What Arizona Reminds Us About Contact Center Outsourcing

Like a lot of people I have been watching the recent Arizona Immigration politics play out. My individual thoughts about government have little to do with partisanship or bipartisanship. Instead I am interested in what actually works in government and not what is compromised.

The whole immigration argument is fascinating as I have seen illegal workers in all parts of the U.S. doing jobs that Americans see as beneath them. You can get a tree pulled or fruit picked for pennies on the dollar by illegal workers which poses an attractive (and less expensive) alternative to a business owner. When the U.S. was growing and jobs were plentiful few complained . . . but the times are different now.

A Difference Between Illegal Immigration and Outsourcing?

In the contact center industry we have a whole different form of "legal" illegal immigration and it is called outsourcing. The same fundamentals exist for outsourcing as does hiring an illegal alien . . . cheap labor. The problem with outsourcing is that more often than not it results in increased total costs.

Companies that outsource their contact centers are lured by reduced transactional costs. However, in the rush to decrease costs they miss the fact that they are outsourcing their waste. This waste comes in the form of failure demand (demand caused by a failure to do something or do something right for a customer).

The fact that contact centers have failure demand of 25 percent and up makes outsourcing a poor solution. They miss the most overlooked fact in contact centers and that is that costs are in the flow and not the scale (transactional). Economies of flow are superior to economies of scale when it comes to business and contact center costs.

Cutting Costs Increases Costs

Contact centers have long been treated as a function or a piece and not part of a whole system. Technology gains have allowed outsourcing to explode with telephone lines and computers, but everyone is missing the real causes of costs. The system that contains the work design that is creating the failure demand is still in place.

Worse, most outsourcing contracts contain SLAs (Service Level Agreements), audits that support the thinking behind function and not system. The focus is on the number of calls, AHT (Average Handle Time) and service level as cost accountants lick their chops at the "savings." The result is the locking in of waste in the form of sub-optimization and failure demand.

Contact centers would be much better off if they realized they were part of a broader system that delivers service to a customer. In studying failure demand, I have discovered that systemic measures like failure demand are the result of the design of the work and often caused by a lack of end-to-end customer perspective (economies of flow). This is a missed opportunity to get to the heart of things that cause customer dissatisfaction and costs.

The insightful study of customer demand and deriving measures from customer purpose (what matters to them) provides us with the knowledge that contact centers need to redesign their systems. Outsourcing on the other hand, only provides centers with increased costs and a call to pass a law to prevent ignorance of the real causes of costs.

First published on Customer Management IQ