Can IP Technology Revitalize the Contact Center Outsourcing Industry?

Today CRM is at the forefront of every organization's agenda. But new FTC regulations in the U.S., and similar legislation pending in other countries, are turning the teleservices outsourcing industry upside down. New IP-based contact center technology options enhance the ability of outsourcers to comply with the new regulations. In addition, questions and doubts about whether a company's invaluable customer contacts could be successfully handled by an outsourcer often halt the process of considering outsourcing in the first place. In some opportunities, persuasion alone cannot overcome the objection. New technology also helps outsourcers to develop business models that address these concerns in new ways. In addition, the software-intensive nature of these platforms is opening up ways of doing business with their suppliers that are especially attractive to the outsourcing industry.

Prediction 1: Changing regulations will create technology churn in the outsourcing industry and will provide an opportunity for outsourcers to cost justify refreshing their technology infrastructure.

Compliance and Productivity: In the US the FTC mandates a maximum of 3% abandoned calls, and puts some real teeth in that by requiring caller ID and recorded messages so people will know who is responsible for the annoyance. It’s easy to comply with the requirement for a maximum abandoned call rate of 3%. It’s just hard to do it while maintaining the level of agent productivity that outsourcers have come to rely on for their business models. However, new dialers using the best algorithms can achieve agent talk-time as high as 51 minutes per hour while complying with the 3% abandonment maximum. With current technology, agent talk-time may fall as low as 26 minutes per hour with the 3% limit.

This may sound far-fetched, but it’s a very real problem. Most legacy dialers don’t do well with the 3% limit. They burn the 3% quickly at the beginning of the campaign, and then drop into one-call-per-agent mode. Then agent productivity drops through the floor, and labor cost per call goes through the roof. Only a few new dialers have updated algorithms designed from the ground up to minimize abandonment, to find and lock in the right pace quickly without using up the 3% allotment, and to adjust almost immediately to changes in the number of available agents.

It’s not hard to see the cost justification from this factor alone. But when the new technology also more easily blends outbound and inbound use, and provides some of the other advantages enumerated below, the case for a change is overwhelming.

Prediction 2: Insourcing and Co-Sourcing, two new outsourcing options enabled by new contact center technology, will fuel significant growth in the outsourced contact center industry during the next 12 months and beyond.

What is Insourcing?: Technology infrastructure located on the outsourcer's premises supports a contact center that is located on the customer's premises and staffed by the customer's employees, or by the outsourcer's employees under the direct supervision of the customer.

The primary benefit of insourcing is that it addresses the control and quality concerns that can otherwise prevent consideration of an outsourced solution for the most sensitive inbound applications. Of course, insourcing itself is not a new model. But insourcing with legacy technology requires a significant customer-specific capital investment that makes this approach economically unfeasible for many potential customers.

With IP contact center technology, an outsourcer can use one platform maintained and supported on its own premises to deliver contacts to agent desktops on the premises of many different customers. Since only one multi-tenant platform is required, no customer-specific capital investment needs to be cost-justified to get a project off the ground. Since distance-insensitive IP provides the primary means of transport, the ongoing communication costs are also affordable. The end result is that a solution strategy that was previously available only at the highest end of the market is now available to many more potential customers.

Insourcing is a proven way for large organizations to outsource their contact center infrastructure requirements as an alternative to building up their own expertise. If it can be cost-feasibly offered to SME enterprises, the same justifications that make it work for large companies will be all the more appealing to smaller ones who can less afford to develop their own contact center competences internally.

What is Co-Sourcing?: Technology infrastructure located on the outsourcer's premises supports a contact center staffed by a combination of customer employees located at the customer's premises and outsourcer employees located at the outsourcer's premises. Calls are distributed by type, by skill requirements, or by shift, or by any combination of relevant criteria. For example, premium customers and complex inquiries go to the customer's own employees, while more routine contacts are handled by the outsourcer. Or, the outsourcer provides overflow during the busiest times of the main shift, and provides all staffing for the other shifts.

Co-Sourcing addresses the control and quality issues by keeping the customers' own agents in the picture and routing calls to the agents best qualified to answer them. It also broadens and outsourcer's marketing opportunity by creating a load-sharing model that will appeal to some potential customers that would ultimately reject a fully outsourced solution.

Unlike insourcing, which has many precedents in larger contact centers, co-sourcing has been rarely implemented up to now. With traditional contact center technology, co-sourcing presents major challenges. If it can be implemented at all, it is usually not cost-feasible. However, IP-based contact center platforms support location-independent agents, which makes them an ideal environment for cost effective co-sourcing. Routing calls to one of several locations and transferring calls from agents in one location to agents in another are simply "business as usual" activities for these platforms.

Both insourcing and co-sourcing significantly broaden the market opportunity for outsourcers. The resulting increase in market size is the driving principle behind Prediction 1.

Prediction 3: Creative business models between outsourcers and contact center technology suppliers will help to significantly increase outsourcers' rate of adoption of IP contact center platforms in the next 12 months and beyond.

Understanding the potential benefits for outsourcers of a new technology platform is one thing; acquiring the capital resources to adopt new technology is another. Outsourcers have an embedded base of traditional technology that represents a large investment. How will they justify migrating to their platforms to IP?

Certainly access to new opportunities that cannot be served by the legacy technology is one good incentive. However, in these capital-challenged, risk-averse times, other ways to facilitate the technology transition may be needed.

Unlike its traditional hardware-based predecessors, current contact center technology consists primarily of software that runs on inexpensive commodity hardware. Therefore, the software companies whose business is the supply of this technology have options not available to traditional suppliers whose cost of goods for hardware is much higher. And here is the key point: when purchasing a legacy contact center platform, outsourcers had to invest capital based on their peak usage. Software-based contact center suppliers are now developing business models that allow outsourcers to pay instead only for their actual usage.

When an outsourcer makes an initial investment in an IP platform with an innovative supplier, he can acquire essentially infinite seat capacity that is only paid for when it is used. This can be a tremendous advantage. Imagine what it would mean to be able to bring hundreds of seats online for a three-month project, pay a reasonable fee for that specific usage, and then let those seats become dormant, incurring no further cost until they are needed again. This is a completely new business paradigm, and it is an outsourcer's dream, because it allows the matching of infrastructure costs and specific project revenues to an unprecedented degree. Technology infrastructure is no longer a capital burden on the enterprise, but rather an operating expense that is always covered by a profitable revenue stream.

Updating technology can revitalize the outsource contact center industry, because new IP-based contact center platforms have many advantages. They can put outsourcers in compliance with FTC rules without compromising productivity. They can make Insourcing and Co-Sourcing feasible and cost effective alternatives for prospects that are understandably reluctant to give up control of customer interactions. IP-based platforms also facilitate CRM application integration and the use of offshore agent resources, and enable universal access contact centers that are open to Internet and e-mail callers as well as telephone callers. Finally, since almost all the cost associated with IP-based contact center platforms resides in the software, the new technology opens the door for win-win scenarios in which outsourcers pay only for what they use. For these reasons, we have made our predictions with confidence. We invite you follow the progress of these predicted trends in the months and years to come.