Call Center Outsourcing: What's the Total Cost?

What is the actual cost of owning vs. outsourcing your call center?

What is the actual cost of owning vs. outsourcing your call center?

About 20 years ago, Bill Kirwin of Gartner Group Inc. introduced Total Cost of Ownership (TCO) to the business world. It was a valuable tool for companies to better understand the actual costs of owning vs. outsourcing operations such as call centers.

Toddlers of that day are now moving into the workforce and trying to get jobs in call centers. Surprisingly, TCO is also still fighting to get noticed by many of those call centers. True, many larger corporations have employed it, but smaller operations are still only vaguely aware of it. Or they may have tried it, but seldom in a truly comprehensive fashion, and therefore had less than satisfactory results.

Still, for those companies that do try it, half using it is better than not using it at all, right? Even if there are glitches and some steps skipped, isn’t it good that those companies are at least implementing some level of TCO in their decision-making? Sadly, no, it’s not necessarily a good thing at all. The only thing worse than an obviously bad decision is a bad decision that looks like a good one.

So what’s been keeping companies from employing TCO in their outsourcing decisions? The costs of outsourcing are relatively easy to measure — most proposals itemize them in great detail. However, the costs of an in-house call center can appear to be immediately obvious when in fact they are often hidden and difficult to measure. Small companies or projects on a shoestring budget are especially vulnerable here. They will have a quoted price from an outsourcer, for which of course they would have specified that every possible price be included, to ensure that they don’t get stung on hidden costs once the contract is awarded. They then compare that price to a seemingly thorough review of the in-house costs.

The obvious cost is payroll, and that’s actually the only one that some companies use when they compare outsourced call centers to in-house. They then conclude that it would be less expensive to keep their operations in-house. But in reality that’s just the start of the costs. Other significant investments include computer and software purchases, networks, office space, agent desks/cubicles and other furniture, real estate, and parking spaces. Other in-house costs are even easier to overlook or underestimate. These include power consumption, insurance policies, janitorial time and materials, payroll, added administrative workloads, searches for qualified workers, training, retraining, sick leave, and many similar by-products of an in-house operation that seldom make it onto a comparative spreadsheet.

In-house costs can be even more difficult to pinpoint if your call center is to be multilingual. What will be the additional costs of finding those agents and assessing their language skills let alone their customer-service capabilities? Who will handle your quality control and monitor the calls in three or four or five different languages? Will you even be able to find the needed languages within reasonable distance of your call center, or will you need to look at hiring and monitoring those remote agents in other cities or countries, or working from their homes? Will any cultural differences become issues? If so, what will be the cost of that? What will be the cost of any morale shift or changes in work habits by your remaining in-house staff as you adapt to the new arrangements? And will there be any effect on the level of service your customers experience? Will people start hearing them talking about their call center frustrations? Will there be any revenue losses that should also be included in your cost analysis?

Other more “trivial” or unforeseen costs can quickly take the total even higher. Who will clean up the coffee when it gets spilled by an operator? What will it cost to find, recruit, hire, and train a skilled new worker if an agents quits halfway through a major client project? What will be the cost of that interruption to their relationship with other employees and the client? If they haven’t put a figure to these and other such costs, then they really have not calculated their total cost at all.

And so the challenge continues for TCO. It still knocks on one call center door after another, resume in hand and with high hopes of being let in so that it can show its potential. But many small to mid-sized operations still see it as overqualified, and stick with other methods and best guesses instead.

How about you? Have you seen examples of call centers that could clearly have benefited from their Total Cost of Ownership being calculated? What do you feel smaller centers can do to identify and better incorporate costs as part of their decision making.

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