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The Hidden Cost of Outsourcing
Alien54 writes to tell us CNNMoney is reporting that outsourcing may not be as big of a bargain as some might think. From the article: "With consumers enjoying more choice than ever before, evidence is growing that great service is essential for long-term customer retention. To cite just one example, a recent survey of pension policyholders in the United Kingdom found that 75 percent would leave their current provider if they experienced bad customer service."
To cite just one example, a recent survey of pension policyholders in the United Kingdom found that 75 percent would leave their current provider if they experienced bad customer service."
If this were true, Dell would not be the number one mfg of computers after losing 75% of their base. How many people here have called tech support and gotten someone with a thick Indian accent named "Steve"?
The problem (if you can call it that) is that Dell offers decent CPU's for cheap. Rather it be for the home or business, people are more willing to take the chance on a computer that's $200 than their competitors.
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
The article is terse, inapplicable to those many markets which are almost entirely price-sensitive, and ill-supported. Pension policies don't really compete on price; they are about service and ROI.
And people often say that they will take their business elsewhere, but then stick to the cheapest vendor when push comes to shove. Self-report is not the best indicator of actual behaviour, especially for a hypothetical.
How about intellectual property? Spend millions of dollars in the U.S. on research and development and then outsource the manufacturing to China and then wonder why the Chinese develop a very similar product. Duh!
I remember a few years ago around 2003/2004 reading article after article that IT in USA is finished all the jobs will go to India, CHina and other. But here we are few years later and the IT job market is pretty good, atleast I think so. Its probably still tougher for somebody with no expierence than it was around 1999/2000. But I am no longer afraid I won't have a job in the IT sector... atleast under current conditions.
Outsourcing does not mean, bad service. It's about getting a service from abroad with most probably lower costs. It's evident that same quality of service taken from India, or China is a lot cheaper than the one taken from US or some other European countries. Companies should be more selective on outsourcing, then they won't lose customer due to bad service, but in no way there's a direct connection with outsourcing and bad service.
The author is thirty years behind if this the first time he's run across this idea. There have been shitloads of studies done over and over again that show that most (i.e., >50%) people leave/switch because of shitty service from their existing supplier/provider/brand/etc.
It's a good thing that inhouse customer service can't be terrible!
Seriously, this just means that you have to be careful who it is who provides your outsourced service just like you'd have to be careful who it is who provides your inhouse services. The big difference is that outsourced service contracts are generally easier, quicker and cheaper to terminate and replace if they're don't meet the agreed standard.
"a recent survey of pension policyholders in the United Kingdom found that 75 percent would leave their current provider if they experienced bad customer service."
People say they will take action all the time. How many actually do? Well they do take action. They tell all their friends how shitty "the company" treated them. They go into detail about how "the company" doesn't care. And then next money they send "the company" a check for the bill.
Replace "the company" with practically any business name.
This article is evidence that its best to let free markets decide the value of things such as out sourcing. So long as consumers have choices, they'll be free to make choices based on what they value. In this case, people don't like the out sourced solution and they are moving to the competitors product.
This is all a lot more neat, clean, and effective than a heavy handed reponse from a clumsy government. Consumers always win when they have an array of free and voluntary choices.
From the article "A 2005 Gartner study predicts"
Okay, I understand Slashdot seeks subjects which spur debate but this one is on the edge. First this is a study which is "predicting." That's the first clue that something is wrong about this, you can make stastics say anything you want. But the real problem here is that they automatically assume that outsourcing will result in a bad experience. Who says? You can have a bad experience with a customer service person (who is American) and just doesn't give a damn. There is no golden rule that the people working for you have any more motivation to help you than an outsourced worker. The article quotes human nature as why they won't identify with the organization...bull. This is nothing but a hyper-general statement to support their conclusions. (Aside from the words likely to, tend to, which are all assumptions.)
The real problem is not that there are companies which are outsourcing -- it is that companies are not caring whether the service rendered is good enough to begin with. If you set a level of expectation for anyone working on your behalf and follow through to ensure that level is being reached it won't matter whether you have employees working at home, in the office or in another country. Far too many companies simply outsource and say do it without monitoring the level of communications to make sure they are doing it right. Saying that outsourcing will automatically cause problems is just an over generalized conclusion.
The one point they did get right though is that it is silly just to compete on price alone. That is actually true, however, they are trying to make this point by generalizing on something which may or may not be true and by missing the real point of customer service.
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There are other hidden costs to offshoring deriving from cultural differences and communication problems. I was involved with three software development projects that had been outsourced to three different firms in India. In only one case was there a marginal win, despite net billing rates that were perhaps half of what we would have paid for domestic IT talent. Much of the cost overruns arose from miscommunication backed by a desire on their part to not appear incompetent. The engineers would come here for several weeks to gain understanding before returning to India to work on the project. Despite this, I found out there were fundamental knowledge gaps that should have been cleared up in the first day, let alone two weeks after they had returned to India (and billed us for two weeks of apparent head-scratching). In my opinion, the only way to make technical offshoring work is to make it onshoring, by opening a local office in the country where the talent lives. I doubt there is a similar solution for offshoring customer support.
