An Offshore Sourcing Backlash
Few issues of late have polarized the national collective consciousness like those surrounding offshore outsourcing or, as it is more graphically characterized, "sending American jobs away." The implications are far-reaching, profound, and, they are escalating daily in: the economy, politics, corporate boardrooms, and even around the dinner table. One cannot pick up a newspaper, or turn on a radio or television without hearing headlines like:
"10,000 Jobs Move Offshore,"
"U.S. New Job Adds Hit New Low for the Quarter,"
"U.S. Market Leader Announces Offshore Partnership,"
"Jobless Americans Becoming the New Under-class."
These headlines hit home. We all have close friends, even senior managers, who have experienced, first hand, the debilitating effects of job loss. Most recently, Customer Service contact centers have come into the crosshairs of offshore outsourcing proponents. While our current job climate is not wholly a result of the move toward "Globalization," global sourcing does account for a significant portion of onshore attrition.
Is offshore outsourcing really the only answer to shareholders' continuing demands for more profit? Is it the right thing to do? Is continued local job loss inevitable? How can we turn the trend around?
As an executive considering outsourcing, these are questions you cannot afford to avoid. This article will explore the reality of outsourcing and prescribe five steps for a balanced approach to offshore outsourcing.
The Offshore Sourcing Reality
The pressures of "faster, cheaper, better" have been with us since the dawn of the Industrial Revolution. Those enterprises that continuously reinvented their business processes grew and prospered. Technology advances continue to provide the "faster" especially in the contact center space. Offshore alternatives offer the next level of "cheaper" because of the vast differences in pay scales between the U.S. and emerging nations as the chart below suggests:
Companies simply cannot discount the benefits of having some offshore customer service capabilities. In addition to lower labor costs, a well-conceived offshore plan can offer:
Expanded hours of operation
Accelerated technical implementations
Work Force Management flexibility in seasonality or campaigns
Ability to scale contact center operations rapidly
Business Continuity and Disaster Recovery Insurance
Redeployment of resources to core business and customer service
Cost Savings Are Not Without Cost
In today's economy, "Faster and Cheaper" does seem to be at the forefront of corporate decision-making. Unfortunately, "Better" – from the customer and employee point of view – seems to be fast becoming a distant second. "Cost cutting" simply is not a sustainable business strategy.
Recently, Dell Computers* learned that lesson the hard way, when it had to recall and re-think cost-focused decisions to move customer support, including support for its highest value business customers, offshore. Those customers responded swiftly, vocally, and, in no uncertain terms. In the U.K., Shop Direct* experienced the same reaction and the threat of defection from previously loyal consumers after a similar series of cost-focused offshore decisions. The culprit at the root of each of these examples was a failure of the offshore resources to "connect with" valued customers as a result of real or perceived (in the eyes of the customer) language and/or cultural barriers. While leading offshore outsourcers employ many good training language "neutralization" programs, the reality is that the perception of language and cultural differences can never be entirely "neutralized."
The potential pitfalls of a "cost at all costs" strategy are considerable, as the Dell and Shop Direct examples suggest. Some of the risks of an ill-advised or poorly executed offshore strategy include:
Loss of revenues and market share from customer attrition
Loss of future labor pools from disaffected employees
Loss of core business quality assurance and operational governance
Hidden migration costs
Contractual/legal exposure due to unfamiliarity with offshore business practices
Political instability affecting business/societal stability
Costly and disruptive rebuilding after a failed initiative
In addition, there is clearly no guarantee that the offshore environment will remain as financially attractive as it is today. There is already abundant evidence to suggest that offshore vendor competition is modeling the behavior of our local outsourcing market space. For example, wage competition and resultant attrition has already begun to narrow the compensation gap. The availability of the "best and brightest" offshore resources is shrinking. The availability of capable and experienced contact center supervision resources is also dwindling. Attrition rates and resulting costs, in dollars and experience, are escalating. And yes, growing demand exacerbates these issues.
Five Guiding Principals To Mitigating Risk…SAnd Saving Onshore Jobs
Fortunately, for those companies who have not yet committed to the offshore siren's call, there are hard-earned lessons to be learned from those companies who have tried and succeeded, and those who have tried and failed. A common theme arises from both groups: "take the time to do it right the first time."
Maintain customer support of Core Business Onshore:
Segment and retain Complex Service Processes and key Customer Relationships
Match work (non-Core transactional) that can be placed offshore to demonstrated offshore vendor competencies
Commit to Maintaining an Active Management Presence in Offshore Locations:
Quality Assurance
Training
Policy and Knowledge Management
Partner with a Reputable Onshore Outsourcer with Offshore Operations and Capabilities.
Insist on Onshore Command & Control Centers for monitoring and routing network, systems and applications.:
In-House or Partner provided
Have a "Back-Out" Clause and a Back-up Plan:
Request and retain current back-up data downloads
Include clear "Termination" processes in all contracts and agreements
"Dual-Source" onshore
Conclusion
The reality is that offshore outsourcing is not the sole cause of our current labor-market woes. In fact, it currently represents only a small percentage of direct job losses. Offshore outsourcing is not likely to go away. In fact, it is attracting more attention and gaining momentum each day. While offshore outsourcing can be a powerful bottom-line contributor from the cost side, it is clearly not the corporate panacea. In truth, it is the blind adherence to the panacea "strategy," that is at the heart of the offshore controversies and the cause of so many offshore failures.
When (not "if") you evaluate offshore outsourcing, there are key benefits and risks that should not be ignored. By taking into consideration the five guiding principals outlined in this article, your due diligence will not only keep the right local jobs onshore but you will significantly reduce the likelihood that you will be providing damage control (and repairing customer and/or shareholder confidence) for a failed initiative.
About TTEC:
TTEC Holdings, Inc. (NASDAQ: TTEC) is a global customer experience technology and services company focused on the design, implementation and delivery of transformative customer experience. TTEC Digital delivers outcome-based, human-centric, tech-enabled, insight-driven customer experience solutions. Founded in 1982, the Company's 48,700 employees operate on six continents across the globe and live by a set of customer-focused values that guide relationships with clients, their customers and each other.
Published: Tuesday, May 18, 2004
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