Foreshore: a vision of CRM outsourcing. (Outsourcing).

Richard M. Earley

Over the past decade, and especially in the last five years, many U.S. and European companies have turned to global outsourcers for technical services. Some of these companies have achieved tremendous success, while the results for others have been disastrous. As in so many cases, the devil is in the details. Companies that haven't experienced the outcomes they hoped for might benefit by taking a closer look at the way they have structured their outsourcing agreements.

CRM is a prime candidate for outsourcing. A holistic CRM strategy has become a necessity for every company, now that even the most solid brand no longer secures lasting consumer loyalty. But in order to survive, companies must contain the costs of implement their CRM strategies.

Outsourced CRM services range from routine e-mail response management and inbound and outbound teleservices to enterprise application development, implementation, and system maintenance and warranty. But just because a service can be oursourced doesn't mean it should be oursourced.

What To Outsource

When you are deciding which services to outsource, consider what is suitable for your organization. It is possible to oursource too much or too little. Outsourcing all noncore functions can leave a skeletal organization that does little more than coordinate outsourced services. At the opposite extreme, maintaining functions that are not business critical or that can better be handled by experts may produce a bloated and wasteful organization. By combining outsourcing with in-house operations, a business can find the middle ground where it operates effectively and profitably.

For example, when you are outsourcing application development, you can begin by selecting an application where the requirements and design for each phase are well defined before development begins. Applications where requirements are refined while development is proceeding, such as in an iterative methodology, are more challenging because they demand more contact between development and design teams; you can outsource such projects successfully once your level of comfort has been established with an outsourcing partner.

Onshore, Offshore, "Un-shore"

Every passing year brings more options to choose from. Onsire, offsite, onshore, offshore, nearshore, and all the variations offered by technology and consulting companies seeking to ride the bandwagon can leave you "un-shore" what to do.

In addition to oursourcers who can work at or near your facilities, you can contract for technical services in Canada, Mexico, South America, Ireland, the Philippines and India, to name only the most significant players in this marker. It's even possible to bring offshore workers temporarily to domestic locations, using the H1B visa process.

According to Gartner, between 150,000 and 200,000 contact center workers are employed in India, the Philippines, Ireland and other emerging destinations. India is the destination of choice for many companies seeking to outsource technical functions. A Gartner survey found that 70 percent of businesses with plans for largescale outsourcing were planning to outsource to India. The Giga Information Group expects oursourcing to India to grow by 25 percent this year alone. Indian outsourcers have been cited for both cost and quality benefits.

A "Shore" Strategy: Foresight 

The disappointing outcomes of many forays into CRM outsourcing are often the result of approaching outsourcing in an ad hoc manner. Outsourcing doesn't mean handing off a function and forgetting about it, or parceling out projects one by one to low-bid vendors. To be successful at outsourcing, it's important to develop long-term partnerships with no more than a few providers. In a partnership, the two parties are clear about each other's needs and expectations, and work together toward a common goal.

Choosing an outsourcer demands all the care and due diligence you would put into choosing any other critical partner. Of course you will want to look for technical expertise. Capability Maturity Model (CMM) and People Capability Maturity Model (PCMM) certifications are good indicators of expertise, with Level 5 ratings indicating the most mature software and workforce processes. Another important factor is favorable cost. But it's equally necessary to find out whether the outsourcer has a strong management team, understands your industry and can work collaboratively with you. The company you select should have a successful record of completing projects similar to yours; you may even want to test them on a small, non-critical project before entering into a long-term agreement with them.

It's also a good idea to select an outsourcer that maintains an office accessible to you. Although you'll be visiting the offshore worksite (more on this later), you'll want to have account executives available to meet with in a more convenient location.

Finally, make sure the outsourcer intends to do the work itself, in its own facilities, and not to turn around and re-outsource it to another provider.

Structuring The Agreement

One benefit of outsourcing is that you can negotiate a more formal and accountable relationship than you can with your in-house staff. You should take advantage of this by specifying your expectations in detail. Spell out exactly what the outsourcer is expected to do, how well they are expected to do it, how the process is to be managed and how you will pay for it.

