The Irony of Customer Contact Center Outsourcing | Article

New Rationale for Onshore/Offshore Decisions

outsourcing CRMA primary factor is strikingly consistent throughout the spiraling initial success of eCommerce, then the dotcom plunge into notorious failure rates, and now the steady escalation of consumers satisfactorily and eagerly adopting the eWorld approach to purchasing goods and services. The ineffective or optimized use of customer contact centers (CCC) almost parallels the business outcomes of eWorld success stories. Indeed, a CCC’s effectiveness in facilitating customer loyalty is critically tied to a company’s bottom line and competitive differentiation.

As recent media headlines and surveys attest, optimized customer service is not attributable to the latest and greatest customer relationship management (CRM) technology. Although management of customer service workflow and proficiency is greatly enhanced by technology, it’s still a people process; and the perception acquired at the time of every contact with a company’s representatives is what makes or breaks customer loyalty.

This critical business function – so labor intensive – has historically suffered extremely high rates of employee attrition. Thus, as eCommerce grew, U.S. companies began outsourcing their CCC work offshore in order to reduce operational costs and access a larger pool of human resources.

Ironically, the movement of work to overseas outsourcers doesn’t always maximize the strategic impact of outsourcing to produce the highest value in a business solution. Outsourcing is not just a tool to reduce operational costs; its best use is to achieve strategic competitive advantages and business transformation.

Not every outsourcer’s solution meets the same needs or produces the same value.

In fact, some American organizations have business requirements or patriotic preferences that are not appropriate for an overseas solution. Others are concerned about business risks because of the political instability in Asian nations, often the site of CCC outsourcers. For these companies, a U.S.-based, yet cost-effective, CCC outsourcing provider is a much-needed alternative.

Now there’s an American solution to this dilemma.

The “Made in America” Label

When the National Library of Medicine (NLM) wanted to convert its paper-based journals since 1957 into electronic files, it sought a cost-effective outsourcing solution, for the task involved about 15 million medical documents (with nearly one-half million documents still being added annually). Situated on the campus of the National Institutes of Health (NIH) in Bethesda, Maryland, NLM is the world’s largest medical library, collecting materials in all areas of biomedicine and health care; biomedical aspects of technology; as well as the humanities, physical, life, and social sciences.

Donald Lindberg, director of the Library, says the nationality of the potential outsourcer was as critical as its expertise and resources. The NLM had outsourced work to “American” firms before – only to learn that the firms subsequently outsourced the work offshore. “We are very specific about wanting our work done in the U.S.,” explains Lindberg. “The NIH is a U.S. government institute. Because of that, we feel very strongly that any contracted or outsourced work should go to U.S. companies if they can meet our standards.”

They selected outsourcer Lakota Technologies Inc. (LTI), owned and operated by the Cheyenne River Sioux Tribe in Eagle Butte, South Dakota. For the past several years, the tribe’s Telephone Authority (CRSTA) has steadily invested in state-of-the-art telephone, cable TV, wireless and broadband technologies.

NLM was happy with the results and the price. The trial project was completed within the three-month deadline, quality and accuracy were great; and the contract has been renewed for a five-year term.

It’s the best of both worlds, according to LTI’s CEO, J.D. Williams; for the ability of offshore providers to deliver high-quality services at deeply discounted prices often is outweighed by the tradeoff disadvantages of time zone/communications differences, logistical challenges, infrastructure challenges and risky political environments. Economic factors that make doing business with a Native American tribe so attractive as an onshore alternative mollify many of the restrictive aspects that sometimes produce less-than-satisfactory results through offshore outsourcing. A tribal reservation’s overhead costs are low, labor potential is high, and a U.S.-based location offers fewer logistical challenges.

“The labor cost is certainly a factor when balancing onshore and offshore,” says Carrie Lewis, senior analyst for The Yankee Group. “But more than the cost is the channel issue of reaching your customers. Lakota looks to be developing a very viable niche.”

Wave Technologies, Inc.’s customer contact center – another Native American service provider – has been particularly attractive to uniquely American needs. In addition to high-volume corporate clients (such as a major U.S. telecom’s help desk), Wave’s highly effective resources and expertise are sought by U.S. government agencies and the intelligence community, who require not only an American workforce but also absolutely secure facilities.

