As firms, including nonprofits and institutions, move their strategies toward meeting their customers’ needs, by investing in tools such as in CRM, call recording, speech analytics, and performance and workforce management systems at their contact centers, they have been moving away from BPOs for such high-value interactions.

These are, to cite the old Chinese curse ‘interesting times’ for organizations seeking to outsource their contact center services and for business process outsourcers (BPOs) alike. That is because serving end-customers has never been more challenging. Today’s buyers are savvy, proactive, quality conscious but price-sharp, unimpressed with brands unless they consistently deliver, and whose loyalty is as good as their last interaction. These individuals also utilize a growing and bewildering array of channels. And as shown by the popularity of the Do Not Call list in the U.S., which will shortly go live also in Canada, customers prefer to reach out rather than the other way around, unless they want you to.

Yet as firms, including nonprofits and institutions, move their strategies towards meeting these customers’ needs, by investing in tools such as in CRM , call recording, speech analytics, and performance and workforce management systems at their contact centers, they have been moving away from BPOs for such high-value interactions.

The BPO firms are now in what Bob Lyons, a former senior executive with Convergys and TeleSpectrum (now TRG Group) who is general manager and vice president of Avaya ‘s Contact Center division calls “a paradox”.

BPOs cannot afford to invest in the latest tools without strong assurance that clients will want and pay for them, yet clients will not do business with these BPOs unless they have those tools. Consequently organizations are now bringing in-house those calls that drive customer satisfaction and outsourcing  those that are mainly transactional.

BPO firms are then let with little more than labor arbitrage and flexibility to offer potential clients. They are hindered by strong price pressure: industry reports indicate the average rate in North America is $25 per agent/hour while historically typical rates were in the mid 30s. At the same time Indian programs demand about $ 11 per agent/hour while those in The Philippines command about $11.50 per agent/hour. Together that leaves many BPO with very little resources to buy those solutions that clients want.

“Companies are beginning to realize that customer retention is also important in addition to pricing and offerings as value and marketplace differentiators,” says Lyons. “Those that do a lot of outsourcing are now demanding that value proposition.

Outsourcers say ‘we can do this in different regions at lower cost’. So what is happening is that companies are saying Tm not getting the innovation with you so I can do it myself and leave you with handling just the transactions with my technology.’”

The Drive to Value-Add

BPO firms, realizing these trends, have been stepping up their quality and services. They have been expanding into areas such as applications hosting , back office management, billing, conferencing, consulting , data analytics, HR management, and market research.

Convergys offers one of the largest menus of value-added services of any BPO firm: from billing to HR and to speech-recognition-enabled voice applications: the latter significantly bolstered by its acquisition of Intervoice, a leading automated voice platform supplier, and to training.

Convergys has been experiencing growing demand for its behavioral intelligence (BI) services, reports Ryan Pellet, VP Global Consulting Services.

BI captures data from interactions occurring in more than 30 different channels, from contact centers to social media, viral marketing, and to games and maps as to how customers are interacting with those channels. That helps enterprises optimize their marketing, customer acquisition and customer service strategies and decide how much resources to spend and where.

Convergys has also been applying its value-add services, such as HR management, to its contact centers. They have bolstered their quality to the point where the BPO firm has won price increases from its clients that helped offset higher costs.

In turn, the high quality contact center care has led to increased interest and demand for value-added services, thereby creating a virtuous circle.

“We drink our own Merlot,” explains Pellet. “We apply the same tools that we offer and provide to our clients on ourselves. If we continue to perform at or above the market standards then we are invited to do the value-added pieces.”

LiveOps continues to do likewise. The pureplay home agent BPO firm has added silent monitoring of agents, which enables managers to identify service issues plus agent readiness assessment testing that helps ensures that agents are ready to go live with end-customers. These tools are also on the Summer 08 release of LiveOps’ hosted On-Demand Platform that it markets to other contact centers.

APAC Customer Services is seeing increased demand for handling back office processes such as claims, receivables, medical bills, e-mail, and USPS for clients.

“We’re providing a one-stop shop for our clients with these BPO services, taking on routine tasks that cost them money to handle, in addition to our contact center services for them, which offers them greater convenience,” explains vice president of operations Rebecca Lucera.

