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Self-Service vs. Outsourcing: |
M A Y 2 0 0 6
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 Alan Winters, President, The Winters Group |
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As customer service organizations continue to look at ways to reduce operational costs, drive greater productivity and enable users to help themselves, a growing number have made adoption of customer self-service a key priority. At the same time, in terms of cost reduction, the economics of outsourcing – whether offshore or nearshore – remains compelling, especially in geographies such as India and the Philippines, where labor costs remain significantly lower than in the US, Europe or even parts of Asia such as Korea. With businesses looking to do more with less, a key challenge remains: can you achieve cost savings while maintaining (or even enhancing) customer satisfaction? With more and more consumers embracing self-service applications like online banking, e-commerce, and blogs, the self-help model has moved into the mainstream, as discussed in prior SSPA News articles (see “The Return of the Next Big Thing,” Allen Bonde, SSPA News, October 2005). Yet, can you make up for the potential loss of customer “intimacy” if clients are helping themselves online, or chatting with other users in a forum, rather than interacting with your agents? And if you outsource, and another company is answering your phones (or email or chats), do you face the same risks? And what about political issues – is it more acceptable to replace staff with a support portal vs. an offshore call center? Self-service and outsourcing are in a number of ways two answers to the same problem. And in most cases, both approaches will play a role in your multi-channel support delivery. How to choose each approach, provide visibility into performance and effectiveness, and manage customer expectations is key. So is understanding the drivers, impacts and potential pitfalls of both models. What to Outsource…and Unintended Consequences Outsourcing, the process of taking all or part of your operational functions and paying a third-party vendor to perform them, can be a positive experience for both the organization and the end customer – if it is done for the correct reasons with mindful thought, action and follow-up. Cost reduction alone cannot be the driving force behind outsourcing. In fact, there are many other factors to consider in order for an organization to be ready to go through this process. Some key ones are political issues (both internal and external), as well as how to best manage your vendor and ensure accountability. In fact, cost savings may be partially offset by the team structure needed to manage the vendor on both an operational and contract basis. The question of what to outsource is perhaps the most significant question to consider. In a way, outsourcing is a form of “lending” your customers to a third-party service provider. Do you want to lend all of your customer contacts, or just certain ones? Is it the low-value, high-cost-of-service contacts? How about the customers that are consistently late in paying their bills? Or is it the ones that contact you at a higher rate then the average? At the same time, a number of outcomes – some unintended – may also result from this approach to customer service. One critical issue is the potential negative impact on customer satisfaction, when certain clients feel like they have been pushed off to an “outsider” who (figuratively, if not literally) does not understand them. Other include:
The Role of Self-Service We believe self-service is an alternative to accomplishing some of the same goals of outsourcing, although the payoff may occur more gradually. Like many technology-driven innovations, the growth of self-service is a result of both consumer demand (“pull”) and business goals and initiatives (“push”). Consumers, who pay their bills online or check-in at the airport at a self-service kiosk, are much more likely to try online support or embrace an employee portal at work. Within customer support and IT organizations, we have seen self-service models, along with new Web standards and on-demand software delivery, powering a new focus on “CRM v.2” applications (see “Is CRM Dead?,” Allen Bonde, CIO.com, January 3, 2006). When deployed correctly, these models put the customer “in the middle of the process” and can deliver significant benefits for users and the organization. Various studies have shown that answering a question online can cost between 4 to 40 times less than in the call center or help desk, and in some cases even generates higher customer sat scores. But just as outsourcing is not a “one size fits all” proposition, not all issues or all customers can be served via self-service. And then there is the issue of losing touch (or even becoming commoditized) if your Web site becomes the primary point of interaction with customers. Fortunately, with an investment in customer analytics, the active deployment of surveys and feedback forms, as well as the ability to track question or chat logs, there is a potential for self-service solutions to actually deliver greater insight than other channels. Two Answers, One Solution Both outsourcing and self-service strategies are derived from the same basic premise: how to drive costs out of the business and provide consistent service. However, both don’t have the same longevity. With outsourcing the organization can see the cost benefit almost immediately, but later may experience issues with consistency of service, loss of customer insight or even lost sales opportunities. Whereas with self-service, it may take longer to implement and therefore the payback is longer, but the longevity of the benefit is well worth the time. At some level, self-service appeals to every stakeholder. You give customers the choice of their preferred contact method and you can drive down your call handling cost by providing more tools for customers to serve themselves. From a customer impact perspective you can actually experience up ticks in customer satisfaction through higher FCR, increased confidence in service, and even greater customer insights. While quick-wins like posting an FAQ or enabling online password reset bring immediate benefit, an issue to consider with self-service is that adoption can be a long time in coming. Customers have to get used to the idea of helping themselves (of course some never will), and need to have faith in the technology and the answers they are getting. The best example to illustrate this point is when the banking industry implemented ATM’s as a new customer interaction channel. When the ATM machine hit our street corners, our first reaction was “no way,” I am not going to trust a machine with my cash transactions. More than 25 years later, we cannot live without them. Regardless of the actual channel or device, it’s a safe bet that outsourcing and self-service will have a place in customer service, and in fact in our global marketplace. While each can provide cost savings, they can also have very different impacts on you and your customers. For those tasked with optimizing their service delivery, who are considering either one, we recommend looking at potential benefits and pitfalls – and how you might implement these two options, to help achieve both near-term and long-range business objectives. ................................................................................................ About the Authors Allen Bonde is the SVP of Strategy & Marketing at eVergance (www.evergance.com), a management consulting and systems integration firm focused on CRM optimization and Web self-service. Prior to joining eVergance, Allen was the founder of strategic advisory firm ABG, Inc., and a consultant and practice director at McKinsey, Extraprise, and the Yankee Group. Alan Winters is the President and Founder of The Winters Group (www.thewintersgrp.com), a customer care consulting firm focused on helping companies realize the hidden value in their contact center functions. Prior to forming The Winters Group, Alan was a customer support executive at Express Scripts and Sprint.
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Comments? Suggestions? We would like to hear from you. Please email the editor at sspanews@thesspa.com. |
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©2005 SSPA