Clearly you don't have any experience of the postgraduate environment in our universities. Half of the brightest students are Chinese, and they take their doctorates and fantastic brains home with them.
They don't need our or anyone else's stinking IP. You've been reading too much western propaganda.
And by the way, "Intellectual Property" is a term created by lawyers for the purpose of getting the different issues all mixed up so that they can profit from "expertly" separating them again. Don't fall for it. Talk about copyright, patents, trademarks and trade secrets separately.
IP == Internet Protocol
In some processes, we witnessed huge improvements in productivity and turn around time - with huge improvements in customer experience and cost savings far over anticipated. Feedback has come from excellent customer response, internal recognition etc.
Moral of the story - any change needs to be properly planned and executed. Outsourcing itself does not imply reduced levels of customer service - bad planning and irrational budgeting does. The process reengineering that goes with most outsourcing work can very often lead to very real gains in productivity and customer experience.
But since this is nothing new and Dell continues to sell it also means that either this does't happen to a lot of people or people just don't learn.
I buy from local shops and NEVER call in with a problem. I put the defective product on the counter on a shopping day (thursday evening or a saturday) and speak loudly about how I want it repaired or replaced. Works wonders. Over a phone they can and will try to tell you that a brand new HD is supposes to show badblocks or that a single wrong pixel in a lcd is acceptable. It is offcourse. If your stupid.
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This is the thing nobody apparently gets.
It is an utter waste of time to study scenarios where customer orders product and pays for it, vendor ships product, customer receives product, end of story.
The _important_ metric is always the worst case scenario where the customer ends up falling in between the cracks in between different departments within a large organisation, nobody the customer contacts has responsobility, nobody has authority, nobody has motivation, nobody has their ass on the line if it escalates.
Anyone can sell acreage on the moon, you judge a company or business by how badly its worst mistakes fuck customers over, and you place the responsobility for that exactly where it belongs, on the directors conference table, and let it run down right through the company.
The reality is the bigger the company the more likely its reaction to a fuck-up being escalated through inaction is to undulge in ever more psychopathic behaviour.
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Does that mean that good customer service can only come from the United States? That seems fairly sensationalist and egotistical.
A well-run call-center gives good customer service. No more, no less. Bad call-centers exist all around the world. Yes, including the U.S.
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Actually, there really isn't much of a correlation between poor service and outsoourcing... Wordt customer service I have seen in over 5 decades was a local TMobile helpdesk.
There ARE, however, very real hidden costs to outsourcing that make it a difficult prospect at best; poor customer service just isn't one of them.
The worst is managing the relationship of your US staff and the outsourced staff. I have seen numerous examples of subtle or even outright sabotage of the project by the US staff.
One of the most successful outsourcers in the United States has a "core values" program for it's US staff...the ability to maintain political neutrality while acting as a good will ambassador is a key core value.
Western and Hindu culture are very compatible if you take care to manage the intercultural references, whch can cause major difficulties. For example, many Hindus will say "You are correct" to acknowledge they are listening. What they MEAN is "OK" or "Uh huh", but Westerners often take is as arrogance or judgmental.
Worse yet, Westerners take it as meaning that their point is understood, and it's culturally difficult (impolite) to ask for clarification if the other speaker has gone on to a new point. Its is very important to make sure what you think you are saying is actually what they are hearing.
One minor point on an underlying theme of these comments. Believe it or not, institutional economic analysis shows that India isn't a serious problem for US jobs, not like China is, anyhow. The reasons range from cultural differences (India is highly conservative, for the most part) to the fact that the level of convergence is much higher, as well as a much higher integration of Indians into American culture. I suspect the reason India is getting such favorable treatment from Bush is that they are viewed as a "client state" of America, not an independent nation, probably for good reason.
if the company has to rehire someone with a higher salery... the company is also going to have to play for the recruiting and training -- if I'm not mistaken these are very expensive costs; last time I heard arround $10-15k.... Also, the "downtime" where there is no employee could cost the company $$$$$$. Not very good business decision for the company..
Sorry to reply twice... just thought of a second point.
I used to work for a "Big 6" professional services/accounting firm. I can't even tell you the number of SAP or PeopleSoft implementations this firm bungled with a staff of 100+ on a project all billing at about $200/hr.
Plenty of high priced consultants screw up too.
To make any kind of large scale project succede, you need to 1) look for - and be willing to pay for - good quality talent and 2) watch them like a hawk. Have them deliver early and often, and monitor their deliverables. Yank them out if the project gets into trouble, don't wait until you've sunk two years and $50 million in before you find out they are incompetent.
India is seeing something like what we did during about 2000. They are seeing an extremely rapid influx of money into IT, and phenomenal growth in that job market.
.com boom -- lots and lots of people who absolutely should not have been hired to do what they are doing are working in the area, and there is a large chunk of the market that is unskilled. Remember all the horrible, awful, terrible websites made by overpaid people who barely knew what they were doing? Yeah. Think of the same thing, but in a different country.
Not surprisingly, this is having exactly the same effect as it did in the United States during the
India will straighten up their act, the same as we're doing. People and companies will start building reputations, the growth will slow to stability, etc. Not every Indian comp.* Usenet poster will be clueless. It'll just take some time.
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