which may create challenges while communicating with customers.
  • Product knowledge limitations. Because outsourcers are not employees of the client, there may be less buy-in or knowledge regarding a company's products and services. This may lead to a lack of confidence or accuracy when interacting with customers.
  • Decreased customer satisfaction. Customer satisfaction is often lower when dealing with an outsourcer. In many cases this is a management issue, but it does show the risk of outsourcing and the effort that is required to make it successful.
  • Decreased control. Organizations that decide to outsource are relinquishing control of one of the most important listening posts for gathering customer feedback.
  • Lack of agent focus. In a shared environment where agents take calls for multiple clients, they may not have the full focus required to excel in each specific program.
  • Removal of local jobs. Using an outsourcer may lead to a removal of jobs in the local community, which may not be aligned with the overall goals of an organization. It may be worth the additional costs to keep the call center close to home.
  • Hidden costs. Organizations that outsource must look at the full cost of call center outsourcing and not just for what they are billed.

Best practices for success

Once an organization decides to outsource part or all of its call center operations, here are a few best practices for success:

  • Monitor and test the quality of the outsourced partner. Businesses must continuously monitor the quality of interactions -- such as monitoring live calls and making test calls into call centers -- to assure that the outsourced partner is providing the expected customer experience.
  • Use call center agents as an asset. Call center agents listen to the actual voice of the customer. It is critical for businesses to receive actionable feedback from the agents to understand the customer pain points that may affect customer retention and loyalty.
  • Assign an internal employee to oversee the program. Businesses may want to assign a program manager to oversee the outsourced call center program and allocate some internal quality assurance resources to ensure they maintain service quality standards and avoid hidden fees.

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