January 2003
Outsourced CRM: Keep The Strategy,
Lose The Infrastructure
By Peter Allen And Mike McMenamin, TPI, Inc.
In the past several years, CRM has become one of the most promising,
compelling and confusing concepts. CRM — which on a high level encompasses
the thorough understanding of customers, how to interact with them, how to
make that process more efficient and how to satisfy and support them with
products and services — brings together business strategy, business processes,
business applications, IT infrastructure and supporting technologies and
platforms. In short, CRM puts customers in the center of the enterprise and
organizes around them, as it should.
Perspectives on what the concept of CRM means to an organization can vary
greatly. Some see it as a series of IT projects, some view it as a software
implementation and some as a technology deployment. Others perceive it as a
combination of business processes and technology applications that support
customers.
Because the supporting CRM technologies and processes are highly complex
and usually require intricate integration and implementation of major business
applications across the enterprise, they are prime candidates for outsourcing to
third-party specialists. However, while the contact center and the CRM
infrastructure in an outsourced CRM environment are managed by an external
third-party, the CRM strategy must remain in your control, not the service
provider’s. Control in this context means leading all actions taken by the service
provider. This is the only way to ensure that all parties — including your
company, its shareholders and customers — are duly served by the CRM
initiative. More importantly, it’s a requisite for survival. No one knows your
customer base better than you do. Likewise, you understand your overall
corporate strategy better than anyone else. With today’s down economy and a
plethora of companies vying for your customer’s attention, your ability to compete
and expand lies in tying your CRM strategy directly to your corporate growth
plans.
First, some important points to consider with an outsourced CRM initiative.
The Challenges Of Outsourcing CRM
A few years back, GartnerGroup referred to CRM as “the concept of moving
ownership of the customer up to the enterprise level and away from individual
departments. The departments are still responsible for customer interactions, but
the enterprise is responsible for the customer.” As this shifting of customer
responsibilities continues across organizations, it causes much debate regarding
the enterprises’ CRM strategy and approach. Likewise, when it comes to
outsourcing CRM, many internal obstacles exist.
The first obstacle many organizations face is the lack of a well-defined CRM
strategy that is clearly tied to its business strategy. When a clear CRM strategy,
which is backed by an executive champion who connects it to the company’s
strategic business plan, exists, the future direction of the organization becomes
clear. Because the organization understands what it needs to do to improve
customer support, service and information, it is often in a better position to make
decisions on whether to outsource. However, in most cases a well-defined vision
does not exist. The result is internal debate and confusion among the marketing,
sales, IT, finance and service departments about what needs to be done, who
should do it and how to fund it.
Because CRM directly touches the customer, it is an extremely sensitive and
highly strategic component. Often, the proposal to outsource CRM is met with
protests that equate to abdicating responsibility for the customer to a less
concerned, less knowledgeable third party. In addition, since CRM has many
different internal constituencies, achieving consensus on outsourcing CRM
functions is often difficult. However, when organizations begin to look at CRM as
a collection of integrated strategies, applications, platforms, technologies,
processes and people, they begin to see how outsourcing the CRM function can
help them meet their strategic, competitive and financial goals.
When Does Outsourcing Make Sense?
While current economic constraints may have changed business priorities,
customer satisfaction remains at the top of the list. Consequently, if enhancing
CRM systems and processes through alternative sources can improve customer
interactions, available customer information and customer service, organizations
have a strong business case for outsourcing. These business cases to justify
CRM outsourcing projects will require tangible benefits to customers,
shareholders and the business’ bottom line. In addition, as mentioned earlier, if
the organization does not have a cohesive CRM strategy (connected to the
business objectives, with executive support), these outsourcing proposals will
flail, and fail.
The decision to outsource starts with an honest assessment of a company’s core
capabilities versus those of an experienced CRM services provider. Can the
service provider deliver the systems and services better, faster, cheaper and with
less risk? Do you have the talent, experience, project management, business
process management, application, implementation and systems skills required to
get this done right? Does the service provider bring some extra value to the
transaction that you do not have or could not efficiently build? Do you have the
ability to select a service provider, put together a contract and effectively manage
the delivery of services to the business?