Avaya’s Lyons is skeptical about BPO firms’ ability to successfully branch out into these other areas as potential buyers may question their competency to deliver because they have not been present in these fields.

“These firms still race the same paradox as with value-added contact center functionality,” says Lyons. “To add value beyond labor arbitrage they need to integrate these services and provide business consulting so that they can provide a premium offer that allows them to capture a price premium. Yet the cost to build or buy such expertise far exceeds the expected return so again you are left with a business model focused on labor arbitrage.”

In the case of Working Solutions, a pureplay home agent-based BPO firm it is the company’s clients more than marketplace expansion desires that drove it to start offer hosted technology solutions.

The firm provides call and contact routing (TDM or IP), IVR, and speech analytics including real-time alerts to supervisors for customers who may require escalations or specialized handling.

“We’ve been providing these services to clients who utilize our agents for quite some time,” says CEO Tim Houlne. “But we’ve seen a growing number of companies ask us to provide software and technology for their internal call center operations.”

Mergers

The low margins, plus ease of entry, and many players along the retiring and cashing out of companies’ founders have made mergers and acquisitions the norm in the BPO industry. Yet while they have led to bigger companies with more clients and workstations it has not necessarily led to greater market leverage, and higher prices.

“Companies will typically want at least two outsourcers on a program so if your two outsourcers who are merging happen to have the same customer, companies will pull that work to someone else, which helps keep prices down,” explains Lyons.

The acquisition of SITEL by ClientLogic last year, now called Sitel, is arguably quite different. It has brought together complementary assets, capabilities, and client lists, with very little overlap. And as such there has been negligible client attrition.

Amit Shankardass, Chief Global Marketing Officer, reports that out of the 450 clients brought together by the merger, only nine of them used both firms. The post-merger Sitel retained 98 percent of its clients, of which 83 are Fortune 500 companies.

ClientLogic brought to the table strong inbound customer care, cross-sell/up-sell, support , plus data management and fulfillment, he explains. Legacy Sitel brought in robust outbound customer acquisition, billing/collections, customer care and IVR competencies.

While ClientLogic had strengths in the travel/transportation, ISP, and retail markets, legacy Sitel delivered heft in financial services and utilities. The new Sitel is now pursuing the energy  and healthcare verticals.

“We’ve experienced strong growth, and so have our clients because there was very little overlap between the legacy firms,” says Shandarkass. “We’re now able to offer and deliver to both sets of firms’ clients and to prospects a complete range of global BPO services that complement each other under one roof.”

Near/Offshoring

The increased emphasis on customer service and quality is impacting BPO offshoring and nearshoring.

There have been many published reports of dissatisfied customers, and companies with having their calls handled in India. Clients and BPO firms are in response moving their more customer-sensitive work to other nations and in some cases back to the US.

The chief offshore beneficiary is The Philippines, which has a strong customer service culture and whose residents have a greater cultural affinity to the US thanks to longstanding military/political and increasingly family ties between both nations.

Yet there are growing concerns that The Philippines’ labor market may soon be saturated, at which point costs will begin to escalate.

The Everest Research Institute reports that offshoring including to India have been successful though for those BPOs and companies that made their metrics quality-focused, such as using customer satisfaction scores, and had agents undergo simulation-based training. Meanwhile the weak US and stronger Canadian dollar has ruled Canada out as an alternative. Many clients have pulled nearshored programs from there, forcing BPOs such as Convergys, ICT Group, TRG, and West to shutter contact centers.

Africa and the Middle East are finally emerging as a quality offshoring option for North American clients as savvy BPO firms, seeing what has happened elsewhere, are marrying the region’s large supply of well educated, highly motivated, and affordable labor with quality-oriented recruitment, training, and agent retention strategies.

BPO at Home

There continues to be strong move to bring BPO home: to those of its agents. The home agent value proposition is access to larger, higher quality and more flexible labor pool without the capital costs of formal contact centers.

West, which has had a home agent program for the past several years, has addressed the issue of data security , which has been a key inhibitor on the part of many organizations, especially financial services firms, in letting these individuals handle their calls.