Wave’s skilled Native American workforce is located in Lumberton, North Carolina, a beautiful area with a low cost-of-living. Attrition is low among Native Americans, says Howard Whetzel, the company’s president, partly due to the fact that they seldom move away from the area where they were raised.

Although offshore outsourcers provide training as to American accents and culture, Native American labor has a distinct inherent cultural advantage and ability to adapt to change more quickly. In general, this is considered by some buyers to offset the lower labor and start-up costs overseas (usually amortized to the buyer).

But some Native American solutions are more cost-effective than those in India, the Philippines and other Asian countries. Whetzel states his American solution is at least $3.00/hour less than leading solutions in India. Wave, which owns an ISP, phone company and wireless capabilities, can operate at lower cost than a company in India, which must lease toll-free lines, needs special licenses to operate call centers, and must connect to ISPs for Web-enabled customer contacts.

Mitigating Risks from War Overseas

Because of the current volatile political situations in many countries, Whetzel points out the high risk of a company losing its CCC if its offshore outsourcing solution is in those arenas. Wave’s risk mitigation capabilities are an effective strategy that many companies are now considering. Wave’s Native American solution becomes the “overflow” strategy for a U.S. company’s call center; then, at the point when war or other disasters affect the offshore infrastructure and human resources, the overflow capability can expand to a full solution for the U.S. company.

Beyond the Frontier

Designing custom solutions, Wave also utilizes its CCC resources as an extension of a client’s internal communications infrastructure. It enables the attorneys in a major American law firm, for example, to communicate cost-effectively anywhere in the world. They dial up to the Web, connect to the Wave call center and can check their phone and email messages.

Although many companies have been unaware of Native American outsourcing solutions, they’re not all start-up, frontier-growth ventures. Indeed, some (like Wave and LTI) are attracting major players in the marketplace as clients and alliance partners.

A recent visit to LTI by South Dakota’s Senator Tom Daschle, accompanied by executives of several technology-based companies, turned out well. “His guests were extremely impressed,” says LTI’s CEO. A highly trained workforce – a necessary element for success – is accelerating growth of the Lakota tribe’s call center. The tribe has an agreement with Cisco Systems to provide networking certification at the high school level, and both a local community college and technical school provide tribal high school graduates with opportunities to further their information technology education and experience.

LTI’s CCC services are attributable, Williams says, to “the appeal of our neutral midwestern accent. Also, our increasing call center workforce skills and the investment we’ve made in telephone technology is attracting clients.” The firm is now beginning to branch out into a variety of other information services such as help desk; data entry; data conversion; document imaging; electronic document management; and distance education operations. As operations on the reservation expand, tribal members will be offered even greater opportunities to acquire further experience performing software engineering, applications development, Web enabling and other information technology jobs, says Williams.

The Majority Doesn’t Always Rule

Native American outsourcers enjoy another competitive advantage in their minority-owned business status. Peter Bendor-Samuel, CEO of Everest Group and its Outsourcing Center, states this feature is very attractive to government and corporate organizations that seek to fulfill their requirements for utilization of minority-owned businesses.

Wave’s Whetzel adds that his company’s SBA, 8(a) Certification as an American Indian Owned and Managed firm reduces the time and complexities involved in obtaining and structuring an outsourcing arrangement for its government clients.

Computer Generated Solutions Inc. (CGSI), a Washington, D.C.-based IT services firm, uses LTI as a subcontractor on large transactions. Through LTI, CGSI gains access to low-cost domestic labor, tax breaks and special considerations of partnering with a minority-owned venture.

The Price Tag is for Value

The irony of much of CCC outsourcing is that, historically, its purpose has been to reduce costs. But outsourcing’s optimal value lies in its ability to make a strategic impact on a company’s ability to compete.

Whether a company is looking for a higher customer satisfaction/retention level, reduced operational costs, tracking and analytical technology and services, or is moving from traditional business models into the eWorld, buyers should seek a provider whose overall solution can produce the most strategic value.

Lessons from the Outsourcing Journal:

  • Native American outsourced call center solutions are not a threat to the thriving offshore industry; they are, however, a viable alternative and opportunity for strategic alignment with some U.S. companies’ business requirements or patriotic needs.
  • A U.S.-based call center solution, whether it’s a total solution or an overflow strategy, is effective in mitigating risks associated with offshore outsourcing in volatile regions.
  • A Native American’s tribal reservation overhead costs are low, labor potential is high, and a U.S.-based location offers fewer logistical challenges than an offshore solution.


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