Eight in ten organisations that outsource their customer service and call centres will fail to achieve targets for costs savings, according to analyst firm Gartner.
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In addition, 60% of organisations that outsource parts of the customer-facing process over the next three years will see customers switch to rivals and find hidden costs that outweigh any potential savings they derive from outsourcing.
"Our research shows there are significant risks associated with outsourcing customer service," said Alexa Bona, research director at Gartner, speaking at the firm’s Customer Relationship Management Summit in London.
"Historically, outsourcing has been seen as a way to reduce costs by getting others in cheaper locations, or with greater economies of scale, to own the processes that are not core to the business. Companies are encountering problems because they don’t approach this strategically. They usually lack information to make meaningful cost/benefit analysis and often focus on inappropriate or unmeasureable service levels and cost metrics."
According to Gartner, successful outsourcing can achieve cost savings of between 25% to 30%. However, Bona warned that a poorly managed outsourcing deal can reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver cost savings.
She added that most companies neglect to manage the customer service experience sufficiently and often lock the organisation into long-term outsourcing contracts without conducting appropriate pilot testing.
To ensure successful customer service outsourcing Gartner recommends that companies create a customer-facing processes. It said that businesses should judge the supplier based on customer satisfaction or other quality metrics to measure and motivate outsourcers rather than "operational metrics" such as the number of calls handled by the supplier.
Users should also not underestimate the management time required to make an outsourcing relationship work, added Gartner.
Gartner has predicted that the worldwide market for customer service outsourcing is set to grow from £4.4bn in 2004 to £6.4bn in 2007.