While the answers to these questions are some of the more common issues to
consider, a less obvious strategic value of CRM service providers is their ability
to function as a catalyst for change and action within the enterprise. They are
focused and often able to lead the organization to a destination they could not
get to on their own.
Aligning Business Plans, CRM Strategy And Technology Direction
A CRM strategy is ultimately an organizational roadmap connecting business
strategy, business processes and supporting technologies. It focuses on
achieving profit and revenue goals by improving how customers are treated,
supported and serviced across the enterprise.
The CRM strategy defines how the organization wants to treat and interact with
its customers (and its prospects). The CRM strategy defines the channel
strategy, the Web strategy and the intended utilization of the contact center. It
defines how customers will be segmented and how different segments will be
treated. This in turn feeds the technology strategy and plan, defining what
business processes, business applications and supporting technologies are
required. Frequently this leads to re-engineering dated business processes,
making account information available to customers and creating self-service
options online for customers. In many cases, this drives the need to integrate or
modernize existing systems.
While a CRM strategy can help create organizational alignment, executive
sponsorship can help move the business to take action. Without executive
support from the top, conflict, confusion and indecision will reign, leaving the
CRM strategy in limbo. A strong executive sponsor will be an advocate of
improving customer care to create competitive advantage and to ensure that
business case benefits can be achieved, driving the initiative forward.
In order to gain support across the organization, the executive sponsor and his
constituents should create momentum with early successes and incremental
improvements. Changes in processes and systems should also address pain
points. The ability to segment customers, interact with customers across multiple
channels, offload contacts and transactions to the Web and enable a one-to-one
approach to customers will drive improved customer satisfaction and improved
business performance.
Retaining Control Of CRM Vision And Strategy In An Outsourced Environment
If the enterprise is going down the right road and has developed a CRM vision
aligned with its business strategy, it does not contemplate giving up the strategy
component when it evaluates a CRM outsourcing decision. Instead, the
enterprise retains ownership of the CRM vision and business strategy, and uses
the outsourcing service provider to enable or implement parts of the strategy
through a major implementation, modernization or outsourcing arrangement.
In any outsourcing scenario, the organization must have some experience and
competency in sourcing relationship management to ensure that the leverage,
capabilities, benefits and business value contracted for are, in fact, delivered.
Most organizations have some knowledge and capabilities in this area, but most
would be well-served by enlisting the help of sourcing advisors to reduce risks for
major transactions.
The Sourcing Relationship Management Success Formula
The major competencies necessary to manage sourcing relationships are
performance management, financial management, relationship management and
contract administration (see Figure 1). The business needs to staff the
governance team with its own people and ensure they have the proper skill sets
to perform their functions. The governance team will help ensure the right work is
done right, that work performed is in compliance with the contract, that costs are
valid and that the company is ultimately satisfied with the services delivered.
Figure 1
Staying Connected To Customers
When business processes like technical support, customer service and telesales
are outsourced to a service provider, the organization must take steps to stay in
touch with its customers. This is often accomplished by retaining certain
functions that significantly impact the quality and tone of customer interactions.
For example, retaining oversight for portions of the training curriculum for new
customer service representatives (CSRs) can help address the desired “soft
skills” in interacting with customers. Providing periodic spot training to CSRs can
help address how to handle special circumstances that arise when delivering
products or services to the customer base. Finally, company approval of CSR
scripts or interactive voice response (IVR) changes, regular monitoring of
customer calls and retention of the responsibility for handling certain types of
problem escalations can allow the CRM governance team to retain control of the
customer interaction and experience.
Careful performance monitoring and measurement of the service provider’s work
(speed to answer, first call resolution, escalations, quality rating, etc.) will help to
improve the productivity and quality of the customer service and support
functions. Likewise, the improved use and analysis of customer information
should provide business intelligence about customers that can enable increased
sales, improvements in services and greater customer satisfaction.
Tips From The CRM Strategy Retention Front
Some organizations have done a stellar job at retaining their CRM strategy while
outsourcing the contact center, infrastructure and processing to third parties. For
example:
The ISP technical support contact center for a regional telecommunications
company:
• Provides scripts to its service provider for their CSRs to use;
• Monitors agent calls weekly, and service provider management monthly;
• Calibrates CSR quality assurance scores with the service provider;
• Visits the contact center monthly, meets with CSRs and recognizes top
performers; and
• Reviews detailed performance statistics daily.
