America First: Why Margins and Profits Just Might Trump Cost When It Comes To Offshoring
Dell’s doing it. Bank of America’s doing it. United Airlines is too. Even TaTa and Wipro are doing it. And that’s moving IT and call center jobs to US soil.
by Jay Battershell, Managing Director, Clearview International LLC
When manufacturing jobs left the country in the early 1980s, it was pretty easy for computer folks who felt secure in their growing industry to be pretty smug about their manufacturing brethrens’ demise. However, in the 1990s that all changed. To IT professional’s dismay, the 2000s have seen at least 1.6 million service-sector jobs leaving our shores. The simple reason: cost.
However, slowly but surely, we’re seeing that trend change. The simple reason? Cost again. It’s not just that American labor costs are affected in what many call this “Jobless Recovery,” but it’s about margins and profits. For a time, American business may have forgotten that loyalty and repeat customers are key to their margins, profits and their marquee brand image.
Perception is Your Product’s Reality
The “2009 Contact Center Satisfaction Index” noted that those who called a contact center they believed to be offshore were three times as likely to defect, while those who felt they had reached a US contact center were twice as likely to recommend the brand to others. Contact Centers of America found that an offshore center took 25% - 35% longer to handle calls and first-call resolution was 20% - 30% less.
As the old adage goes, a satisfied customer will tell one or two folks about their experience, whereas a dissatisfied one will tell 8 to 10. Losing the unhappy customer, along with several others who might have been first-time or repeat customers can equal geometric losses in potential revenues, the margins companies can demand and thereby damage their profits along with their brand reputations.
Personal case in point. Our marketing director, a long-time Apple user reaches a North American help desk when she needs help with her Microsoft products for Apple. Her issues typically resolve with one call. They understand her problem, can document the issue, and communicate to her how to fix the problem quickly in a language she can understand. Many of us wish we could say the same for our overseas Microsoft-for-PC support. It’s a brand issue Apple takes seriously.
After all, that’s the key. If customer loyalty and delight are key to your product, choosing where brand touchpoints occur and who’s doing the touching becomes an issue of profit, not just cost. And we shouldn’t forget that as IT professionals, we have both internal and external customers we need to delight as well, so functions that support those who reach the end customer are every bit as important.
America First Doesn’t Mean America Only
Before you pull the plug on your offshore solutions, it’s important to remember that not every aspect of your business is a brand or customer touchpoint. And some products and services can be supported very well with simple offshore and IVR systems.
ACS’ vendor/accounts payable system is a prime example of effectively offshoring the set-up, invoicing and payments to vendors through an online system with an off-shore-based support center. Vendors to ACS don’t hear, “The check is in the mail.” Instead they can access the system online or call the support center to find out if invoices have been received, processed, and sent. It’s on-time information that’s easy to access and it’s meaningful to vendors. Saves money, saves time, makes the vendors happy, and is a plus to their brand.
The Right Mix for your Mission
At Clearview, we’re doing two things to help clients discover the right mix of onshoring and offshoring aspects of their business. First we focus on helping customers truly understand the mission of their business—the higher calling that helps determine what needs to be local and what needs to be global. It’s an intricate dance that takes into consideration customer expectations, customer delight, costs, profits, margins, and even legacy—OK, your legacy systems too, but primarily, the legacy you want to build for your organization. Whereas an IT cost savings might look great on today’s balance sheet, it might also be a repeat-business killer two years from now. So it’s a depth and breadth of business insight supported by IT and shoring decisions that clarifies your business strategy.
Secondly, we understand the pressures for cost savings and containment even on those critical brand touchpoints. To that end, we’ve embarked upon a “Not-So-Remote” solution that comes close to matching offshoring pricing with American solutions.
It starts with high-quality but untapped workforces that are found in non-NFL cities. Many college and university towns have tremendous workforces, but because they are a little off the beaten path, they have extremely favorable salary and cost-of-living scenarios. As lifestyle becomes more important, we’re finding that more and more qualified people would like to work in these highly livable towns at a reasonable wage rather than moving their families to big cities for higher compensation. Add to that “work from home” opportunities for certain types of shoring, and the cost comes down, the business makes sense, and the customers are delighted.
Another Dose or Two of Reality
Customer intimacy and economics, not patriotism or politics, are driving recent trends to American shores. TaTa and Wipro have made the move to the US specifically for these reasons. ABC News noted in late 2008 that “Proximity to customers was ‘the paramount reason’ for TaTa consultancy services to open a 1000-new person office in Cincinnati…”
CIO Magazine shined some reality on savings in early 2009, “In reality, 10 per cent to 15 per cent savings are more realistic for highly commoditized service areas….”
In the San Jose Business Journal, Accounting and Consulting firm, BDO Seidman, LLP reported in March 2009, “When asked what one location they might consider for outsourcing in the future, CFOs most frequently cite the United States (22 percent), followed by China (16 percent) and India (13 percent).”
Really? CFOs? After all, it’s all about cost.
Jay Battershell has been providing Managed Services to global businesses for over 15 years. As a senior executive at Clearview, Accenture, LSG Sky Chefs and Uniden, Mr. Battershell has demonstrated successful leadership of IT organizations and IT outsourcing teams in the delivery of business results while continuing to decrease the total cost of ownership for IT. “America First” is Clearview’s answer to companies who want to make better sense of shoring solutions.
Clearview International LLC has been bringing clients improved IT strategy and outsourcing services since 1996. Through our multiple data centers, Clearview provides a redundant, reliable, scalable and practical suite of services that can be tailored to support clients’ needs from business and IT strategy to complete computing infrastructure. Clearview is headquartered in Dallas and has facilities throughout North America, Europe and Australia. http://www.clearviewfocus.com
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