Its new West at Home Locked-Down Desktop Security Environment transforms employees’ home desktop computers into a West proprietary environment. When its home agents begin work, the software only runs those applications or processes explicitly permitted to be operated, which locks down their computers. They cannot access other files, folders, or programs or go to West-unauthorized Web sites during this time, nor can they download, store and/or print information. When the agents have finished work, their desktops are restored to their former state.

APAC is taking a slightly different road. For the past four years it has had a similar large center/larger community-home agent constellation model to what Sitel has recently adopted. This fall APAC is branching out into small towns, with storefront locations of 10-12 seats that have training and HR functions that in turn will service outlying home-based agents.

“Our clients will benefit from this strategy because it will be reaching out to a high quality labor force that has not been tapped by contact centers because these communities have been too small to support traditional facilities,” explains Lucera.

Canada’s Domestic BPO Market

Canada’s currency relative to the US dollar has risen to the point where on some occasions it is more valuable, which has made it less viable for nearshored programs.

The flip side to the strong Canadian ‘Loonie’ is that Canada has still, relative to the US, a strong domestic market thanks to its energy and more stable housing sectors.

Outsourcing is one of the best means of reaching out to Canada’s 33 million consumers, and to its business and government sectors. BPO firms who know Canada can navigate your program through the country’s two official languages, cultural issues, the metric system, and regulations, such as the new Do Not Call list that comes into effect Sept. 30 (see related article).

US-based BPO firms with operations there are aggressively pursuing Canadian business. ICT Group is netting results from this strategy. Canadian revenues help drive a 33 percent increase from international sources in the second quarter 2008 from the same period in 2007.

Earlier this year Convergys appointed Igor Sarenac as Vice President, Business Development, for Canada, placing special emphasis on attracting and expanding business among companies headquartered there.

There are also many Canadian BPO firms that offer an increased range of services. As one example, 24-7 INtouch has launched a value-added partnership program that provides clients with complete end to end solutions through a one vendor relationship. Pre-screened quality outsourcing solutions through a single vendor make it beneficial for clients to easily outsource and manage all of their unique business needs.

“We recognize our strengths, and don’t attempt to offer everything ourselves, “says Greg Fettes, President and CEO of 24-7 INtouch. “Instead, collaborating with strategic and complimentary vendors allow us to offer a total solution our customers can depend on.”

Boutique BPOing

Boutique BPO firms are smaller companies whose value propositions stress top level high-customizable quality customer care and satisfaction and personalized attention to clients’ needs. They are noted for loyal, well-trained and experienced agents and supervisors backed by quality assurance systems. They can provide the ideal adjuncts and partners to best-in-class in-house contact centers. While their rates are not the lowest, they deliver value for money.

“Boutique contact centers are better suited to enable customer care and satisfaction because they are more focused, hiring and keeping people off the beaten path, and they don’t need to hire thousands of people,” says Bob Lyons, general manager and vice president of Avaya’s contact center division.

InfoCision is one such boutique BPO. It specializes in customer acquisition, care and retention, nonprofit fundraising, and product and pledge fulfillment. All of its contact center agents relate to American end customers; its services are delivered via 32 small facilities located only the USA. It has won Customer Interaction Solutions’ magazine’s Marketing Via Phone (MW) Quality Award every year since its inception.

Outsourcing Your Help Desk

There are times when your contact center needs help with IT issues yet your help desk is swamped. And if you are with a small/midsized firm you may not be able to justify having a full-time IT team yet you need their services when your operations go buggy.

Help desk outsourcing enables you to quickly and effectively resolve many problems for less money compared with expanding your IT desk or bringing in an outside onsite support professional.

The Utility Company has made it easier for more firms to benefit from help desk outsourcing. It has come up with a new service aimed at small/midsized businesses, 1-866-My-Utility Per Minute Live Helpdesk Service. It provides remote monitoring and management for IT (network, desktop, security, and storage ), business applications, Web/Internet, copier/printer  and telecommunications, 8am to 8pm ET.

1-866-My-Utility Per Minute dramatically reduces waiting times and time to resolution, with a 50 percent -80 percent savings over typical break/fix support contracts. There are no minimum charges or travel; the lack of the latter also makes this option environmentally friendly with no pollution or gas consumption.