Most frequent reasons for outsourcing failure ?

The most frequent reason for outsourcing failure is sending your call center work overseas instead of selecting a vendor located in your region.

Just ask your friends & neighbors about their Call Center experiences.

I’m sure that some of your friends will tell you that they’ve occasionally had the experience of dealing with a Call Center Agent based in your region who was clearly a poor fit for the job - and who delivered a poor caller experience.

But when it comes to describing their experiences dealing with a company that has shipped their Call Center work overseas - the vast majority of your friends & neighbors will tell you that they generally have a hard time understanding – or being understood by the Agent – and that their call is typically being handled by a ‘script reader’.

The Call Center Agent is your ambassador to your customers. The human voice of the Agent provides your company’s human face. If your customer cannot understand the Agent due to accent issues or communicative style - the problems are compounded. The prospect can become agitated and your company may wind up losing a customer and future sales. In the present economic environment, just hearing a foreign accent could trip that trigger. Losing dollars chasing dimes is not a wise long-term Customer Care Strategy.

Companies are also re-examining the impact of sending their Call Center jobs overseas on their corporate reputation. Corporate Social Responsibility is considered an important factor in business success today. Companies are thinking twice about employing workers in countries with poor human rights records - or lax labor standards such as India.

Ask your friends what they think about the exploitation of Labor. Call Center workers in India experience abuse & exploitation to a degree and on a scale that would be viewed as criminal in some instances by North American Courts of Law. For example; Indian Call Center Agents are treated as 21st Century ‘cyber-coolies’. They work graveyard shifts - under high pressure – in work environments where liberal attitudes to sex and club drugs are encouraged and thriving. Colluding employers have set up “Blacklist” data bases - containing the details of their Call Center employees - so that “negative insider elements” can be detected at the recruitment stage. Workers in their hundreds are fired without so much as one cent in severance pay.

Overwhelmingly your friends & neighbors will tell you that when they are contacted by telephone – they want to speak with a Call Center Agent from their region - who is typically better able to serve and communicate with them. Probe a little deeper – and they’ll also tell you that they’re opposed to shipping Call Center jobs overseas – and particularly to countries with poor human rights records - or lax labor standards such as India.

From the Jan. 2010 Issue of Site Selection: “Offshoring calls to India works in very limited situations. Interaction with clients and understanding the culture & environment of clients doesn’t work very well at all. The direction of the industry is to bring these customer facing jobs back to the USA.”

The latest Labor Market Outlook from the Chartered Institute of Personnel & Development in the UK: “UK companies are bringing back call centre operations to the UK from India. Most of the companies that we deal with are looking to keep call centre staff in the UK wherever possible because there is a significant increase in the level of service and customer satisfaction provided."

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Thanks for your reply Bob. I agree in most cases. I would also like to add the following resons:

Trying to Outsource a Problem - that happens in many cases
Failing to Seek Outside Advice
Writing a Poorly Written Service Agreement
Losing Control over the Outsourced Activity
Failing to Plan an Exit Strategy or do Contingency Planning

Surely there are more reasons for failures, just wanted to higlight some of them.

I believe, many times the outsourcing company doesn't use enough qualified resources to make the job. Not the number, but the quality of the human resources gets the jobs done. Usually one skilleld and capable person doesn't make the double amount of money that 2 average performers. Additionally this person only occupies one workplace and uses one computer with software licenses. And the most important: creates much less communication overhead.
In spite of all this most of the customers seek to get the hourly rates as down as possible, without having in consideration what they can get for these rates.

Many outsourcing deals fail because of problems that occurred before the vendors were even invited to the table.
Look at the typical decision process, that's where the wheels started to fall off the car.
Take a look at this explanation:
www.ouchsourcing.blogspot.com

Best wishes,

Jim SMith

In my experience this is often due to a mismanagement or miscommunication of expectations and reality on both sides.

Often the client (the outsourcer) hides the issues they are trying to address, or is unclear of what they expect to achieve, and/or is unwilling to support the outsourcing agent once they go live. In one company I worked for the outsourcing agent was the only live call center available when they launched their first promotion to market, and they failed to tell the outsourcer about the promotion at all or respond to requests for help once the call centre was flooded with interested customers being dealt with by agents who were oblivious to what was going on. The internal customer care manager used this to demonstrate their ineffectiveness, rather than accepting responsibility for the communication breakdown.

On the other side of the coin, outsourcers often exaggerate their capacity and understanding in order to seal the deal. Or are working to tough financial targets agreed by management that turn out to be unrealistic and are therefore prepared to cut corners to meet these rather than return to the negotiating table to find a way forward. Another outsourcing provider I worked with, deliberately mis-sold a package for my employer to literally thousands of customers in order to make the bonus incentive, our own failure was to monitor this so it became a crisis situation before anyone was aware of the issue.

My keys for succesful outsourcing are:

- Be prepared to pay for it, it will be cheaper but screwing every penny out of your partner leaves you right at the bottom of their priorities list
- Communicate clearly and openly, make it a partnership for the right reasons and not a supplier-vendor relationship
- Carrots are more effective than sticks, encourage honesty throughout the relationship
- Know what you expect to achieve, make sure they know it too
- Be prepared to make drastic changes to ensure effectiveness
- Run a pilot first if at all possible on a small scale
- Try not to interfere in the outsourcers management approach, it's one of the reasons you hired them in the first place, having said that make sure you have management representatives at all levels in place on site to make decisions in an instant on your behalf in necessary and make sure they are directly employed by you
- Treat the outsourcers employees as you would your own, make sure that if you run branding exercises, team building etc. that wherever possible you include them too, how else can they represent you if they don't know who you are?
- Deliver cultural training regularly to emulate your brand
- Deliver all product training yourselves focusing on brand as much as possible
- Empower them to make decisions on your behalf, particularly if it takes 3 weeks to make a decision in-house
- Live with the consequences of those decisions if they were made in the right spirit of your agreement, even if they were wrong
- Hold regular review meetings to ensure things are on track
- Don't make changes every 5 minutes, you need to give things a while to settle in before deciding whether they work or not

And so on...

