Consider the Source

Contact Center Outsourcing Consolidation- Where Are the Benefits?

By: Mike McMenamin, Associate Partner & Director, Contact Center Services, TPI

  In the past 3-5 years contact center outsourcing, a $60 billion market, has experienced significant consolidation. Here is a timeline of how the consolidation progressed:

1. Stage 1: (10 -15 years ago) -  Large buyers of contact center outsourcing services, i.e. Fortune 500 firms with more than 500 agents (many with more than 1,000), initially outsourced for cost savings and to reduce large employee populations of agents; moved work out to one or two service providers.

2. Stage 2: (5-10 years ago) - These same buyers realized that using multiple service providers created ongoing price and performance competition; workload was split between multiple service providers (sometimes as many as 10 based on their size).

3. Stage 3: (3-5 years ago) – As a significant portion of the work portfolio has migrated offshore and all major providers have established a global footprint of some kind, buyers have begun to consolidate their stables of multiple service providers.   They see and realize the benefits (i.e. knowledge transfer, global standard processes / tools / technology, improved global account management) of moving toward fewer and usually larger, more capable service providers. 

In this market, the Tier-1 service providers have been the beneficiaries of this move towards consolidation on large accounts.  The large telecommunications companies (Sprint, AT&T, and Verizon) have consolidated and now rely on two to three major providers, as opposed to 10 different firms in the past.  Firms like GM and HP (with > 5,000 agents) have also consolidated using a smaller number of service providers.  This allows the buyers to move their workload around the globe (onshore, offshore, nearshore) with a single service provider as their markets, demand, and business priorities change from year to year.

When Should Government Work Be Outsourced?

By Daniel Jones, Partner and Director, Public Sector

Professional service contracts are a relatively small part of the services brought in by governments, but the impact can be high and widespread use of consultants can quickly result in a very large expenditure on presentations and reports. To curtail this practice, the Department of Homeland Security recently announced a workforce assessment initiative reviewing all professional services contracts exceeding one million dollars before a new contract is awarded or an existing contract is renewed.

This raises an interesting question of what constitutes an inherently governmental function, particularly when looking at the wider question of Public Sector outsourcing.  A significant increase in government work was outsourced to private companies during the Bush administration as well as the Thatcher administration in the UK. There is no easy answer to the question of what needs to be done by public servants, although there are, at least at first sight, some obvious areas - policing, armed services, courts, taxation and border control, but all of these include activities that can and are outsourced, often to great benefit. Ultimately the answer as to where to draw the line on outsourcing will result from a political decision on the role of the private sector in delivering public services.

Some would argue that public services are special and that a sensitive public service should not be outsourced, but there are examples of great services delivered by commercial organisations for government, just as there are examples of exceptionally poor services delivered by public sector employees. The difference has generally to do with leadership, service design and levels of investment, rather than any difference in the motivation or values of public servants and corporate employees. Where the service is outsourced, a key determinant of service quality is the ability of the public sector to provide effective service management and governance.

Professional services are a lot less tangible than outsourcing and public sector organisations in all the major economies will be looking hard at the value they receive from their advisors - and rightly so.  In some cases they will undoubtedly conclude that the work should have been done by a government employee, or that they did not receive value for the money spent.

Not all professional services fall into this category.  There are some areas where external specialists, supplementing a skilled internal team, can make a very significant difference, particularly if they come with proven methods, in depth experience, and a wealth of detailed data to support their advice.

It’s a Government Thing

Shaun Daly of TPI’s Financial Analysis Services Group will be "blogging about the bottom line" this week.

Every business has industry-unique requirements that must be attended to when contemplating a business process change as significant as outsourcing.  State government is no different. 

If you haven’t noticed, the state government community is showing an increased level of interest in IT outsourcing and is focused on exploring the leverage potential in data center consolidations.  Several states have already contracted with service providers and several more are currently exploring their options.

From a financial perspective, it is imperative the outsourcing project team address the current and future budget process and ensure continued participation from all agency funding sources. With increasingly tighter budgets, grave security threats, inadequate disaster recovery capabilities, and an aging workforce, state agencies are turning to the market place for help as many currently manage and maintain independent IT shops without taking full advantage of the enterprise opportunities of the entire state.