Call Center Outsourcing: What are the Hidden Costs and Commitments?

[Updated January 27, 2022]

At a certain point in a business’s growth, outsourcing becomes a necessity. With the demands of the “NOW Customer” higher than ever, customer service is at the forefront of every business model. The economic benefits of high-quality customer experiences include an increase in revenue, longer customer lifetime value, and a better chance of outperforming the competition.

Even if your product, marketing, and manufacturing are all stellar, your company has got to have the customer service to match! Maintaining a high caliber of support during rapid growth requires hiring more support and sales employees and, most likely, investing in outside resources.

This is where call center outsourcing comes in.

Traditionally, call centers have been the go-to outsourcers for phone support. They’ve been able to handle process improvements while fielding inbound calls (or, more recently, emails, texts, and live chats) at scale. Call center relationships are bound by Service Level Agreements (SLAs) stipulated in annual contracts.

But, service levels have changed drastically over the years, particularly in the e-commerce industry, where customer service expectations are being held to impossible standards set by the world’s best-in-class brands. Gone are the days when it’s enough to answer general questions from customers. Call center agents in retail are occasionally expected to engage in cross-selling and upselling. 

Call centers can definitely help solve short-term problems around cost savings and scalability. However, do the benefits of call center outsourcing hold up in the long term in a drastically changing world? What should leaders and senior management be looking for?

What to expect from this article

We believe that there are hidden costs that might not be inked directly in the contract, but are clearly written on the wall.

Outsourcing to any third party (call centers, business process outsourcers, service vendors, consultants) can be a daunting task for business managers. If you’re budgeting for a call center relationship in the next year, it’s important to know that there are costs and commitments that may not immediately appear in the business strategy. Considerations such as risk management, metrics, communication, efficiency, and even natural disasters should be taken into account when making this decision.

And as more and more companies outsource their customer support, it has to be expected that salary packages for call center agents are becoming highly competitive. The minimum wage offer can depend on the complexity of the account and the experience of new hires. Fluency in English communication is not enough anymore to make customers happy. Your customer support workforce must be equipped with excellent communication skills, multitasking ability, and the flexibility to adjust to a different time zone. 

In this article, we’ll explore what those are costs and the best way to avoid them!

What is call center outsourcing?

Call center outsourcing is the process of contracting labor from a call center to handle a business’s customer service ticket volume. Location is an important consideration in outsourcing. An organization can either outsource nearshore or offshore. Outsourced call centers can handle both phone and digital inquiries, depending on the contract.

Retail, financial services, and healthcare are the most common industries that outsource their customer support. But other sectors, such as the subscription business model, insurance, education, vacation rental services, Saas (software as a service), and information services, are quickly catching up. Even human resource management (HR), content creation, and logistics services are joining the growing trends of outsourcing. 

Why do companies outsource to call centers?

Companies outsource to call centers when their call volume or rate of growth is too high to be handled exclusively by their in-house experts. For some businesses, handing over customer support to a call center provides economic relief and the tools to solve customer problems more efficiently.

With the growth of telecommuting, not only big companies are outsourcing nowadays. Small and medium-sized enterprises are hiring independent contractors to perform a wide range of tasks, such as call and email handling, outbound sales, telemarketing, project management, developing web content, responding to customer inquiries on social media, information retrieval, creating a web page for business, and more. This is the reason why many are choosing to be a freelancer.  An hourly worker can make hundreds and thousands of dollars without the hassle of commuting and the dreaded 9-5 working time.   

The pay offered to freelancers and full-time contract workers in a BPO or call center setting is not much different. But compared to call center agents in the office settings, freelancers’ earnings are subject to certain payment transaction fees ranging from 5% to 20% of their hourly rate. Pay rates may also differ depending on which country the freelancer operates.  Moreover, the workload of a freelancer may be of the various mix depending on the project scope. 

The Hidden Costs and Commitments of Call Center Outsourcing

Call center outsourcing is often thought of as a way for companies to save money. However, there are many hidden costs associated with call centers that may not be explicitly written in the contracts, including:

Outdated SLAs
Ramp-up time
Contingency plans for natural disasters
Inflexibility

1- Outdated (and costly) SLAs
Call center success, productivity, and team performance are typically measured on traditional metrics: customer satisfaction, first response time, first call resolution and average handle time on your website or phone. Today, many businesses see customer service as a revenue-generator rather than a cost center. Economically, call centers that don’t measure revenue-focused metrics could be costing their clients missed revenue and wasting human capital.

These metrics include: repurchase rate, customer effort score, the happiness of agents, and reduction in contacts per order (traditionally, there are incentives to drive more volume into a contact center. This is not, and should not, be the case anymore.)

2- Cost of getting started with a call center
As every business leader knows, time is money. The process of vetting a vendor via an RFP and negotiating a call center contract can take months. That’s time and resources that could be put towards other, revenue-focused business initiatives.

Additionally, there’s the recruiting, training, and onboarding of customer support agents that can take weeks at a call center. Still, employee attrition remains a big problem in contact centers, and maintaining adequate staffing levels is a struggle. This can be attributed to inadequate learning opportunities, toxic culture, low to zero wage increase, and other factors outside the control of management like a call center agent’s preference to engage in freelancing.

The time spent in this process is better spent finding staffing and technology solutions that can ramp up and down quickly, without affecting the quality of support (or even costlier: a brand’s reputation).

3- Lack of contingency plans
In 2020, like many other businesses, many call center operations in places such as India and Asia were brought to a halt by COVID-19. Due to the proximity of the workspace and the nature of the pandemic, many employees were forced to leave the office and work from home on inadequate internet which impacted job efficiency. This was a major economic blow to many retailers and businesses who depend on the scalability and consistency provided by an established call center.

More importantly, the pandemic has been a case study in the effectiveness of brick-and-mortar call centers. They are susceptible to natural disasters, which deeply affect the well-being of support agents and can cost your business dearly. Not to mention that the lack of social interaction has taken a toll on the agents’ mental health. 

Contingency plans must be in place in order to make sure that the unexpected doesn’t cost you millions in customer neglect. Better yet, explore distributed outsourcing models like the Human Cloud Network or intelligent agents.

4- Inflexibility
Today’s businesses require flexibility from their outsourcing partners. You never know when a marketing campaign will go viral and ticket volume will surge, nor can you forecast staffing needs 6 months in advance (during a very uncertain past couple years!). Call Centers can end up being much costlier than negotiated because of rigid minimums, SLAs, and requirements (ie overtime during an unexpected surge). It’s better to select a partner that prioritizes flexibility and doesn’t charge for the unexpected.

Call centers may cost more than you bargained for

Sometimes outsourcing with a call center presents hidden costs that don’t appear until it’s too late. These include outdated SLAs, time of ramp-up, lack of contingency plans, and inflexibility.

With Simplr’s NOW CX solution, premium brands are eradicating customer neglect, turning browsers into buyers, and turning customers into fans. It’s an outsourcing solution that has today’s customers in mind!