Tuesday, June 8, 2010

The Math and Myth of Outsourcing

Math in a quote
"Simple logic should tell us it's impossible for the private sector to deliver the same service for less and make a profit as well."
Ellen J. Dannin, Professor of Law, Wayne State University Law School

The Myth of private industry's inherent efficiency
There is this myth out there that private industry is exceptionally efficient when compared to government.  It may be efficient, and in some cases that might hold true, but beware the trap of all or nothing, black and white  thinking.  Just considering how individual contractors have their own equipment, licensing, insurance, payroll, buildings, vehicles etc, starts to show a duplicated cost in private industry that is quite wasteful.  So I think we can agree that private industry isn't exactly waste free, and perhaps quite inefficient as each private enterprise has to "re-learn" how to chase contracts perform work and satisfy the customer... or at least take the customer's money.  So private isn't necessarily more efficient and if the money is being wasted on inefficiency it isn't necessarily available to provide value to the customer.

Add a Layer, save money and miss the point
Everyone I know has at some point had a disappointing experience with "outsourced" call-centers.  You phone a number in North America (where English is the primary language) and you expect to get an English speaker because you need help.  And... you get someone from a foreign country who is very interested in "registering" your problem (so they get paid) and reassuring you, but they keep missing your meaning because English is not their language, it is an acquired job skill, one they polish and polish, but will never truly understand the way a native speaker understands it.  The whole point of customer service is to.... Serve the customer.  Seems to me that making the customer speak to someone who doesn't quite understand their language is going in the wrong direction.  What could lead to such insanity?  Could it be corporate cost cutting?  Ever notice the sales guys are from your country and native English speakers, but as soon as you sign on the line and they get your money, you are put off to people in a foreign land who don't even understand what you are talking about because they are probably trying to answer your question from a set of scripts. Going to a third party at arms length just to save money can certainly compromise the quality and the value you get out of that service.  Notice the "outsourced call center" isn't needed until we try to save money, then we look smart to the accountant and foolish to the customer. (who are you trying to impress anyways)

My Outsourcing experiment
I tried outsourcing once for my software company, and I spent so much time explaining, re-explaining, documenting, defining, paying, reacting to their lax security and adapting their half solution to meet my simple requirements, that any savings I thought I would experience were "Lost in Translation".  On the receiving end, several years ago I bought a Dell laptop, and when I had trouble, Dell saved a dollar or 2 by paying someone in another country to answer my call.  They weren't much help, and were hard to communicate with. The English was flawless but the meaning was lost. So I made sure that the next computer I purchased was not a Dell. Dell! Are you missing $200?  I gave it to your competitors because of your stupid Cost cutting, cost avoidance, whatever, I call it bad service.

So Leaders! Are you listening?  Stop flirting with the guy in accounting and consider the REAL cost to outsourcing before you go down that road and convert your customers into haters.

Cheers, what is your experience with outsourcing?