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| CURRENT SECTION :: News | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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Businesses seeking to outsource customer service operations have their work cut out for them, according to the latest research from Gartner. The analyst says 80 per cent of organisations looking to outsource over the next two years will fail, as part of a bodged attempt to cut costs. This is despite the rapid advance of customer service outsourcing, which is set to grow from $8.4bn in 2004 to $12.2bn in 2007. The offshore market will however remain a small element. However, companies eyeing offshore locations are being urged to act strategically, as many end up with hidden costs by neglecting a serious business approach. This translates into companies being surprised when they eventually pay more for an external service, than if it was provided in-house. Alexa Bona, director of Gartner research, said that the historically cheap process of outsourcing non-core processes carries some “significant risks.” “Historically, outsourcing has been seen as a way to reduce costs by getting others in cheaper locations, or with greater economies of scale to own the processes that are not core to the business. “Companies are encountering problems because they don't approach this strategically. They usually lack information to make meaningful cost/benefit analysis and often focus on inappropriate or unmeasureable service levels and cost metrics.” Although outsourcing can make savings of up to 30% for the most effective companies, Bona believes a poorly managed model can reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver on cost-savings. She said most companies fail to manage the customer service experience sufficiently and can sometimes lock their business into long-term outsourcing projects before trialing pilot agreements. High levels of staff retention at customer service outsourcing providers also poses problems, given the 80 per cent attrition rates - compared to an average of 19 to 25 % for in-house operations. Gartner recommends companies intending to outsource should start outsourcing onshore, where they can rehearse “a controlled and phased approach” before trying their hand at offshore outsourcing. But the analyst says hype around these type of outsourcing operations has exaggerated their true scope and market place presence. Evidence reveals that the market for offshore customer services is expected to grow just two per cent this year, climbing gradually to five per cent in 2007. Other research from Gartner indicates that the large Indian owned BPO firms which operate customer call centre services, will be acquired, merged or marginalised by the end of 2005. The move is expected to affect about 70 per cent of the country’s top 15 BPO operators, such as Infosys and WiPro. Infosys, which is India’s second largest software exporter, this week said it needs an extra 300 acres of land to house an extra 10,000 workers it recruited in the nine months before December. The company said that with the new land it intends to build an extended campus in software city, Bangalore, where it houses about 45% of its 35,000-strong workforce. See also Risks of IT outsourcing exposed Mar 8, 2005 Email this article Printer friendly page Previous Page
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