For most people, the acronym TCO stands for Total Cost of Ownership
. Being a pioneer in the field of Total Cost of Ownership with many published papers, TechWise is extremely familiar with this definition. TechWise also conducts customer satisfaction studies. Over the past few years, findings from these studies suggest another topic that would use the same acronym: Total Cost of Off-shoring
. Companies have been off-shoring all aspects of their operations for many years. Based on our research, the decision to offshore business operations may sometimes not be in the best interest of the company
. In this two-part article I want to focus on one particular area - the practice of off-shoring customer support. First I want to touch on outsourcing.
Off-shoring and outsourcing, although related, are not the same. Outsourcing refers to the process wherein a business contracts with a third party service provider to provide services that might otherwise be performed by in-house employees of the business. There are many potential benefits of outsourcing, including:
- Cost Savings: In-house employees cost more than outside service providers, especially after factoring in overhead and benefit costs.
- Service Quality: Since most third party service providers are specialists in the services they provide, businesses usually receive access to leading-edge technologies and practices that in-house employee often cannot match. Additionally, service providers are extremely motivated to "do their best" because they are under contract and since their reputation is at stake.
- Staffing: By outsourcing a non-core function, a business avoids all the headache associated with recruiting and hiring staff for such non-core function.
- Capacity Management: It is much easier and cheaper to increase and decrease capacity when the work is outsourced, then when it is done in-house.
As with most decisions, there are some potential drawbacks from outsourcing including:
- Company knowledge: An in-house employee will always have a better understanding of a company's products, services and operations than a third party.
- Staff Turnover: Some outsourced jobs are highly monotonous, which can lead to high staff turn-over which in turn causes the quality of services to suffer.
Outsourcing to a company in a different country, or off-shoring, can have additional drawbacks:
- Linguistic barriers: When the first language of the off-shoring nation is different from the nation that outsources the function, there is the potential for linguistic barriers. Even in situations where the countries speak the same language, differences in dialect, accent, word use and phrases can lead to communication challenges.
- Social Responsibility: Off-shoring tasks effectively shifts jobs out of the country, which goes against the social responsibility of the business outsourcing the process.
In part 2 of this article, I will discuss the implications of these pros and cons specifically as they relate to off-shoring customer support.