Tough Times Call for Tough Measures
When the U.S. economy started to tumble — and sales of computers along with it — global PC manufacturer Gateway knew it had to impose hard-nosed measures. A company known for its superb service, Gateway’s challenge was two-fold: Its restructuring plan called for closing its European operations, but it still had customers under warranty who resided overseas.
Gateway solved the problem by outsourcing. “We had to cut expenses but we still had a customer base that was under warranty,” said Steve Olson, senior manager for international operations for the North Sioux City, South Dakota, company.
Like many other U.S. companies, Gateway knows it is not alone as it faces the prolonged economic slump. “A growing number of big companies face economic pressures that are speeding up their decision to off-load activities that aren’t part of their core competency, says Brian Bingham, world manager for CRM and customer care research for IDC, a business research and forecasting firm.
The Need to Find a New Service Provider
For many years, Gateway’s European headquarters in Dublin, Ireland, had responsibility for dozens of showrooms across Europe, the Middle East, and Africa. The facility warehoused and shipped replacement parts. It handled computer repair and onsite engineering, which were also included in the warranty. In addition, the offices handled all administrative, legal, finance, and accounting functions for the region.
In August 2001, Gateway began shopping for a provider by issuing a Request for Proposal (RFP) to eight firms that specialize in call center operations. However, the service provider had to handle the warranty work as well. Making sure the expectations of its customers were fully met was the company’s top priority in picking a supplier.
“Certainly, the ability to meet service levels and do it in a cost-effective manner was our key criteria for selection,” says Olson. Gateway chose ClientLogic, a call center management firm based in Nashville, Tennessee.
A Fresh Attitude Toward Change
According to Amit Shankardass, solution planning officer for ClientLogic, the outsourcing of Gateway’s European operations required a whole new way of thinking. “We saw a company looking to reduce its costs. In that context, the operation became a cost center, no longer a profit center,” said Shankardass. Ireland is an attractive location for U.S. companies looking abroad because “it is a near-shore solution with offshore benefits.” Ireland’s close proximity to major East Coast cities gives it an advantage over other offshore venues, he adds.
Bingham says Gateway’s move essentially meant taking the call center “off its books” as an expense. Productivity issues can drive such moves as well. Training service reps to sell new products and services when they have a customer on the line produces new revenue, he points out.
“It’s not only handing over a cost to another company,” he says. “There are tactical and strategic reasons. It can improve customer care and overall operations because it allows Gateway to go back to doing what it does best, which is manufacturing and selling computers.”
Better Business Results
When ClientLogic won the account, it was up against a short timeframe. Gateway had already announced its date for pulling out of Europe to employees, and the supplier had only a short time to recruit, train, and transfer Gateway’s people, processes, and technology to its own site, also located in Dublin. ClientLogic serves five other international companies from its Dublin center.
“We sat down for countless hours with ClientLogic to craft very specific language in infinite detail about what we expected,” said Gateway’s Olson. “It addressed all aspects of the business under various contingencies.”
The service level agreements (SLA) included penalties associated with not meeting the agreement’s standards in addition to the standard requirements like the speed in which customer service representatives are expected to answer the telephone, the degree to which impatient customers abandon their calls, the duration of each call, and whether customers are satisfied with the measures taken to resolve their problem.
While the agreement does not contain rewards associated with surpassing service standards, it does include incentive rewards for ClientLogic when customer care representatives sell additional Gateway products or services to existing customers.
In addition, Gateway told ClientLogic it would have to gradually reduce personnel to match the dwindling volume of warranties that existed in the region. “Everybody went into this with their eyes wide open. We knew the call center would shrink and eventually go away in three years,” Olson says. Gateway wanted remaining customer warranties to be fulfilled with good service until the last day.
Moreover, Gateway expected calls to drop off dramatically once it stopped selling PCs overseas. That, too, was written into the SLA so Gateway would not end up paying for idle customer service representatives. Olson notes that there are 24 elements in the SLA.
Once the process of migrating and hosting Gateway’s operation to its own site began, ClientLogic had to work fast to meet the deadline. It went live in June of 2002. ClientLogic has reduced the average time customer calls are handled from 13 minutes to 11 minutes, while increasing customer satisfaction rates to more than 80 percent. It received a 100 percent satisfaction score from Gateway, and an 88 percent satisfaction rating from call center employees, according to Olson. “Today we have one-third the number of call center representatives we had earlier,” he notes.
ClientLogic’s workforce management program allows managers to monitor the performance of the call center’s output every half hour on a daily basis. When a dispute over performance arises, the two firms sit down and discuss a resolution. The contract contains terms to handle disputes. Says Olson, “We follow up with an amendment to the contract that describes what we have decided.”
Gateway not only realized its much-needed cost-savings but also got an additional bonus: Its customer care improved, too!
Lessons from the BPO Outsourcing Journal:
- Outsourcing can reduce costs and improve efficiency by allowing firms that specialize in customer care to implement better methods.
- Outsourcing can play a major role in a corporate restructuring that is aimed at streamlining operations without alienating customers.
- Outsourcing brings on board suppliers who understand they will be measured by stringent performance standards.