The scope of the agreement must be very specific. If the outsourcer is developing or maintaining software, do their responsibilities include stress testing and documentation? Who builds and tests the interfaces with other applications? If they are handling phone calls, which subjects can they escalate and which do they have to handle? Who provides the scripts and templates for agents to follow? What data should they be collecting about callers?

Performance goals are also crucial. How quickly do you want the outsourcer to turn around programming requests, and how error-free do you expect the code to be? For a contact center, what service level must they provide and what customer satisfaction scores must they achieve? If the outsourcer is hosting your application, what are the target response times? And most important, if they don't achieve their performance goals, how do you assess and collect damages? Enforcing a contract with an offshore service provider is somewhat easier if the provider is actually based in the U.S.

Management processes should be included in the agreement as well. How do you want the outsourcer to structure its organization? What kinds of management and progress reports do you expect to see from them, and how often? Do you want to set goals for management objectives that affect you indirectly, such as employee turnover? Do you need to require the use of naming conventions or call categories consistent with those used by the rest of your organization? Change control processes should also be spelled out. What are the procedures for putting new programs or procedures into production, and who has to sign off on them?

Finally, your agreement should specify how the outsourcer is to be paid. When you're not there to oversee the operation, a time-and-materials contract can be risky and uncontrollable, and will lead to arguments about how many resources a task should have taken. You're better off with a contract that specifies a fixed price per item -- whether that item is a programming module, an enhancement request or a call handled. Even paying a fixed price per week or month can work; enforcing your required service levels will ensure that the outsourcer devotes adequate resources to the job.

Partnership Is A Two-Way Street

The service level agreement is critical, but it isn't enough. Any agreement will run aground unless you hold up your end of the bargain, too. Problems and issues will arise in the outsourcing relationship, just as in any other relationship, and you need to address them as they occur, before they affect performance. Think of the outsourcer as if it were an arm of your own company: You've got to make the commitment to support it and provide the guidance and resources it needs to do a good job for you.

On your end of the partnership, you need both day-to-day management and executive sponsorship. The day-to-day manager must be available to act as a liaison to the outsourcer, transmitting instructions, resolving or escalating issues and setting short-term priorities. This manager is also responsible for monitoring compliance with the service level agreement -- for example, verifying that error-free code is really error-free. By contrast, the executive sponsor sets overall objectives and strategies, resolves high-level issues and commits appropriate resources to the relationship.

Don't expect to manage the contract from the safety of your own office. In spite of the wonders of modern communications, nothing beats face-to-face visits. You should tour the outsourcer's facility before entering into an agreement with them, then visit on a regular basis after the contract is in effect.

Both the manager and the executive sponsor should be sensitive to any indications that the outsourcing relationship is not working. Just because the outsourcer is meeting performance standards doesn't mean that everything is all right. It may mean that you've left something important out of the service level agreement! Listen to what your customers, internal and external, are telling you. If the people who are interacting with the outsourcer have complaints, you need to take these seriously and, if necessary, modify the service level agreement to prevent them from recurring.

Be Prepared

Before entering into an outsourcing agreement, you should have realistic expectations of its costs and benefits. For offshore outsourcing, labor cost savings are the greatest benefit. You can expect to save as much as 80 percent on labor costs. (While offshore labor rates may eventually be driven up, this hasn't started to happen yet.) You may also save on training costs, if your alternative was retraining your own staff on CRM technology. However, your overall savings are likely to be in the 25 to 40 percent range. Some of the labor cost savings will be offset by higher infrastructure costs -- for networks, servers and communications -- and by the costs of managing the contract.

Since most offshore outsourcers are operating at an efficient scale, your cost savings should be roughly proportional to the size of the project. In other words, it's just as advantageous for you to use an offshore out-sourcer for a small project as for a large project. For a small project, however, you'll need to be especially diligent in minimizing your contract administration costs.

Part of being realistic about costs is correctly estimating the resources needed for the task. Pursuing cost savings doesn't mean doing projects on the cheap. And while pay scales are lower in many developing countries, programmers and customer service representatives there can't work any faster than they do in the U.S.

