by Beth Bacheldor

Is Offshoring Really a Money Saver?

Dec 08, 2009
IT Leadership

A report that looks at numbers from the Contact Center Satisfaction Index says the real cost of offshoring is no savings.

The arguments for and against offshoring are usually, in their own rights, valid. While the current case against offshoring centers on the economy and high rate of unemployment on our own soil, the other arguments against offshoring include risks associated with service levels, security, and loss of control over your infrastructure and/or applications. The reasons for offshoring include access to new talent, handing off operations that aren’t part of your core business. But the strongest advantage, offshoring proponents claim, is the ability to save lots of moolah.

But what if offshoring didn’t actually save you money?

According to a new report, offshoring contact centers is no bargain—in fact, the report states that the practice has significant problems that can ultimately hurt revenue and profits. I need to point out that the report was done by Contact Centers of America (CCA), an organization formed specifically to bring jobs back to the United States and which provides customer contact management solutions. So you may want to take off your rose-colored glasses and put your analytical ones on as you read this. Also for the record—and worth noting—is that 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, so there is a fair dose of validity here.

The first interesting stat in the report is 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. If you think it is bad 32% of your customers didn’t get their issues resolved the first time they dialed your toll-free number, imagine if 58% didn’t. Yikes.

The CCA takes that stat and illuminates it in a different way. The report considers the variance—the 26% of customers that will have to call back with the same issue just to get you to the 68% FCR you could have had had you kept your contact center on this side of the ocean. If a company is paying an offshore contact center $3,800,000 for 1,000,000 calls per year, the report hypothesizes, the savings would be close to a $1,000,000 if these unnecessary callbacks were eliminated. Now that is a lot of moolah.

It’d be nice to be able to survey thousands of U.S. workers and customers to find out how satisfied they are with the IT services that touch their worlds, and then to break all the responses down in numbers that could be used to compare services managed and rendered offshore versus those managed and rendered here (either by an IT outsourcer based in the United States or by a company itself). Then we could convert that satisfaction into dollar amounts, and find out whether offshoring actually does save you that much money.

Guess I’ll just have to ask you. Leaving all the other arguments aside, do you think offshoring saves companies money?