In my previous post I introduced a new term with a familiar acronym: Total Cost of Offshoring (TCO). Companies have been offshoring various operations for many years, most notably manufacturing, software development, and technical support. For this post I will focus on offshoring one specific customer-facing service: technical support. This practice falls under the broader umbrella of Business Process Outsourcing (BPO).

Companies have been offshoring their technical support (and IT services) since the 1990s. The explosive growth of the IT market leading up to the Dot-Com Crash fueled the movement to BPO Offshoring. India is a leading (and perhaps best-known) provider of offshore IT services. Once its infrastructure was developed, India was perfectly positioned to offer these services. The availability of a large, educated, English-speaking work-force combined with low labor rates made it very attractive for firms to outsource technical support to India. Other countries also offer these services including Argentina, Bolivia, Brazil, China, Indonesia, Malaysia, Pakistan, Panama, and the Philippines.

Years ago leading computer industry companies including HP, IBM, Intel, AMD, Microsoft, Oracle, Cisco, SAP, and BEA moved much or all of their technical support offshore. This decision directly impacted their bottom line. Support costs dropped considerably, which led to improved profitability. Financial analysts were happy due to the positive impact on the companies' P&L statements. Thanks to the differences between India and the U.S. in terms of time zone, labor laws, and national holidays, offshoring made it easier to offer technical support 24 x 7 x 365. All in all, the decision to offshore IT services seemed like a "no brainer."

Our research, however, has uncovered hidden costs that may cause some companies to re-think their decision to offshore IT services. One of the areas we focus on in customer satisfaction and loyalty studies is customer touchpoints. Primary touchpoints include sales contacts, ordering activities, fulfillment activities, and problem resolution. Out of these, problem resolution (e.g., technical support) often has the greatest impact on customer satisfaction and brand loyalty.

Can you remember the last time your printer or computer crashed (usually right before the "big presentation")? Did you feel a little stressed out? If you were not facing a deadline, were you not a bit annoyed that the printer or computer stopped working? Many customers are not in a good mood when they call technical support. This heightened level of emotional engagement magnifies the impact of the call. If they receive prompt, polite resolution to their problem, they are likely to end the call feeling much better about their product and the manufacturer. If, on the other hand, they reach a technician who is hard to understand or who cannot solve their problem, they will end the call with a much lower opinion of the company.

Outstanding technical support can turn dissatisfied customers into advocates while poor technical support can turn dissatisfied customers into disgruntled customers.

Now thanks to social media networks like Facebook or YouTube, customers have a channel to vent their frustrations to the masses. The long-term damage to future sales and brand image can far exceed the financial savings from offshoring IT support.

Don't get me wrong, offshoring technical support makes sense for many products. However, high-ticket items that are technically complex may be better served by domestic support by "factory technicians". Several years ago, Dell made the decision to move its technical support back onshore for these very reasons. More recently, HP opened a new call center in Conway Arkansas just two months ago. Recent personal experiences, combined with results from a few studies, indicate that other companies may benefit by following Dell's and HP's lead (at least for some of their products). I encourage companies to consider the Total Cost of Offshoring when deciding which services to offshore.