One task that many companies tend to underestimate is system maintenance. CRM systems, like other systems, don't maintain themselves, Upgrades and new releases of software must he installed, bugs must be fixed and users demand enhancements. When you upgrade other systems integrated with the CRM system, the interface must also be modified. System maintenance usually requires a team of several full-rime programmers.

Managing The Project

For system development, the most successful approach is usually to hire a small onsite ream consisting of project managers, quality assurance specialists and technical leads, and have them work with the larger offshore development team. Since only the onsite team meets with users, and since you can't directly oversee training of the offshore employees, you must send extremely complete and clear specifications to the offshore development team. Most professional out-sourcers do not need a lot of time to get up to speed, as long as they receive all the appropriate documentation, so with good management you should be able to start realizing cost savings very quickly.

You can also rake a hybrid onsite/offsite approach to system maintenance, with an onsite manager and analyst setting priorities, controlling releases and assigning tasks to the offshore programmers. Or, alternatively, maintenance may be entirely managed offshore, with users submitting enhancement requests over the Web.

For contact centers, you may be able to delegate management of the written channels (e-mail, fax, snail mail, chat) to the outsourcer. Telephone service tends to be more critical, and you will probably want to manage that directly. With good communication links, you can request and receive real-time reports from the telephone system, and you can monitor telephone calls to make sure agents are following the procedures you specified.

If the project is large or complex, implementing it in phases is a good idea. You can get used to working with the outsourcer and iron our all the kinks in the relationship before charging full speed ahead,

For example, in a system maintenance project you might outsource the less serious fixes first, keeping the more severe problems in-house until the offshore team is up to speed. For a call center, you could phase in the work by sending them e-mail first, then overflow calls, then weekend calls or a particular queue, and finally all first-tier calls.

Culture Shock

With non-native English speakers, and sometimes even with native English speakers, communication problems may arise. After all, misunderstandings occur between members of the same household and coworkers in the same office, so it's nor surprising that people talking over long distances and across cultures, without the benefit of face-to-face interaction, will sometimes fail to understand one another.

You should be aware of the potential for misunderstanding, and rake steps to keep it from becoming a problem. Make sure the outsourcer you choose has trained its staff in communicating with American and European organizations. Employees who will be speaking to the public, such as customer service representatives, can be trained to speak slowly and clearly, so that unfamiliar accents won't get in the way of communication, and to use speech patterns like those of the people they are speaking with. They can also be trained to follow the standards of etiquette that prevail among the population they speak to.

You'll need to give specific instructions about how you want outsourcer employees to answer the telephone and address customers or colleagues. There may also be expressions or inflections you want them to avoid. In general, a customer calling an offshore call center shouldn't have to think about where the person on the other end of the telephone is located.

In systems development or maintenance, where fewer people are involved in communication, accents and speech patterns tend to be less of a problem. However, cultural gaps can still lead to misunderstandings. For example, people in different countries may have different expectations about meeting deadlines. Tomorrow" can mean several different things in different places. You need to be explicit about what your expectations are.

In today's difficult economic times, with businesses struggling to survive, you need foresight in order to grow and thrive. But foresight alone isn't enough; innovative measures are needed, too. While outsourcing CRM services isn't the right choice for every company, it can add a powerful boost to productivity as long as it is instituted, implemented and managed with care, Taking the time and effort to fully develop your outsourcing plan before putting it into effect can move you from foresight to foreshore.

Richard Earley of Covansys Corp. (www.covansys.com) has been developing and delivering integrated solutions for over a decade and has a history of experience in enterprise development, marketing, sales and operations/practice management. Originally operating as a management consultant for large call centers, he was then involved in the early adoption of CRM applications and business telecommunications, developing and operating customized programs for government, health care and call center markets. Earley subsequently joined an international consulting firm where he has filled many roles including director of the National CRM Practice and is the moderator of the Any Answers discussion forum (www.crm-forum.com/anyanswers), a source of information written by CRM professionals for CRM professionals.

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