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Evaluating Outsourcing Customer Service Cost: Is it Worth It?

Most companies perform some kind of customer service, whether that involves handling and processing orders, back-end support, or both. In many companies, the ongoing debate is: should we handle the process internally, or would outsourcing customer support be more cost effective?

Many companies view this question as one of cash flow — how much (more) is outsourcing than managing customer support in-house. But evaluating and comparing these options is more complex than simply cash flow. Here are some other key factors:

Labor Costs (and sometimes the only cost that is considered)

We all get that there is a differential in base wage from internal vs. outsource, but internally we also have the somewhat hidden costs that include benefits, sick pay, vacations, holidays, and the training and management of the agents. Then we need to figure in the cost of recruiting associated with the original hire and then the recruiting, rehiring, retraining costs associated with attrition. And now that we mention attrition, are we factoring in all of those costs?

Other Hard Costs

Companies that operate in-house call centers often do not realize, are not aware of, or do not include all the hard costs, so they do not have a complete picture of what they are spending to do it themselves. Therefore, they do not realize the true cost of insourcing.

This is one reason companies come to us. We help them see what other costs are involved that they may not have considered. Costs often overlooked include the space to house the agents, furniture, equipment, managers, trainers, Quality Assurance personnel, investments in technology for a voice platform, voice analytics, reporting platform, etc.

Opportunity Cost

It is also important to look beyond direct expenses.  There are MANY opportunity costs associated with running your own internal contact center including items such as:

  • What if you’re out of space and considering an extra 5,000 sq. ft. on the floor above? How much square footage are you utilizing to house CSRs?

  • Are you factoring in all the overhead associated with an additional X employees?  Perhaps the CSRs and all the associated supervisory and management personnel are putting you over the line for certain HR regulations. And if it’s not HR, it’s any number of administrative costs associated with having an additional team of employees.

  • Do you have the critical mass to scale up all the technology needed to successfully operate a 21st-century contact center? There are a lot of systems required — telephony, workforce, HR, payroll, quality assurance, etc.

  • What is the ongoing capital investment for technology, security, reporting, etc? Is it possible that you could wind up limiting investment in equipment, R&D, etc., for your core business because of the ongoing investment in a call center?

  • And what is the opportunity cost if you operate your own center and then don’t keep it current? How will that affect your ability to perform the customer service and support function at the level that you and management determines is necessary to support your customers.

And then there is the human side — how you are utilizing your people? It is one thing if you have 50,000 employees and you need an extra 20 people for the call center. But what if you have a 100-person company and you need 50 people for your call center? Or you have just 50 regular staffers but need 100 to handle customer service?

If your company is virtual — a very small staff using cloud-based services — operating a call center requires that either you shift your focus or hire a new set of people to ramp up a quality contact center. It gets worse if call center needs are likely to fluctuate for seasonality or other reasons. Now, the tail is clearly wagging the dog. With all the systems and support required, you are now in the call center business instead of focusing on your company’s core offering.

Conclusion

Is outsourcing customer service cost worth it? Well, the contact center is on the front line, dealing directly with your customers every day. You do not want to cut corners and deliver a bad product to your customers as their first impression, or any impression.

If your internal call center is already a solid operation, then the cost may be worth it. Otherwise, spending a little more to outsource to ensure customer service excellence will be money well spent, and in reality, once you have all the costs at your fingertips, it may really not cost any more at all.

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