Within the last two years, a Chennai-based technical support startup and two Bangalore-based technical support startups managed to get Venture funding to rapidly expand their technical support services. While large IT outsourcing companies such as Accenture, Wipro and IBM provide technical support outsourcing services to their customers, large organizations such as Microsoft and Dell have started their own captive centers to provide technical support to their customers all over the world.

This trend clearly shows the value proposition for technical support outsourcing services. However, companies are starting to realize the challenges that result in hidden costs and overheads. These challenges, when not planned for, can drastically reduce the cost-savings.

In this article, we will discuss the challenges we’ve discovered during our interviews with technical support vendors and captive centers.

Cost challenges

The direct cost involved in technical support services is projected to increase by an annual rate of 15-to-20 percent. The major factors which increase the cost of services are that of the raising costs of resources and real estate. Vendors, seeing an increase in sales costs, will then pass on this increase to their customers.

 

-- Resource cost escalation

Technical support resources need a higher level of technical aptitude opposed to that of BPO and customer support services, causing the technical support and IT Services vendors to compete for the same pool of talent. This pool of talent is only 10-percent the size that of the BPO/customer support services pool of talent. Furthermore, this pool of talent size is reduced as the resources require the ability to clearly communicate to customers and to have an attitude/mindset for wanting to resolve customer problems. These two factors result in higher resource cost escalation compared to other outsourcing services.

-- Real estate cost escalation

Real estate prices in various parts of India have been increasing in the last few years due to the IT boom. In 2005, more than 6 million square feet of office space was prepared for occupation in different parts of India. The industry predicted that even 6 million square feet will not meet this market’s demand. Real estate rental prices are showing an annual escalation of 10 percent.

-- Sales cost escalation

Indian outsourcing vendors primarily sold their services with cost-savings as the unique selling point by hiring a junior sales force in the U.S. and augmenting the team with strong pre-sales teams in India. With the entry of companies such as Accenture into the off-shoring arena, Indian vendors are forced to invest in an experienced sales force in U.S., thereby increasing the overall cost. This increased cost is then passed on to the customers.

People Challenges

-- Recruitment of talented resources

It is extremely difficult to attract talented resources for the technical support industry. As mentioned in the previous section, companies hiring technical support resources compete with that of IT services vendors. In addition to the challenge brought on by competition, technical support requires engineers to work night shifts—which is not favored nor usually preferred by experienced engineers.

-- Attrition

The job pressure faced by technical support resources is highly compared to that of IT services. Technical support resources are constantly under pressure to resolve customer problems within their given time frames. Any reduction in customer satisfaction can be easily tracked down to these resources. A combination of job pressure and a high demand in the market for technical support resources has caused the annual rate to exceed the 20-percent mark.

-- Training

Training needs for technical support resources are distinctly different from that of IT services and BPO companies. They require a similar training program which combines technical training, spoken/written language training and cultural sensitization training. It is pertinent that vendor organizations determine the right training programs for their technical support staff.

Infrastructure challenges

-- Transportation

The public transportation system in most Indian cities is non-existent. The government has passed on the onus of providing safe night-time transportation to employers, therefore; requiring technical support centers to provide a daily pick-up and/or drop-off service to each employee.

-- Telecommunication

The telecommunication infrastructure in India has improved consistently within the last few years. However, network latency and service breakdowns are continuing to haunt the technical support industry.

Onsite challenges

-- Customer backlash

Outsourcing backlash sometimes causes challenges to offshore technical support due to the perception that jobs from countries such as U.S. and U.K. are rapidly moving to lower cost centers. The end users and onsite technical support staff tend to magnify these issues/mistakes committed by offshore resources. In addition, this adds to the job pressure for offshore resources.

-- Global management

As more teams are spread into multiple geographic regions, companies are being faced with the complex task of managing the diversified global workforce. Due to time zone challenges and immaturity of the global support industry, very few managers are properly trained or have the capability to manage resources.

-- Lack of planning

Many companies are jumping into the off-shoring bandwagon at a blistering pace without understanding the challenges associated with off-shoring their technical support services. Most companies have unrealistic expectations on cost savings and about how quickly they are going transition. Some companies, fearful of being left behind, have also started their offshore operations despite their lack of global outsourcing needs.

Conclusion
Global outsourcing is proving to be an irreversible trend. A future note would be that more companies will leverage off-shoring, despite the unique challenges associated with providing technical support services from remote locations.

This article is part of our effort to provide a high level of information to help companies understand, appreciate and mitigate the challenges associated with off-shoring technical support. In the past two years, Zinnov has extensively studied the trends, risks and best practices associated with off-shoring technical support services.