Inside the Mind of the Outsource Agency
By Colin Taylor, Founder & CEO
Anything you are doing today could be outsourced. This article is not about whether you should or shouldn’t outsource: that is a business decision only you can make. Rather this article strives to provide some insight into the outsource agency’s mind and what lies behind their contact delivery and rate structures. By being informed you will be better equipped in any future dealings you have with outsourcers.
All existing channels (calls chat and email) in any call or contact center could conceivably be processed by an outsourcer. Voice calls need only to be directed to the outsourcer by the client or their Telco (see the routing approaches below for more detail). Both chat and email can be delivered regardless of whether the application is local or hosted. If hosted they can be processed from any location that has access to a decent internet connection. To have the outsourcer handle email or chats only requires that they have licenses. Additional licenses may be required and can be purchased or assigned by the client. Some local applications of chat and/or email can require extension of the switch.
There are a number of routing approaches to deliver calls to an outsourcing that you may wish to consider:
1. Contingent overflow Calls only overflow from the client queue(s) once a specific threshold is met. This threshold could 5 minutes on hold, 21st call in queue etc. However if the call is going to be forwarded from the client queue to the outsourcer then a second line (on the client switch) will need to be available to carry this call. You will need to review the number of lines /circuits available and ensure adequate circuits. If not, this may pose some problems, such as not being able to forward calls as no lines are available. A second consideration is that this process may increase long distance charges. The client presently pays the 800 number fees associated with the incoming call. In order to send the second call to an outsourcer through this process a second line is required and a second long distance charge will apply to the call.
2. Allocation Routing Calls are routed to the outsourcer based upon a defined allocation. This allocation can be a fixed number such as 1,000 calls per day or a percentage of calls such as 10% of traffic. Geographic (based on Area Codes) and time zone routing can also be implemented. In all cases the routing can be set up, to be allocated in the ‘cloud’ by your Telco. The cloud routes these calls directly to the outsourcer and not to the client. As a result no additional circuits, lines or long distance charges would be incurred.
3. Time of day routing This allows a client to effectively shorten the work day in the in-house center and route calls outside of the defined hours to the outsourcer. For example if the in-house operating hours were 9 am to 5 pm all calls outside of this window could be sent to an outsourcer. This could include 7 x 24 operation, over a holiday or peak season. It could also serve to flatten out the morning demand somewhat. This consolidation of operating hours could allow the client to staff more agents during peak periods and handle more contacts.
4. Overflow routing This directs calls to an outsourcer only when all client lines are busy, engaged or when the specified in-house queue depth is met. This can increase the total number of calls handled by increasing overall queue depth.
Many of the above routing models can be used in combination.
Regardless of how the traffic is delivered to the outsourcer, time and effort must be devoted to training the outsource agency staff. The most common approach is to employ a ‘Train the Trainer’ model, where the client would train the outsourcer’s trainer who in turn would train the outsourcer’s agent. There is often a fee attached to this process and either the Trainer goes to the outsourcers site or the outsource trainer comes to the client location (both incur additional expenses). While the outsource agents are trained, there is generally a fee per agent training hour that is incurred.
Fee structures employed by outsource agencies tend to follow one or more of the following models:
1. Cost per minute. The outsourcer charges a set fee for each minute of time their agents are working on the client program. These rates are either based upon talk time (ATT); the actual time spent speaking with a customer or handle time (AHT); the total time spent working on the customer request. It is important to note that ATT can be supported by reports from the outsource vendor switch or from the Telco (as long as a dedicated telephone number is being employed).
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AHT is supported only by a report from the vendor switch and can easily incorporate wasted time if the agent so enters it. From a philosophical perspective to maximize revenue it would be in the outsourcers’ best interest to have the calls take longer as they charge based on time. Ethical firms would never do this, but like in any industry there are always ‘bad actors’ who will take advantage of the unsuspecting.
2. Cost per call. Under this fee model the outsource agency charges the client a pre determined price for each call handled. From a philosophical perspective to maximize revenue it would be in the outsourcers’ best interest to make the calls as short as possible to improve their profit margin per call. The same disqualifier as above can be cited here.
3. FTE- Or Full Time Equivalent. This model is essentially an hourly based model with the client paying a fixed rate for each hour an agent is working on the client program. Note this is based on staffed hours and not on talk time or handle time, so a 60 minute hour not 60 minutes on calls.