The toll-free customer service product information center for a consumer goods
manufacturer:
• Visits the center every month and works directly with the CSRs;
• Personally educates the CSRs on new products, issues, product use, etc.;
• Monitors calls and conducts quality assurance calibration sessions with service
provider supervisors and CSRs; and
• Has problem calls escalated directly to its own customer care team.
The telesales organization for a nationwide PCS provider:
• Requires that the service provider connect to/use its systems; and
• Retains significant control over how new CSRs are trained (duration of training,
training content, testing before new agents get on the phone, etc.).
Retaining Key CRM Thought Leaders And Customer Care Experts
In most customer-driven organizations, CRM thought leaders and customer care
experts have developed and evolved. These people hold many different
positions, but they are often the champions of CRM, striving day in and day out
to serve the business’ customers. They often have unique backgrounds that
qualify them for this role, and they almost always bring a perspective from time
spent on the customer side. These people must be retained when CRM functions
are outsourced, and they can act as key members of the governance teams,
providing guidance and insights to service providers striving to improve customer
interactions and satisfaction.
Amidst today’s competitive marketplace, outsourcing CRM may provide your
organization with the pathway to competitive advantage. A carefully managed
outsourced CRM environment holds the potential of improved customer sales
and service channels. However, when leveraging a CRM service provider’s
expertise and capabilities, you will want to be sure to develop and retain a
comprehensive CRM strategy. After all, only you know where your organization is
going, and you will want to be sure your customers follow you there.
TPI, a sourcing advisory services firm, has advised over 500 sourcing
transactions with a total contract value of more than $300 billion since its
inception in 1989. TPI assists clients with the evaluation, negotiation,
implementation and management of IT and business process sourcing
transactions. Peter Allen, TPI managing partner, possesses global service
delivery, practice development, new services development, industry relations,
business intelligence, account planning, account management, sales and
marketing expertise. Mike McMenamin, a TPI project director, has more than 25
years of experience in business process outsourcing, IT outsourcing, Internet, ecommerce, CRM, ERP and application design, development and implementation.
[ Return To The January 2003 Table Of Contents ]
Separating Myth From Reality: How Outsourcing Can Improve ROI
And Lead To Greater Profitability
By Tom Antunes, Convergys Corporation
Outsourcing is a business practice that is often too easily dismissed because of
long-held misperceptions. We often hear that “it’s more expensive to outsource”
or that “customer management is too strategic to be handled by a third party.”
Myths like these have influenced many service providers to keep their billing or
customer care operations in-house.
Yet in the face of declining average revenue per user (ARPU), increasing
competition and significant incremental capital investments in billing and
operational support systems to launch new VoIP and 3G services, the practice of
“doing it all in-house” is undergoing re-examination.
The following offers a look at some of the more pervasive myths about
outsourcing, as well as compelling evidence against them.
Myth number 1: It’s more expensive to outsource.
Reality: It’s more expensive not to outsource.
Cost is one of the most important factors to consider when evaluating an
outsourcing offering. To make a fair comparison, a provider’s business case for
outsourcing should compare the projected total cost of ownership (TCO) of
outsourcing versus TCO if the work were to be done in-house. When performing
this comparison, all costs must be considered, including:
• Administrative costs, including human resources, taxes and facilities;
• Cost of capital (financial cost) including hardware, capital depreciation and
software;
• Future expenditures for development, implementation and migration costs to
develop a new solution in-house;
• Research and development for evaluating new technologies and value-added
services; and
• Consultants and other contract services.
Most providers find that with outsourcing, TCO is often less than keeping
operations in-house. Cost efficiencies can be maximized because outsourcing
provides the ability to add/subtract resources to match project and volume needs.
Additionally, since providers who choose to outsource share facilities and the
information technology infrastructure of the outsourcer, capital investments are
lessened, helping drive down the overall cost per transaction.
Myth number 2: Outsourcing decreases control over data.
Reality: Outsourcing puts you in control.
