Outsourcing Customer Service

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Outsourcing Customer Service

Executive Summary

The choice to outsource company’s relations with their customers is a choice many businesses are making. With the costs of labor more than a quarter of the rate an average customer service representative makes in the United States (U.S.), large companies are making the choice to offshore some, or the entire company’s customers service departments to other countries.

To many of these companies, the benefits are out weighing the issues relating to outsourcing in general. Breaches of security and customer satisfaction are some of the problems businesses are facing when making the choice to offshore. Are cutting costs more beneficial than customers losing faith in the products of the company?

Outsourcing Customer Service
Outsourcing is a business practice that is used around the world. This paper will describe the business case for a company to outsource some of its operations, and the risks that are weighed when choosing to outsource. What impacts those decisions have on the company and its customers will also be discussed. A Background on Outsourcing

Outsourcing customer service overseas involves hiring another company abroad to take over either some or the entire customer support department. Outsourcing has become a growing trend today. Many large American, European, and British corporations are eager to cut costs by off shoring customer service jobs to foreign firms for significantly lesser wages. Why Outsourcing?

Some of the objectives a company will accomplish by outsourcing jobs to foreign firms are cost savings, having 24 hour customer service, and a centralized service center. Each of these points does however come at a price, and will sometimes outweigh the benefits. Saving money has been the greatest reason companies have chosen to send the majority of their customer service departments to other countries. The thought of cheap labor is enticing to many businesses when making the choice to off shore. The average call center graduate, usually holding a bachelor’s degree (BA) earns 3,000 rupees a week, which is the equivalent of 67 U.S. dollars (Aspden, 2006). To facilitate the need to off shore, construction of office space is taking 10 months to complete instead of the normal 18 months in Bangalore, India. Each month over 40 companies make the decision to outsource Information Technology (IT), back-office and customer service departments to India, and other countries. To fight the onslaught of new business, India has setup second tier cities to handle the overflow of demand and establish call centers such as Pune, Kolkata, and Jaipur, just to name a few. These cities in India are growing quickly to accommodate the need for outsourcing, while slowly loosing the foothold on the market due to the increases in pay. With other countries such as China, Hungary, and the Philippines competing for lower wage work, India may loose almost half it’s market share by 2007 (Aspden, 2006). However, companies are finding out that there are hidden costs involved with the outsourcing of customer service. A growing trend of customer dissatisfaction is causing major corporations to reconsider the outsourcing of its services. In a recent survey of pension policy holders in the United Kingdom (U.K.) it was found that 75% would leave their current provider if they experienced bad customer service (Pfeffer, 2006). Mega corporations such as Dell, Capitol One, and JP Morgan all made an attempt to outsource customer service and all reversed course. Evidence is mounting that good customer service is pivotal in a company’s retention of customers. A 2005 Gartner study predicted that 60% of organizations that outsource customer-facing processes will see significant numbers of frustrated customers switching to competitors (Pfeffer, 2006). Even call centers in the United Kingdom (U.K.) have reverted calls back to their own soil due to customer complaints, with the majority of those...
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