Evidence shows outsourcing can weaken customer satisfaction.

Business researchers have studied Fornell's American Customer Satisfaction Index (ACSI) scores for companies that outsource some customer service functions -- and the evidence shows outsourcing does lower ACSI scores. Jonathan Whitaker, M.S. Krishanan, and Claes Fornell wrote recently in How Offshore Outsourcing Affects Customer Satisfaction, in the Wall Street Journal (behind paywall): "Are companies that send customer service abroad making a mistake? It's hard to answer that question without knowing offshoring's actual impact on customer satisfaction. Our research indicates the effect in most cases is significantly negative - but similar to the effect of outsourcing customer service domestically. That suggests companies shouldn't necessarily forgo the savings they can reap from offshoring. But if they're going to do it, they'd better do it right."

A recap from Michigan's Offshoring: Where's the Value? says "'U.S. firms that offshore customer service may save money on labor costs, but they also pay the price in terms of unhappy customers.... Firms are increasingly offshoring front-office functions such as customer service call centers and back-office functions such as information technology to manage their operations and achieve their strategic objectives, including expansion to new markets, access to global talent or improved efficiency,' said M.S. Krishnan, professor of business information technology at Michigan's Ross School of Business. 'However, the implications of offshoring from a customer perspective may differ depending on the functions that are offshored.'"

The researchers analyzed offshoring and outsourcing activities of 150 firms / business units from 1998-2006. They found that "offshoring and domestic outsourcing of front-office (customer service) functions result in similar declines for customer satisfaction. Prior work shows that the average ACSI decline is associated with a drop of 1 percent to 5 percent in a firm's market capitalization, depending on the industry."

Associated? Hmmm. This caught my eye: The researchers said "average ACSI decline is associated with a drop of 1 percent to 5 percent in a firm's market capitalization." OK, this is the kind of statement that sometimes blurs the line between real evidence and, um, who knows what. Is this simply an unexplained correlation? They didn't explicitly say it's a cause-and-effect relationship. But I'm not too crazy about the way they worded this, because IMO it implies something that probably doesn't exist.

Comments

[Engineering Services Outsourcing]

Interesting article...
something to think about.

[Redhuan D. Oon]

It really depends on what you are outsourcing. Softskilled stuff such that has maximum human touch with your customers should not be. That includes handling complaints and hand-holding.

What you can outsource are those back kitchen stuff such as further detailings of a matter. But how about a hybrid call centre that has your own people as frontline, and Hyderabad as the downline?