Having managed a call center, I have always been a proponent of in-house call centers, but times are tough and they are changing. Every company today is looking for ways to save money without hurting sales and customer service. As the pressure on businesses to dramatically reduce costs intensifies, you need to look at domestic or off-shore outsourcing of some or all call center and data entry functions as a way to improve your bottom line. Companies are also outsourcing these functions more because they can avoid using capital for new order management and telephone systems.

Recently, one of our clients outsourced 300,000 phone calls off shore, resulting in a substantial reduction in costs. How substantial? This client's fully loaded internal cost per minute was $0.72, while a fully loaded off-shore cost per minute for this client is $0.42—and most of the customer service remains in house. Additionally, the client's 90,000 mail/fax orders cost only $0.15 per order: scanned, transmitted to Asia, keyed overnight and available on-line for picking and customer service the next morning.

Clearly, you need to look at the potential savings of offshore outsourcing. How should you approach doing this type of study?

Know your internal costs

In order to compare your internal costs to outsourcing, you need to identify your fully loaded internal costs. “Fully loaded” includes direct and indirect labor, occupancy and telecom costs. This needs to be converted to a cost-per-minute basis, which is how outsourcing will generally be proposed and invoiced. You may say that you can't control occupancy costs, however, there may be other uses for that space, if call center is outsourced.

Competitively bid out to multiple vendors

It goes without saying that you need to competitively bid the potential project to a short list of qualified bidders. This is the only way to get the lowest costs.

Formalize an ROI (Request For Proposal).

This should include the following items: A pro forma for your business, meaning the types and volumes of transactions (actual and multi-year forward projections); required services; service level standards for total call length, abandonment rate, and average call service level standards; request references and boilerplate contract; details about order management systems needed, systems integrations including e-commerce site, etc.

Decide what to keep in house.

In my opinion, you should keep your customer service internal. This gives you a way to monitor the service levels of the outsource company.

Ask other critical questions.

Among the things you'll want to know: whether or not the provider PCI credit compliant and certified; whether will you monitor your customers' calls; who are the company's references.

Come up with standardized questions to ask each of the references so you can compare their responses.

Domestic outsourcing has some advantages over off shore. For one, there may be an advantage in the area of English speech. However, I am greatly impressed with how well the Philippines has performed for some of our clients. Also, shorter travel distance means you can visit centers more often. Also, a person you hire via domestic outsourcing understands US culture, obviously. Another benefit of domestic outsourcing is that it keeps jobs in the USA. This may or may not be as much of a factor for you.

Of course, domestic outsource providers' costs will be higher than off shore, but that is not necessarily a dead end. We have one client, a major non-profit with a high average order, that outsourced 100% of its direct orders domestically while keeping customer service in house. They were able to successfully renegotiate with their domestic outsource provider so that the costs were not so widely different.