Somebody forwarded me this article to me from the outsourcingcenter which includes survey data - http://www.outsourcing-journal.com/jul2009-awards.html (disclaimer: it is a small sample size and I'm unfamiliar with the source so can't speak to the validity of the data). Top three reasons for outsourcing failure include:
- Communications post contract signing
- Mistaken Contractual Assumptions
- Provider's over-promotion of capabilities

I've seen the following problems with outsourcing:

1. Vendors over-promoted their capabilities - promising they would be able to handle seasonal variations in call volume, and were not; that they would be able to hire and retain qualified agents, and were not; that their in-house training was top notch, and it wasn't
2. Vendor was not properly prepared by client - vendor agents didn't receive adequate product and procedural training from the client and therefore gave wrong answers. Also, client didn't provide vendor with proper information about call volume and seasonal variations going in (different vendor than in item 1) so vendor didn't have adequate resources available. It's not always the vendor's fault when this relationship fails.
3. Quality of the vendor agents - outsource vendors don't usually pay their agents a lot, and they get what they pay for. And there is usually high turnover among these low quality agents.
4. Ability of vendors to retain good agents - the good ones they do hire get better offers from other vendors, and leave regularly

I am currently consulting to a government organisation on SLA performance management and breach of contract matters.

Most of you have already said what I am seeing. Lack of experience and knowledge by the customer is what was the result of most of the problems experienced by this customer. The partner providing the outsourced services of course will deliver what the contract says and the contract doesn't say much. There are no catalog of services. No clear definitions in the contract schedule. No clear delivery objectives. No proper performance management clauses. The customer has very little recourse for any breach of contract "get out" clauses. All this is only discovered 5 years down the line during a Security Assessment where I had to look into what services the partner was supposed to provide against the poor security posture.

Basically ZERO service management practices deployed.

Customers need to educate themselves and take control of ICT governance at board level and the processes, policies and procedures must be disseminated and put into practice at ICT Management levels and the board must monitor and take accountability for IT.

Its not always the Outsource Partners fault. Outsourcing is a joint venture and both parties MUST take responsibility.

The question here is most frequent reasons for failure -
from the vendor's perspective
1) Customer not having a clear understanding of what they would like to outsource
2) Not understanding why they are outsourcing in the first place and then not willing to support the vendor/partner in meeting the objective of outsourcing.
3) Hands on and Hands off approach flipflopping making the vendor/partner confused and always looking to see where the next fault is going to be and how to manage that.
4) Unrealistic expectation of cost savings
5) Non-prioritization of outsourcing objectives
6) Expecting more bang for the buck right from the start even before the vendor/partner can understand what is needed.

from the customer perspective
1) Not being able to meet the expectation projected during the pre-sales period where inflated capabilities were mentioned.
2) Not clearly mentioning the exact deliverables and timeline with the set SLAs.
3) Not putting the right skilled people in the correct positions leading to immature and in-experienced people handling critical areas causing failure.
4) Not being flexible enough to handle reasonable change in requirements and instead responding to customer requirements by providing CRs to approve.
5) Not looking for the best solution and instead limiting the focus to doing enough work to just get done with the engagement.

Great answers to a very good question. In my experience the main reasons I have seen for an outsourced arrangement to fail are:
1. Lack of training and defined process.
2. Lack of quality management to ensure the process is followed and correct behavior or process when (not if) required.

Outsourcing is a partnership that needs to be managed.

I led a 1000 people team which managed a fortune 5 client from India. In my experience outsourcing does not fail but yes it fails to live upto the promise and can deliver much more. Some of my learnings have been

- treat the outsourced team as an extension of your company if you are in it for long haul, identify and invest a core team of about 30-40% of the people who should stay with your account for atleast 2 years
- flexibility is a great thing but no system can handle more than 20% variability, joint planning of future work or ramp downs helps a lot
- make sure that the contract allows you to reward some of the high performers directly
- understand the politics of on-shore and off-shore team and take steps to remedy some of the dysfunctional aspects

Regards
Chintan Tyagi
www.eazework.com

Thanks for good resources. Great answers to a very good question. In my experience the main reasons I have seen for an outsourced arrangement to fail are:
Lack of training and defined process.

1. LACK OF CLARITY on what you want from the outsourced vendor. Most of the failure cases are ones where the client says "Just do something....". In cases where there is great clarity on what you want, failure rates are very very marginal.

2. Reduce this to a clear statement of expectations, and deliveries between you and the vendor:-what you will supply - this has to be defined crystal clear, and processing you want, and what the outputs will be. Also include as to how these outputs will be validated

3. Once this definition is available and a clear SOW - Statement of work - is done, some procedure to monitor the intermediate deliveries. These intermediates may be at the vendor's place only - but you as the client should have a right to monitor and "validate" the same.

4. If possible, set up a schema where there is continuous interaction and an incremental delivery / prototyping system between you and the vendor.. This will reduce surprises at the end.Proble