Top five business outsourcing considerations
In today’s fast-paced business world, driving efficiency is often at the heart of growth plans. When thoroughly planned, outsourcing plays a vital role in ensuring productivity is high; enabling managers to focus on business development and disruptive innovation.
However, some organisations cause irreparable damage to their business by outsourcing too early, while others risk falling behind to more innovative competitors by ignoring the opportunities available; and some companies outsource the wrong mix of activities. It’s unclear whether this balancing act is why the outsourcing market in the UK declined in Q1 compared to the same period last year, although it could also imply a wariness to trust third parties with internal business processes.
If this is the case, business leaders are setting themselves up for a fall. Failing to outsource effectively can cause irreparable damage to an organisation. Put simply, business growth will be stunted.
To ensure SMEs are reaching their full potential, John Cooke, founder and managing director at Black Pepper Software, investigates the top five considerations every business should make before outsourcing.
Put simply, the majority of outsourcing takes place to increase profit margins, lowering expenditure on labour and operational costs, while improving the bottom line. However, the cost-efficiency of taking this approach comes into question if the wrong processes are left in the hands of a third party.
Offshoring well-defined maintenance tasks, such as payroll management, removes the need for businesses to hire in-house experts to manage accounts, freeing up capital which can be invested elsewhere. Core activities shouldn’t be outsourced though, as the necessary knowledge levels will inevitably be found in-house and should remain at the heart of the company. Google wouldn’t outsource search engine algorithm innovation to a third party for example – it would risk losing its competitive advantage. The same is true for all businesses, regardless of size.
2. Business reputation
Businesses live and die by their reputation and in the social media age, each product and service they offer is scrutinised under the microscope. It’s therefore vital that the highest possible standards are maintained continuously, especially for external facing processes. Failing to take your reputation into account before outsourcing may be the biggest mistake you ever make.
Take call centres for example. When outsourced efficiently consumers rarely realise they aren’t speaking to an in-house representative. However, if offshored poorly a disconnect between the business and its customer service becomes far too apparent, leading to a vocal and costly backlash. The same is true of all external processes. Offshoring may free capital, but if service levels drop the cost of rebuilding business reputation is much higher than any initial savings.
Many businesses aim to transform their offerings and innovate like a ‘start-up’. However, internal constraints and practices can stifle this. Established businesses investing capital in disruptive innovation should be the cornerstone of their development plans. Outsourcing innovative processes such as software development often breeds the best results, as internal team members may be too close to the business’ existing processes to ‘think outside the box’.
When successful, such innovation is highly lucrative. By researching and identifying a new market the disruptive business will immediately become the industry leader, leaving competitors in its wake. If companies fail to do so their competitors will, so outsourcing wisely in areas such as innovation is critical.
Businesses need to be wary though, pick the wrong partner and it can set back innovation and growth, resulting in missed opportunities. A partner must be agile, able to rapidly adapt to ever changing business needs, all while working very closely with the company.
4. Communication & collaboration
Agile development has continued growing in popularity, with continuous communication and collaboration at the heart of innovative projects. It’s therefore vital to keep this in mind before outsourcing project work to a third party, especially when considering offshoring. UK businesses which turn to Asian companies will likely find daily iterations are difficult to manage due to the vast time differences. In some circumstances, there may only be a few hours of overlap during the working day so time for communication is limited and can seem rushed. This will either impact product quality, or at least result in unnecessarily long lead times. Also cultural differences shouldn’t be underestimated, companies frequently need to work much harder to overcome these than is often considered up-front.
However, when outsourcing onshore, communication isn’t strained by time zone difficulties, cultural differences are minimised and daily iterations are also still possible to ensure projects remain on track. Large companies can benefit greatly from onshore outsourcing, taking advantage of rapid and low cost innovation using an external team without draining resource from their day-to-day operations.
5. Calculated risk
Outsourcing is often unfairly viewed as a risky option, and although there is risk involved this depends on the type of processes outsourced. If core business practices are offshored the risk is huge, as you have little control over what is a central element of your organisation, which can have disastrous results. On the other hand, outsourcing development projects should be viewed as well-calculated risk, offering businesses an opportunity to research their market and work closely with a third party to innovate and generate the highest quality results possible.
Our work with design specialist Black Country Atelier (BCA) highlights this, as the firm is aiming to offer technology which enables consumers to design their own loomband pendants on their mobile device before 3D printing it in-store. This was a movement into a completely new market for BCA yet they outsourced app development and the project was turned around within a week, rather than the usual months which traditional approaches offer. Having such fast turn around and innovative input at a low cost enabled BCA to test the waters with a product that may now hit the high street before the end of the year.
Time to reap the rewards
Outsourcing is a key element of business today and to write it off as unnecessary risk is short-sighted and leaves organisations at risk of being left behind by their competitors. Companies simply can’t be as efficient if they handle all tasks internally, while failing to look further afield than the office floor for expert advice when aiming to disrupt the market can be a mistake which is impossible to bounce back from.
Re-defining the economics of CX in the new customer journey
There’s no shortage of customer service channels for the enterprise to select from today. Regardless of the many new metrics that have emerged – such as customer success, or empathy – cost reduction is still a primary driver in selection criteria.
There are many articles dedicated to how companies can turn customer service and customer experience (CX) from a cost to a revenue centre. The problem is, if you stop there and don’t look beyond cost reduction, you’re limiting the scope for CX to become an even bigger economic contributor in the enterprise.
