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Focusing solely on price-based criteria when selecting outsourcing vendors inevitably leads to quality defined by numbers rather than the customer experience. However, when outsourcing becomes about a business partnership rather than simply a financial transaction, the foundation is mutual benefit and shared risk and reward, which creates more opportunities to drive measurable customer experience improvements.
It may not be surprising to you, if you have familiarity or intimacy with outsourcing, that price is still the number one priority when choosing an outsourcing partner. According to Ovum’s CRM Outsourcing Business Trends Survey 2011, price topped the list as the most critical criteria, according to operator decision-makers for contact centre operations. You’re probably saying to yourself, “well we know this; it goes without saying” but it is worth talking about, because the conversation around outsourcing needs to change.
“There have been a number of news headlines in the past few years about recognised brands moving their operations back onshore as a result of large-scale failures with offshore outsourcing,”
says Jeffrey Puritt, president, Telus International.
“This is an opportunity for a new dialogue. Why are companies still prioritising price as the number one selection criteria for outsourcing providers when it’s been proven that price-based relationships often fail companies, the outsourcing provider, and most importantly, customers?”
The contradiction between price-based vendor selection and outsourcing success is definitely a challenge for our industry. But it is also an emerging opportunity to drive critical change that puts the customer front and centre in any outsourcing client and provider relationship.
According to Forrester’s The Customer Experience Index 2011, the telecoms industry has some work to do in elevating customer satisfaction scores. Across wireless, internet and TV companies in the US, customer experience measures average 64%, 56% and 54% respectively. Considering that retail, the top performing industry, scored 82% in overall customer satisfaction, telecoms companies have a lot of room to improve, even ranking below airlines.
To that end, it’s time to look at how we evaluate, select, negotiate and govern outsourcing partnerships and initiatives across our industry. Initiatives that are primarily price negotiations can be doomed to failure right from the start because they discount the customer experience.
And analyst research like Forrester’s proves that to be true. In short, outsourcing should be a business partnership, not a financial transaction. Approaching outsourcing as a business partnership dictates that key elements of the origination and evolution of the outsourcing relationship must change.
“When I began to think about the disparity between price-based relationships and outsourcing success, I suspected that there was an opportunity to disrupt the peace a bit and hold up a mirror to entrenched cultural practices in our industry,”
“Most decision-makers, when first contemplating outsourcing, usually ask, “How do I determine if outsourcing if right for my business?” But the reality for most organisations is that the people who are best suited to answer that question – the operational leaders – aren’t always consulted.
In many organisations, outsourcing decisions are driven purely by number crunchers – the CFOs – who may not foresee the long term client experience risks of sending critical work, such as customer facing initiatives, to an outsourcer. It can be a false economy. It can create superficial savings.
At first look, outsourcing by relying on a price-based vendor negotiation and selection presents costs savings. But based on widespread failure, it ends up costing more – in unhappy customers, jeopardised loyalty, frustrated employees and low morale.