Before the offshore call center went live last June, Everdream trained 15 Costa Ricans from Sykes in the United States, intending to have those call-center representatives train more individuals back in Costa Rica. In the meantime, there would be a mix of U.S. and offshore operators, with callers sometimes getting the Latin American center and sometimes a U.S. center.
The results were disastrous. Some problems involved a poor reaction by customers to the Spanish accents of the Costa Rican operators. But the bigger problem was that the training the Costa Ricans received clearly had not brought them up to the skill level of their U.S. counterparts. "Any savings we saw in lower salary were outweighed by the loss of productivity," says Griffiths.
The problem wasn't just how long the calls took. "Our experience was dismal," and went way beyond language barriers, says David Boatman, CIO of Charlotte-based Sonic. "We have 200 controllers in our dealerships around the country — basically junior CFOs. They're running a major operation, and they don't have a lot of time." They certainly didn't want questions like, "Is your computer plugged in?" or "Is there a floppy in the drive?" coming from a help-desk operator. Yet Boatman says it was that kind of "level-one" response the Costa Rican center gave, delaying the critical answer that Sonic people wanted: Is this problem caused by a user, or is it a warranty issue?
"It got so bad I couldn't keep up with the complaints," says Boatman. "My interest was in stopping the carnage. The last thing I want to do is worry about PCs. They're his business," says Boatman, referring to Griffiths, "but they're the bane of my existence." A devoted Everdream customer — then and now — Boatman quickly passed Sonic's complaints on to Griffiths.
With complaints like Sonic's pouring in, Griffiths canceled the Costa Rican project and began repatriating the help desk after just three months. "We felt that if we didn't take significant and rapid action, we would seriously jeopardize our customer base," and Everdream's entire business. Upon review, it became apparent that callers were hanging up when a Costa Rican answered the phone — and calling again to try to get a U.S. operator.
Fortunately, Everdream's outsourcing provider supported the company's decision. Griffiths says he holds Sykes blameless, and Everdream continues to do other business with the firm: "They were disappointed, too, and were 100 percent behind us in our decision to pull out."
Where's the Light Switch?
Getting out of an offshoring deal gone bad isn't always so easy. "There are many traps for the unwary," warns Mike Conza of Boston-based law firm Testa Hurwitz & Thibeault LLP. Even when things seem to be going well — as they did during Everdream's early training sessions — Conza advises his clients to install safety valves. "Put your offshore operation on a short leash, and fund it only on a month-to-month basis at first," he suggests. If outsourced work belongs within a cost center rather than a revenue center — usually the case in early offshoring arrangements — the penalty from pulling back will be less severe if the proper contractual exit provisions are in place.
"If I had a disaster," says Conza, "I'd want to be able to shut off the lights as soon as I could." In Everdream's case, more and better training could have corrected the situation, acknowledges Griffiths. "But if the learning curve had to be longer, we just couldn't afford it." Everdream's up-front fees for infrastructure, security, training, and flying trainees and executives back and forth, he reports, represented two to four months' worth of operating expenses — a ratio that appears typical for such small projects.
To be sure, many offshoring ventures end up as financial flops. Although 42 percent of those surveyed by CFO reported savings of more than 20 percent, 10 percent of respondents reported no savings at all. And companies much larger than Everdream have learned similar lessons. Last November, for example, Dell Computer closed down a Bangalore call center servicing high-end Optiplex desktop and Latitude notebooks, returning its help lines to Texas, Idaho, and Tennessee because of what Dell said was dissatisfaction with the level of support customers had been receiving.
In the end, Griffiths says, Everdream's experience hasn't soured him on the idea of offshoring. Instead, it has taught him valuable lessons about both outsourcing and Everdream's perception of itself.
"At the end of the day, we learned what was important for our customers, and the esteem they placed us in for the level of service we'd been providing through the help desk," he says. "We thought [the call center] wasn't a core competency for us, but our customers taught us that it was."
Roy Harris is senior editor at CFO.
Avoiding the Pitfalls
Tips for arranging offshore operations through a vendor.
- Design an exit strategy, such as month-to-month contract terms, for the early stages. Allow yourself to back away if goals aren't met.
- Level with employees about U.S. job reductions and cost savings, emphasizing competitiveness and any opportunities for new jobs.
- Avoid making your company's core competencies dependent on offshore operations.
- For processes being relocated offshore — whether simple or sophisticated — make sure results, quality, and worker performance can be precisely measured. Then measure them.
- Monitor the work being done for security lapses and performance, preferably by putting some of your own managers on-site.
- Consult international-law specialists about the tax and labor laws that apply where you will be operating, particularly if you are setting up an offshore subsidiary. (For example, in India employees have certain "moral rights" to the property of their companies, unless a contract expressly deletes them.)
- Review U.S. accounting regulations pertaining to offshore operations, such as Statement of Auditing Standards No. 70, "Reports on the Processing of Transactions by Service Organizations."
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