by Beth Bacheldor

When Offshoring Doesn’t Add Up

Mar 01, 2010
IT Leadership

A Michigan payment systems and printer manufacturer has realized that for its business, offshoring is no value.

I ran across an interesting story in the Detroit News about a company that had offshored its call center operations to Bangalore, India in the hopes of saving money and reining in efficiencies. I bet you can guess where this is going…

Turns out, the company’s leadership began to realize that offshoring its customer service wasn’t achieving the outcomes they’d hoped for. Now, not only does this company not offshore, this company runs its call center in-house.

The story (which can be read here) describes how Burroughs Payment Systems, a manufacturer of payment systems and printer solutions, discovered that since it began offshoring customer service calls to India, more of its machines were being returned and more engineers were being sent out in the field to fix problems. Those returns and house calls were offsetting any savings the company was gleaning from its cheaper customer service labor in its offshoring arrangement.

Moreover, the brand was taking a hit. So Burroughs brought its call center in house and staffed the center with employees who had first-hand experience building and servicing its systems. Now, according to the article, cost savings are 10 times greater than the cost savings it would have achieved offshore. Customer satisfaction is up, fewer units are being returned for repairs, and fewer engineers are sent to the field for fixes.

This may be one example, but there’s other stuff to back it up. Remember the study done by the Contact Centers of America (CCA)? If you don’t, here’s the blog. The CCA—which once again I want to point out is an organization formed specifically to bring jobs back to the United States and which provides customer contact management solutions—found that offshoring may be more costly than not. The CCA’s report is based on, and analyzes, data from the Contact Center Satisfaction Index (CCSI), the CFI Group’s index that employs the methodology of the University of Michigan’s American Customer Satisfaction Index. The CCSI surveyed more than 2,200 participants across multiple industries, and determined that offshore agents provide first call resolution (known as FCR in the contact center world) to only 42% of customers, whereas domestic agents do so to 68% of customers (that means that 58% of those did not get their issues resolved the first time they dialed into an offshore center).

The CCA may only be about data, but Burroughs is a real-world example that I think speaks volumes. Offshoring will still continue, and by all accounts continue to grow, but it is definitely not the panacea. It does work for some—saving money and delivering value—but it doesn’t work for all.