Outsourcing offshore without getting burned. (Outsourcing).

Not too many years ago, the idea of outsourcing customer service seemed fairly risky. Using someone else's employees to handle key points of contact -- surely customers would notice a difference in quality between dedicated employees and hired guns. In addition, there were concerns about basic logistical issues, such as systems integration and call allocation.

Over time, these concerns were satisfactorily answered and contact center outsourcing became an acceptable option for many companies. Outsourcing now accounts for about 12 percent of the total customer care market, a statistic that has remained stable for the past few years.

A new trend is emerging, however, which seems even more risky and exotic -- offshore outsourcing.

An increasing number of companies are farming out customer care services to countries such as India, the Philippines, Northern Ireland and Barbados, which raises additional concerns. Can developing countries supply the necessary infrastructure to support state-of-the-art contact centers? Will American consumers react negatively to unfamiliar accents and idioms? Will foreign governments change the rules and put companies' investments at risk?

Despite these concerns, an increasing number of North American companies are choosing foreign suppliers to handle at least a portion of their customer support. These companies are motivated by a variety of factors, including coverage, cost, quality and capacity.

Coverage was initially the most important issue for many organizations. Consumer demand for service accessibility has accelerated during the past 15 years, to the point where around-the-clock service is no longer a novelty but a basic expectation. To meet this demand, companies in the airline, banking and computer industries pioneered a "follow-the-sun" strategy, opening contact centers in widely spaced sectors of the globe to ensure continuous, overlapping coverage. Other industries have followed suit, increasing the demand for suppliers in complementary time zones.

Cost savings, while not originally the primary motivator, have made foreign outsourcing increasingly attractive. Labor and overhead costs for agents are substantially lower in emerging economies than in North America, although the savings can be mitigated by higher telecom, infrastructure and internal management costs. Even raking these additional expenses into consideration, many companies have realized significant savings when using foreign outsourcers.

A more surprising motivator is quality. Foreign contact center agents have shown they can match, and in some cases exceed, their North American counterparts in key productivity and quality measures, despite not speaking English as their primary language. One reason is because foreign suppliers are able to attract extraordinarily well-educated and qualified agents, particularly for technical support positions. India, for example, graduates 100,000 engineers each year, many of whom are available and willing to work as support agents. Contact center agents in Asian countries are typically college educated, highly respected and paid well relative to the country's standards. The average turnover rate in North America is in excess of 30 percent -- more than twice the rate reported by many Asian outsourcers.

The issue of capacity is closely related to quality. With more than 70,000 contact centers in North America, qualified agents are often difficult to find and retain. In some regions, the available labor pool is nearly tapped out -- a situation that is unlikely to occur for some time in countries such as India and the Philippines, which have large populations, high unemployment and a large pool of qualified workers.

Despite these advantages, offshore outsourcing is clearly not for everyone. The complexity of setting up operations with a foreign supplier can be significantly greater than using a domestic company. Issues of routing, scheduling, systems integration, human resource management and vendor relations all become exponentially more difficult when dealing with a supplier halfway around the world.

That said, companies can keep a number of best practices in mind as they navigate the various stages of the process, from vendor selection through maintenance and evolution of the relationship.

Vendor selection. Create a multifunctional taskforce to review and vote on RFPs, including representatives from such areas as IT, finance, legal/tax, operations, quality and training. When the top bidders are identified, members of the taskforce can meet with their supplier-side counterparts, exchanging site visits to establish mutual credibility and a positive working relationship. The selection process should also include hiring counsel in the countries of top bidders to advise on tax and legal implications and to review the suppliers' books.

Negotiation. Consider a multiyear contract rather than the one-year renewable term that is commonly used with domestic suppliers. This sends a signal that your company is fully committed to the relationship, giving the vendor more freedom to invest in adaptations that will make the partnership a good fit. The contract should be tempered with a strong "kicker" tied to quality standards. Clear measurements and targets should be identified, with penalties if the targets are not met by a specified date, and a cancellation option if they are repeatedly missed.

Pre-implementation. Both companies should agree on hiring and training criteria before hiring begins. To ensure consistency between in-house and outsourced service quality, help the vendor replicate your company's recognition and reward programs with the agents it assigns to your business. Consider flying a high-level executive to the vendor's site periodically to recognize top performers.

Measurement and reporting criteria should also be clearly spelled out in the pre-implementation phase. Productivity and quality variables should be identified, and the method and frequency of reporting specified.

Implementation. Assign an "away" team to spend from two weeks to three months with the vendor during implementation. This team typically includes members of the original selection taskforce, ensuring continuity in the process and internal commitment to the selected vendor's success. The away team reinforces the cultural fit, solidifies contacts and processes, shares best practices and acts as a conduit for resources and communication. It may also test agents as they come through training and recommend early-stage adjustments to training content and focus.

Before going "live," it is advisable to include a short rest period using dummy contacts. During this period, agents' responses can be evaluated and shared with thc vendor, and necessary changes put in place.

Steady-state. Assign a dedicated relationship manager -- preferably someone who was on both the selection team and the implementation ream. Plan frequent, formal communications with the supplier's project team, including weekly scheduling calls and quarterly face-to-face meetings.

Research should be conducted periodically to ensure service consistency between offshore and domestic support. Research studies may include mystery calls that compare agent responses between contact centers, content analysis of customer feedback to determine if accent or usage problems are evident, analysis of call monitoring recordings, and transaction-based customer satisfaction surveys.

Evolution. Consider migrating customer contacts to the supplier in small steps, by incrementally expanding contact channels, complexity and/or volume over time. For example, many offshore vendor relationships begin with e-mail support before adding chat or voice.

Keep the vendor fully informed about new products and features long before they are rolled out. Customer support for new products and features should be tested with in-house agents before being assigned to the outsourcer.

Finally, be open to advice and information from the vendor team. They understand the challenges of offshore outsourcing better than anyone, and are just as committed to the project's success as you are.

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Peter Gurney is managing director of Kinesis (www.kinesis-CEM.com), a developer of customer experience strategies. Peter has worked with dozens of brand name companies, including Expedia, E*Trade, Westin Hotels, Starbucks, Microsoft and Bank of America, among others. He can be reached at [e-mail]. Bill Price is founder of Driva Solutions, a strategic consulting and operational implementation firm. A contact center veteran, Bill has more than 22 years of service industry consulting and operations expertise, most recently at Amazon.com as the company's first vice president and general manager of global customer service. Bill can be reached at [e-mail].