There is every opportunity for customer service and CX to significantly influence the front end of business, particularly amongst direct-to-consumer subscription-based products and services, such as popular streaming services like Netflix, Amazon, Disney+, as well as sports subscription services like DAZN.
In these products and services and others, there are new customer journeys that may drive business growth and revenue. They start earlier and may last a lifetime, so getting things right at the start of the journey is key so that customers have the best experience from day one.
Not only will this help in making customers less likely to reach out for issues-based support further down the line, but these customers will be much less likely to churn, and much more likely to take up new services as they are offered throughout the lifetime journey.
So, what does the new customer journey look like for these services?
Opportunity waiting for the likes of Netflix & Disney
While consumers may have previously regarded customer service as a way to mitigate the inconveniences in their lives, the customer journey is expanding in scope every day. Today there are many more touchpoints available that put CX in a position to drive revenue.
For one-off purchases, traditional CX deployments have not changed significantly in the past few years. However, if you look at the change in the CX relationships we’re seeing with subscription-based products and services, particularly media-based streaming services, it’s clear that these companies lead what quickly become very multifaceted relationships with their customers. These have serious potential to evolve over time for increased economic benefit.
For any sort of subscription-based business, customer lifetime value is paramount, and the requirement to actively manage a continued positive customer experience is critical.
Every interaction is an opportunity, and every data point is a chance to offer more value. Introductory offers can convert to longtime customers. Longtime customers may take up opportunities to upgrade to more premium products or services. They may also appreciate incentives to invite family and friends to become customers. Consumers who like a particular service, for example, may appreciate a recommendation for another similar or complimentary service.
It all starts with customer interaction, and the customer experience journey becomes an opportunity to strategically affect the user base and resulting revenue - which is a far cry from the limitations of call center cost reduction or churn metrics.
How do companies support the new customer journey?
More and more, customers look at the new customer journey as engaging with brands as part of their lifestyles. Many companies are making brand ambassadors available before the traditional customer journey even starts, which is a marked change from a purely transactional relationship associated with a one-off purchase.
These ambassadors, who are often independent users of products or services, are providing trusted pre-sales advice, and that same trusted advice can also function to nurture the customer journey in a subscription-based relationship. Call it ‘GigCX’ or ‘crowdsourced customer service’ or even ‘peer-to-peer customer service’ - it doesn’t matter.
The key is in providing impartial, trusted advice from real users. Think about it: who would you rather get advice from? Someone who has used a product or service extensively, or someone who has been trained to provide customer service surrounding that product or service?
For services such as streaming media, advice from trusted experts with real product know-how could be invaluable. This may not be limited to technical issues, such as what to do when you can’t access your favourite show, or how to access services across various devices. It could be parents helping other parents who are concerned about how to restrict adult content from child viewers, or simply customers who have similar taste in programming who can comment on the benefits of upgraded or premium products. The point is, these experts are easily available at any touchpoint in the customer lifetime journey, creating more chances to add value.
It’s also about tipping customers from ‘passive’ to ‘promoter’ in the NPS scale. It’s an opportunity to turn neutral customers who may be vulnerable to competitive offerings into loyal enthusiasts who will keep buying and referring others, fuelling growth. It may ultimately help drive even further revenue by creating customers that are helping to sell the brand itself.
And, while chatbots and automation may play a key role, they are often not able to handle the more complex support needed in the new customer journey. Conversational AI is rarely as conversational as it claims to be, and in the new customer journey, most companies are finding that a mix of automation and people-centric service is an ideal way to nurture the many new touchpoints created.
It’s no longer about trying to replace human capital with automation: it’s about orchestrating a uniquely personalised CX, and proactively engaging during the customer lifecycle to enhance the experience, and to create more long-term value.
At the moment, we’re only seeing the tip of the iceberg in terms of the power to affect the economics introduced by the new customer journey. We’ll no doubt see this evolve rapidly particularly amongst streaming companies as they use human-centric connections in CX to support the full potential of customer lifetime value.
About Roger Beadle
Roger Beadle is an entrepreneur and business leader who is reinventing how customer service is delivered via the gig economy. After establishing several businesses in the contact centre industry, Roger co-founded Limitless with Megan Neale in 2016. Limitless is a gig-economy platform that addresses some of the biggest challenges faced by the contact center industry: low pay, high attrition and access to new talent. Previously, Roger and Megan helped to build one of the largest privately-owned outsourced contact center business in Europe, before selling the business to the global conglomerate Hinduja Group. Roger is an outspoken proponent of digital ethics, worker’s rights and the ‘good-gig:’ which encapsulates gig work for incremental pay versus full time work, skilled gig work, no unpaid time/downtime and zero expenses.
Named a Rising Star at Deloitte’s Technology Fast 50 program, Limitless is a gig customer service platform, combining crowdsourcing and AI to help global businesses address their biggest customer service challenges – rising costs, increasing attrition, variability in demand and the need for diversity. Brands like Microsoft, Unilever, Daily Mail Group and Postmates are using Limitless’ SmartCrowdTM technology to connect with their most engaged customers, and reward them for providing on-demand customer service that can flex in line with demand. Limitless is one of the world’s first global tech platforms to introduce localised platform terms to protect the rights of its gigging workers. Backed by AlbionVC, Downing Ventures and Unilever Ventures, Limitless is empowering people worldwide to earn money for providing brilliant customer service for the brands they love.