• Technology
  • CFO Magazine

Making It Work

How to avoid some common offshoring blunders -- and what to do when you can't.

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.”

Discuss

Your email address will not be published. Required fields are marked *