Abroad and back -- outsourcing the wrong move for U.S. firm

Sometimes a move offshore or "nearshore" is just the wrong move. One tech firm in the U.S. brought jobs back home after a failed experience abroad.

What Joni Mitchell and countless others have said is so true: "You don't know what you've got 'til it's gone."

Gary Griffiths didn't exactly pave paradise and put up a parking lot, but the president and CEO of Everdream Corp. did outsource a call center to a provider beyond the U.S. border. It was a bad move, but not a totally bad experience.

The decision to outsource

Everdream, based in Fremont, Calif., provides customers with remote desktop management services: new applications, updates, patches, antivirus, backup –-- the works. The company also has a help desk that's always open. A couple of years ago, Griffiths considered the help desk a nice service to have, but he didn't think it was Everdream's bread and butter. In fact, the help desk call center, which was in Charlotte, N.C., was turning into a hindrance.

"Our big concern was our ability to keep the call center growing with the customer base," Griffiths said. "We didn't think it was a core competency, and we didn't want to be bottlenecked by our ability to hire." So Griffiths and his team decided to shut down the Charlotte call center and outsource the work.

Cost was not the driving factor, and Everdream's Request for Proposal package did not request an offshore location. "We wanted a firm with call center experience that was large enough to provide scale," Griffiths said. The service provider that Everdream picked gave them three geographic options for a call center: the U.S., Manila and Costa Rica.

Do you know the way to San Jose?

"We picked [the one in] Costa Rica near San Jose -- it was attractive in terms of cost and breadth of capabilities, and we felt more comfortable with the logistics of travel and infrastructure," Griffiths said. The company and the country both had come highly recommended.

Fifteen people were brought up to Fremont and spent the next four months training, then working under Everdream's supervision. Those 15 agents then went south -- back to Costa Rica to train other call center employees the Everdream way.

And that's where things went south in the figurative sense.

If customers called and heard an accent, they figured it would be a bad experience. Even though there were improvements over time, the [negative]perception was there. 
Gary Griffiths
CEOEverdream

"We were sure it would work," Griffiths said. "But when they [the original 15 agents] got away from our people and had to be trainers themselves, the process broke down."

The call center in Costa Rica supported other companies in addition to Everdream -- there was an assembly line "move 'em through" idea of customer service as opposed to Everdream's highly hands-on approach. This clash of philosophies and a second wave of agents (the ones who had not trained in California) who struggled with conversational English proved a bad combination.

The customer complaints began almost immediately.

"If customers called and heard an accent, they figured it would be a bad experience," Griffiths said. "Even though there were improvements over time, the [negative] perception was there."

Three months later, Griffiths knew he'd made a mistake. The real clincher, he said, was when he realized the labor just wasn't there. Considering the promise of scalability led Everdream to Costa Rica in the first place, the shallow talent pool proved an untenable situation.

"It [the talent pool] was not what it had been reported to be. We couldn't find the right number of agents with the right level of skills," Griffiths said. The training was taking much longer. Productivity was hurting. Something had to be done. Everdream was about to "do a Dell" and pull out; Dell Inc. famously re-routed tech support calls from India back to the U.S. last year after customers complained of poor service.

Do you know the way from San Jose?

Griffiths said that initially he didn't tell the partner that Everdream was pulling out. Instead, it was a gradual process; Everdream stopped hiring in Costa Rica and started hiring in Charlotte again, giving many ex-employees their old jobs back. The outsourcing deal wound down over a six-month period.

Lessons learned

Griffths said there are four lessons CEOs and CIOs can learn from his experience:

1. Don't skimp on customer satisfaction. Losing customers will make any cost savings seem trivial.

2.Weigh productivity losses against cost savings. Griffiths discovered that Costa Rican agents worked for less, but U.S. agents could handle twice as many calls.

3. Beware of hidden costs. Make sure you know the management and infrastructure costs of the call center. Is the power grid as reliable as it is stateside? Do the phone lines work well? Griffiths said phone static garbled about 10% of the calls. He didn't anticipate that.

4. Be aware of the cultural issues. It's important that the work culture and professional philosophies of the two companies are on the same page. In Everdream's case, a service business had no place in a high-volume call center. 

So wasn't the outsourcing partner a bit peeved? "They understood that objectives weren't being met," Griffiths said. "They were supportive and great to work with through the process." The split was so amicable that today, each firm subcontracts for the other. "We both agree [that] this was just a misfit," Griffiths said. "We are a consultative and analytical service that didn't translate well into a standard help desk call center."

So is Everdream spending more now that its call center is back in the U.S.A.? It took some extra cash to pay for transition costs, but overall the company isn't spending any more money thanks to the productivity factor. "Our overhead has dropped, and labor is actually lower on a per-call basis," Griffiths said.

Chris Selland, vice president of side sell research at Aberdeen Group Inc. in Boston, said that Everdream was lucky to have a happy ending to its outsourcing story, but warned that the book may not be closed yet. "It will be difficult to measure the long-term damage to their customer relationships," he said.

Like a college kid with a backpack, a passport and a semester off, Everdream took a long journey to discover itself. In this case, the company discovered that the help desk is a core competency, a "special sauce," a strength that should not be outsourced. "We learned a lot about ourselves," Griffiths said.

The offshore debate

While Griffiths has decided that offshore outsourcing is not for Everdream, he is not ideologically opposed to it. "I don't think it's evil or detrimental to the U.S.; it has and will continue to play an important role in the U.S. economy," he said.

Given the fact that it's turning into a hotspot on the campaign trail, any offshore failure will just prime the pump of partisan politics. This puts an even greater onus on offshore companies to not fail.

Aberdeen's Selland said that there will be more failures, but that offshore companies need to keep focusing on delivering better service, not just cheaper service. "The market for cheap labor will continue to be a race to the bottom -- and appropriate only for the most cost-conscious, risk-tolerant companies," he said. "[But] I have no doubt that offshore providers will continue to become more -- not less – competitive.

"This is overall good for the economy but, of course, painful (in the short-term) for those who are displaced."

FOR MORE INFORMATION:

Aberdeen's Chris Selland said what happened to Everdream in Costa Rica could have happened anywhere. Click here to read why.

Gartner analyst Roger Cox predicts this will be the year of a big offshore failure -- one much more nightmarish than Everdream's. Click here to read why Cox thinks this will happen.

What are your outsourcing plans for 2004? Take our survey, and tell us.

Many more IT executives are satisfied with their offshore experiences. Click here to read more.

Wharton Business School thinks offshoring can be a double-edged sword. Check out this article: Offshoring: The world can be your oyster -- or clam.

Meta Group weighs in with The top 10 risks of offshore outsourcing.

Got a question about offshore outsourcing? Ask our expert.

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