The Contra View on Tech Support Outsourcing

6 Mar ’05

The Register has an interesting piece on the contra view that many businesses have of tech support outsourcing.  Money quote:

Shunting tech support to foreign countries is unpopular and a waste of time, according to new research.

Even though there is a "worrying" shortage of skilled IT staff in the UK, nine out of ten UK organisations are actively trying to keep their IT support in-house.

Of the 200 public and private sector organisations quizzed as part of the research by UK software house Touchpaper, fewer than three in ten outsource any part of their IT support service.

Just three per cent of companies would be prepared to shunt their IT support overseas even though it can often work out much cheaper.

I recently posted a similar piece on Go Daddy!’s views on outsourcing.

Finally, Gartner has recently published a study that suggests that the great majority of customer support outsourcing projects fail.  Quotes:

Companies that outsource customer-service functions to reduce costs may risk reducing their client list as well, Gartner Inc. warned today.

In fact, the Stamford, Conn.-based research company predicted that through 2007, some 80% of organizations that outsource customer-service projects to cut costs will fail. This is because outsourced centers often have high staff-attrition rates of up to 80%, and many companies neglect to manage their outsourced operations, according to Gartner.

"Companies are not looking at processes from a customer point of view and this is risky," said Gartner research director Alexa Bona.

Those that outsource internal functions such as human resources and finance don’t have the same level of exposure because problems are dealt with by their own staff, Bona said. But customer-facing processes such as call center services and tech support require specific training and management to prevent client loss.

The CNet piece on the study notes that Gartner concludes that outsourcing customer service typically costs more than doing it inhouse:

Outsourced customer service operations can cost almost a third more than those retained in-house, according to a new study by Gartner.

The research firm found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations.

Alexa Bona, research director at Gartner, said businesses often fail to take hidden costs, such as in-house backup support to the outsourced function, into account.

"The outsourced service is often more efficient, but then outsourcers need to make a profit too," she said.

Gartner also said 80 percent of organizations that outsource their customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing.

"If all you are trying to do is save money, you are not going to be successful," Bona said.

 

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