Tuesday, March 22, 2005

Call centre outsourcing does not work, says Gartner

"Many customer service call centres that have been outsourced to third-party suppliers are under-performing", according to a new report by analyst firm Gartner.

Of the organisations that outsource their customer service and call centres - including the IT systems - 80% will fail to achieve their targets for costs savings.

In addition, 60% of organisations that outsource parts of their customer-facing processes over the next three years will see customers switch to rivals and find hidden costs that outweigh any potential savings they derive from outsourcing.

According to Gartner, successful outsourcing can achieve cost savings of between 25% to 30%. However, poorly managed outsourcing deals can reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver cost savings.

Most companies fail to manage the customer service experience sufficiently and often lock the organisation into long-term outsourcing contracts without conducting appropriate pilot testing.

To ensure successful customer service outsourcing, Gartner recommends that companies create customer-facing processes. It said businesses should judge the supplier based on customer satisfaction or other quality metrics to measure and motivate outsourcers, rather than "operational metrics" such as the number of calls handled by the supplier.

Users should also not underestimate the management time required to make an outsourcing relationship or contract work. The analyst firm has predicted that the worldwide market for customer service outsourcing is set to grow from £4.4bn in 2004 to £6.4bn in 2007.

Wednesday, March 16, 2005

Multi-process HR outsourcing growing quickly

The outsourcing of three or more HR functions, commonly referred to as Human Resources Outsourcing (HRO), grew by 37 percent in 2004, according to an in-depth study issued today by the Everest Research Institute. The report, Human Resources Outsourcing (HRO) Annual Report 2005, also found cost savings accelerating for buyers, both large and small, and the scale of HRO engagements increasing, as global deals become increasingly common.

Key findings of the report are:

-- Buyers - Prices across all segments have fallen over the last 4 to 5 years by more than 20 percent as the market has matured, with prices for larger buyers (in excess of 25,000 active employees) falling faster than those for small buyers (with fewer than 25,000 active employees). However, the number of small buyer transactions has recently crossed that of large buyers, and this segment will see further price reductions as the market continues to scale and the delivery model matures. While the offshore component has not been much of a driver in HR outsourcing, its impact could accelerate in the future.

-- Suppliers - Major revenue opportunities for suppliers still abound. These include the small buyer segment, less mature markets such as Europe and Asia, and larger global transactions. Effectively penetrating each of these markets, however, will require a different set of skills and technologies. Meeting the needs of the small buyer segment, for example, will require that suppliers effectively leverage a single technology platform to work for a number of smaller customers.

-- Investors - Increased merger and acquisition activity is likely as suppliers seek partners with complementary capabilities and large suppliers without capabilities buy into the market. The European and Asian HR outsourcing markets are far less developed than North America, and new VC-funded initiatives could arise in these locations if established suppliers do not make investments. At the same time, the window for organic new supplier entry is rapidly closing, and established suppliers will have an advantage going forward. Visit Everest website.