The provider will always own subscriber information and retain the choice of how
to service those subscribers. Nevertheless, the outsourcer must take ownership
of performance. To that end, service level agreements (SLAs) should be
established during contract development as control parameters for the
performance. Such parameters give the provider control by making certain that
the outsourcer maintains an acceptable level of response to both subscribers and
to the provider and by clearly defining the legal ramifications and/or penalties if
that response is not met. Common areas monitored by SLAs for billing
operations include system response time, system availability, bill timeliness and
completion of system enhancements.
Other parameters that can also help the provider retain control include
establishing and/or defining:
• Minimum staffing levels;
• Change management requirements;
• Control reports;
• Escalation process for issues;
• Release/version control measures;
• Data security; and
• System accessibility.
Myth number 3: I can do it myself, really.
Reality: You have more important things to do…really.
Historically, companies that attempt to build billing operations in-house are faced
with internal departmental competition for financial and human resources —
competition that can be magnified by internal politics, which ultimately delay
major project completions. Outsourced billing contracts circumvent this problem
through the development of milestones and timetables that document each
phase of the system development process with associated due dates, enabling
providers to maintain complete control of the entire process.
Furthermore, today’s tight economic environment requires providers to make
smart choices regarding how best to use available resources. By outsourcing
billing and customer care, a company can concentrate its knowledge capital on
growth strategies, pricing and product development and delivery issues and allow
the outsourcer to worry about investment in capital assets and items such as
training, quality assurance and staff development, which are included with the
most effective and sophisticated outsourced solutions.
Myth number 4: My outsourced system won’t change to meet my needs.
Reality: Outsourcing provides more system flexibility than in-house development.
Actually, it is often difficult for providers who keep systems in-house to stay on
top of changes in technology and industry standards. The cost of maintaining
such expertise alone can be overwhelming to those who choose in-house
development. Customization of the system can be difficult to support along with
the management of day-to-day operations.
Instead, outsourcers can maintain such expertise and put economies of scale to
work for individual clients. That way, each provider has access to a dedicated
staff of experienced developers whose core competency is to develop new billing
systems and applications to support corporate business and technology
strategies.
Moreover, the outsourcer’s annual spending in R&D “future-proofs” billing
products, minimizing the amount of system development required both at the
start of a provider’s billing relationship with the outsourcer as well as throughout
its lifecycle.
An outsourcing environment also allows providers access to a flexible migration
path for clients to expand billing and customer care capabilities without loss of
initial investment and greater expansion capabilities into new vertical markets or
support systems.
From Reality To Profitability With Outsourcing
In truth, there are many operational, technical and financial considerations that
must be weighed when determining the right approach to an outsourcing
relationship. Dispelling pervasive myths about outsourcing is only the first step in
helping providers move toward this operational choice. Ultimately, the decision to
continue with an in-house operation or to partner with an experienced outsourcer
will be based on the provider’s comfort level with the outsourcing company, its
technology and other factors. If you’re a service provider considering outsourcing
as an option, visit the outsourcer’s data center, more than once if necessary. You
must be comfortable with where your data will be housed and processed.
Don’t simply rely on what you hear during planned visits and sales presentations
when assessing an outsourcer’s solution. Rather, get to know the organization
that will be handling your account and try to gain a thorough understanding of
how the relationship will work on a day-to-day basis. You’ll need to know not only
how issues will be resolved, but also the people who will be addressing those
issues.
Get references, and check them. Talking to other clients cannot only help you
understand how well the outsourcer builds relationships, but will also provide
valuable insight on what to do, and what not to do, in building your own
outsourcing relationship.
In today’s tough economic times, many companies are re-thinking business
models — transforming existing operations to increase revenue and reduce
operating costs while ensuring customer satisfaction and loyalty. When all is said
and done, outsourcing billing operations can have many positive impacts on
these efforts, including helping to improve corporate earnings and achieve
sustainable performance benefits for the companies who choose to do so.
And that’s no myth.
Tom Antunes is vice president of Convergys Product & Industry Marketing.
Convergys Corporation, a member of the S&P 500 and the Forbes’ Platinum 400,
is a global leader in integrated billing, employee care and customer care services
provided through outsourcing or licensing, serving companies in more than 40
countries.
[ Return To The January 2003 Table Of Contents ]
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