Outsourcers may also charge Set Up, installation, connectivity and Telco usage charges. It is essential that what the fees are and what they cover is well documented and understood. Most outsourcers can also have the Telco charges directly billed to you.
The classes of service that outsource vendors can offer would include: Pure Dedicated, Dedicated and Shared. In the pure dedicated model the agent works exclusively for the client. In the Dedicated model the agent works exclusively for the client when scheduled, but may also be scheduled to service other clients during other shifts. Shared service involves a pool of agents who take calls for a number of clients during the same shift periods, so one call for client A, then client B, then a client call etc. The more practice an agent receives, the better they will perform and the more efficient they will be.
Pure Dedicated service will generally allow the agents to be better trained employ and retain their training and knowledge and consequently perform better.
The Dedicated shift model can erode effectiveness as the agent also works periodically on other programs, not employing their client specific knowledge and training.
In the shared model knowledge and training erode quickest and quality tends to be the worst of the three options.
The costs for the classes of service range from Pure Dedicated being the highest to Shared being the lowest. Volumes and pricing structures also affect the selection of class of service.
It is simple to add a new client program to Shared service, but outsourcers will be reluctant to offer either dedicated model unless they are assured reasonable revenue (FTE model). To provide dedicated service without ‘volume guarantees’ on a ‘per minute’ or ‘per call’ basis reflects a risk that many outsourcers avoid.
Location of the outsourcer is also a factor to be considered. While offshoring to India or the Philippines is certainly an option it is not considered in this article. Within North America there are differences between Canadian and US outsource vendors.
Generally speaking US firms have higher fees than Canadian firms. A recent study completed by TRG identified Canadian outsource vendor prices (in Canadian dollars) ranging from $0.65 per minute to a high of $0.87 per minute, based upon 30 full time agents Monday to Friday. The US costs averaged 15% higher. Note that price would likely increase by 30% or more with fewer than 10 FTE (full time equivalents) requirements. With the currency conversion the relative difference can move on a daily basis. Of course the rates are also impacted by the Service Levels agreed to, the higher the performance standard the higher the cost to deliver the service.
The timing to implement a program with an outsourcer also needs to be considered. Calls routed from a client to an outsourcer require receiving line(s) at the outsource location. In the case of Shared service these lines may already be in place. However for dedicated service dedicated telephone lines will need to be in place. Telco routing changes will generally require 2-3 weeks to put in place once they are ordered. So 3-4 weeks could easily pass before these are in place. Some outsources will hold extra lines for such a situation and others will order them as required. If lines need to be ordered a minimum of two weeks notice will be required. If ‘Train the Trainer’ is employed with two week training, then 5 weeks can easily pass before the outsourcer will have trained agents available to take calls. While it is possible for an outsource agency to implement client programs in days (I know because I have done it) generally outsource agencies will look for 90- 120 days to implement a new client program. The largest variable in determining an implementation timetable is the length of the training program required.
Finally, outsourcing is known to reduce costs. What is less well know is that the costs for change or improvements generally go up, while the speed at which those changes can take effect slows down. This is because the outsourcer is usually very well disciplined on the floor and know how to optimize the calls overall operation. However, most service agreements or contacts are structured to reduce the costs of operating. Any changes that a client wants that reduces the call length, volume of calls, or other items upon which are paid, reduces the outsourcers’ revenues and also reduces their already thin margins of profit. Outsourcers also have overhead, bureaucracy and processes that are on top of those of their clients. This increases the work needed to identify, quantify, analyze, and implement changes to existing processes and procedures.
The result is that while outsourcing often does reduce direct contact center costs, it often increases the organizational costs and can reduce both the speed and flexibility to react to market and customer needs.
Outsourcing is successful most often when undertaken by firms and organizations that have an excellent understanding of their needs and those of their customers, and where the processes and procedures are clear, well documented. Outsourcing can be particularly desirable to organizations that have well known seasonal surges or those looking to extend access. Often outsourcing becomes the course of last resort as companies struggle to contain costs.
Failure to understand the outsourcer operating model and the combinations and options can ve both dangerous to the service you deliver to your customers and expensive as well.
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