Most call centre outsourcing deals fail to achieve target, says Gartner

Many customer service call centres that have been outsourced to third-party suppliers are under-performing, according to a report...

Many customer service call centres that have been outsourced to third-party suppliers are under-performing, according to a report by analyst firm Gartner.

Of the organisations that outsource their customer service and call centres - including the IT systems - 80% will fail to achieve their targets for costs savings, according to a Gartner report.

In addition, 60% of organisations that outsource parts of their customer-facing processes 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 has shown there are significant risks associated with outsourcing customer service," said Gartner research director Alexa Bona, speaking at the firm's Customer Relationship Management Summit in London earlier this month.

"Historically, outsourcing has been seen as a way to reduce costs by employing IT workers in cheaper locations, or with greater economies of scale to own the processes that are not core to the business.

"Companies are encountering problems with outsourcing because they do not approach this strategically. They usually lack the information to make meaningful cost/benefit analysis and focus on inappropriate or unmeasurable service levels and cost metrics," she said.

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 fail 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 recommended that companies create customer-facing processes. It said 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 or contract work, said Gartner.

The analyst firm has predicted that the worldwide market for customer service outsourcing is set to grow from £4.4bn in 2004 to £6.4bn in 2007.

Read more on IT outsourcing