Lowering the Cost of People | Article

desktop outsourcing monitor with stacks of moneyInitially, the e-commerce world was peopleless; there was a manufacturer and a consumer and almost no one in-between. Ironically, it is becoming clear that what is going to separate successful companies from unsuccessful ones in the evolving e-commerce world will be people.

“What we’re finding is that the contact point has moved from the manufacturer’s sales rep in a retail store back to the manufacturer,” says Randy Warren, president of Tracmail, Inc. “Consumers definitely want assistance with the Web. It may be sales assistance about a particular product or even a tax question. Maybe it’s a question at a health care site that an RN could answer. The entire customer service cycle-from acquisition to retention-requires that people be sitting there.” Warren points out that five years ago there were not people behind e-commerce sites but that, in today’s world, an unattended web site is unacceptable. His company, Tracmail provides Internet communications services, putting people behind its customers’electronic communications.

Warren says that typical automatic email messaging systems get only 30% of the answers correct or satisfactory; yet the growth of email us huge. “As an example,” he says, “a guy bought a computer and emailed the manufacturer that he needed a copy of the invoice. The automatic reply said: ‘Our current queue is 96 hours to get you this answer.’ All he wanted was an invoice.”

In organizations where there is more than one route to the company (snail mail, email, and telephone), the problem is even worse. They must be able to coordinate databases so that they know when a customer calls, for instance, that the customer first did not get a response to email and then sent a letter asking for a response before escalating to a phone call. The customer service rep needs to be able to tap into the databases and see that this is the person’s third attempt to reach the company. “Linking all those processes together is something that companies need to think about prior to going on the Web or outsourcing,” advises Warren.

“Web sites are overwhelmed; and the reason they can’t step it up is because the cost of people is too high,” Warren says. “The single largest source of costs for buyers in an outsourcing relationship is labor, and 70% of contact center costs are labor-related.”

Offshore Labor

To provide a contact center based in the US can be cost prohibitive, Warren says. Thus, Tracmail’s facility is located in Bombay, India. He says that the first thing buyers should do to reduce outsourcing costs is to see if their work can be placed offshore. Place a call center aimed at the Hispanic market, for example, in Mexico instead of the US.

“The reason we are in India,” Warren explains, “is because of its large pool of English-speaking, educated labor who work for a significant discount when compared to their counterparts in the US.” Other costs (such as rent and telephones) are also significantly lower offshore, enabling the outsourcer to provide better services for a lower overall rate.

“Actually the employees in offshore locations work for more money in their country’s economy,” he says. “You pay them in the same relative wage scale as you would in the US. But when you go to these other labor markets, the dollar is so strong compared to their economies. If you pay somebody in his or her country’s economy, that is a tremendous discount. WWW means worldwide, and there is no reason to think borders anymore when it comes to doing certain functions. As I travel through the Caribbean and Ireland and other places in Europe for other sites, we are seeing people taking it to the lowest labor center, based on what their need is at that time.”

Incentives, Added Value, and Expertise Also Reduce Costs

Warren says there is no hard and fast rule as to whether to use bundled services for call center outsourcing. If inbound calls are outsourced, it may make sense to bundle that process with electronic messages because there may be some “dead time” for the agents. Alternatively, it may be less expensive to send those processes to different outsourcers. Warren advises buyers to handle this on a case-by-case basis.

He points out a new trend in pricing structures, which enables buyers to reduce costs. By moving away from a strict, per-hour cost structure toward a per-incidence cost structure (or a per-success cost structure), the buyer is able to incent the supplier to become more efficient. It doesn’t work in all cases, he says, because it can result in sacrificing customer service if not handled appropriately. But where it works, it is a win-win situation for both parties.

“For example, in setting up a project,” he explains, “let’s say we think something takes four minutes to complete, and we charge the customer X for that four minutes. If we can then reduce that to three minutes, we save 25% of the time to complete that job.” Typically what happens is the outsourcer then shares some of that gain back to its customer in the form of reduced billings. Warren explains that call center efficiency is increased by fine tuning software so that the company is able to autosuggest more and more answers, thereby reducing the reply time. Additionally, the people become more experienced.

By going offshore, an outsourcer can also be cost effective in providing professional people to answer questions. “The differential between putting a professional in a contact center environment in an offshore country as opposed to the US is tremendous,” he says. “If you need to put an RN, or an attorney or accountant in front of that screen to answer questions, you are moving from a labor base of $8-$15/hour to between $50 and several hundred dollars per hour. In an offshore facility, you can put a qualified professional at a workstation to handle inquiries and respond to customers for far less than in the US, thereby providing significant added value to customers.”


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