Customer Service Glossary

What Are Outsourcing Tiers? 

Outsourcing tiers are the different levels of outsourcing, which is the practice of hiring an outside party or service provider to complete tasks that were once performed in-house by full-time employees or staff members. 

Many companies strategically transition to outsourcing to cut costs, improve efficiency, and reallocate resources toward the functions that give them a competitive advantage over their competition. As a result, companies often reassign operational functions, such as customer service, technical support, call center services, and administrative tasks, to outsourced employees. 

Outsourcing tiers describe the different types of outsourcing available to companies. While some experts disagree on the number of outsourcing levels, most accept a three-tiered outsourcing model. 

Why Are Outsourcing Tiers Important for Customer Service? 

Outsourcing tiers provide companies with the flexibility, customization, and agility they need to move forward while providing their customers with a cohesive support experience.

Outsourcing does not take a one-size-fits-all approach. Instead, companies can outsource as much — or as little — work as they desire. Other benefits of outsourcing tiers for customer service departments include: 

1. Reduced Customer Support Costs

Studies show that outsourcing can reduce costs by 20-30%. By outsourcing customer service departments, companies can take advantage of lower salaries, reduced equipment and infrastructure costs, and fewer employee benefits, such as health insurance or paid time off.

In addition, contracted service provider organizations oversee the recruiting, hiring, training, and management processes.

2. Improved Efficiency

When companies hire a third-party service provider, they can take advantage of immediate access to an experienced talent pool.

Business process outsourcing (BPO) organizations ensure that their employees have the training and knowledge to take on customer and technical support requests across various industries, eliminating the need for lengthy training periods or departmental downtime. 

Further, outsourced call center associates have a single focus: providing rapid, high-quality customer or technical support. Because of this, in-house staff and management teams can focus on what they do best.

3. Enhanced Customer Experience

Finally, outsourcing can improve customer experience in several ways. First, customers can enjoy prompt, expert technical support from experienced associates.

In addition, clients can take advantage of call center assistance throughout every stage of the buyer’s journey. Finally, customers can contact trained customer service employees at any time of the day or night, which reduces wait times and improves satisfaction ratings. 

What Are the 3 Outsourcing Tiers? 

Outsourcing of any kind typically follows a three-tiered approach based on the level of outsourcing a company desires. The three tiers of outsourcing are as follows: 

1. Project-Level Outsourcing

During project-level outsourcing, companies outsource certain aspects of a project to third-party providers, such as developing a part for a new product.

2. Program-Level Outsourcing

Program-level outsourcing includes outsourcing various projects within a program, such as product development functions.

3. Division-Level Outsourcing

When a company transitions to division-level outsourcing, it hires a third-party group to oversee an entire department.

For example, a company may eliminate its in-house customer support call center to an offshore organization based in India to improve efficiency and reduce costs. 

Factors to Consider Before Outsourcing

Companies have to consider countless factors before outsourcing, including: 

1. The Nature of the Work

Companies rarely transition their core functions to outsourced organizations. Instead, they may eliminate staff who perform administrative and support functions, such as customer service, project management, or bookkeeping services.

2. The Cost-Effectiveness of Outsourcing

Typically, companies transition to outsourcing to cut costs. Businesses can take advantage of lower costs of living in offshore countries and reduce salary expenses by as much as 30%. Further, businesses don’t have to rent, purchase, or build extra office space to house their customer service departments.

3. The Ability of the Service Provider

While most businesses see the advantages of lower customer support costs, they still need to provide their customers with experienced, reliable service. With this in mind, companies should consider a service provider’s track record and training processes before initiating a partnership.

Why Companies Use 3-Tiered Outsourcing for Customer Service

Three-tiered outsourcing provides companies with the flexibility and personalization they need to provide their clients with consistent, reliable, and high-quality support. That said, each business has different needs and expectations. 

As such, each business needs to consider factors like the nature of the work, the costs involved, and the ability of the outsourced organization before transitioning work at a project, program, or division level.