Onshore, offshore, nearshore... whyshore?

Outsourcing – contracting of work with the intention of increasing the efficiency of an organisation or reducing costs – has been around for quite some time now. What is new however is the global nature of outsourcing. Since the 1980s, industrial activities have been outsourced ‘en masse’ to countries such as India, China and South Korea. The IT sector in India has experienced an average 28 percent growth per year during the last five years. Outsourcing to other countries (offshore) is a realistic option for many organisations, but can also cause some specific problems.

Outsourcing stands for the contracting of a particular company process in order to realise a saving of costs or an increase in efficiency. The term ‘company process’ can be widely interpreted. In fact, anything can be outsourced including software development, bookkeeping, production processes and service desks. Implicitly there is already a lot being done in organisations in terms of outsourcing, without actually using the term. Consider the company that comes to clean your office or the caterers who look after the meals in the canteen.

Onshoring, nearshoring and offshoring

Outsourcing can take place on home turf or overseas. By outsourcing at home, or rather onshoring, companies can keep the contracted services close by, making it easier to keep track of them. However, in that case less money is saved on taxes and salaries. From a European perspective, nearshoring, outsourcing in the Middle East or Eastern Europe, often means lower labour costs and taxes, but processes are kept relatively close to home. Offshoring on the other hand mostly takes place in India and other Asian countries. This region is a favourite destination for outsourcing, thanks to the extensive infrastructure that has recently been established, the relatively low labour costs and taxes, and the plentiful supply of educated ITers. This is of course ideal for large organisations that wish to cut costs on a large scale.

For many larger organisations offshore outsourcing is thus a realistic option, also in the service management sector. That is why in a country like India, 80 percent of the fastest growing sector, the services sector, is made up of outsourced services.        

Offshore outsourcing of service management

Once the decision has been made to ‘go offshore’, numerous factors need to be taken into account, which will ultimately contribute to the success or failure of the venture. These include language, availability of educated employees, available infrastructure, work climate, (company) culture, wages and taxes. One factor certainly not to be underestimated in the service management sector is the communication between the caller and the service desk. Various reasons can be attributed to the frequent ‘miscommunication’ that occurs.

One possible cause of miscommunication is insufficient training. When service desk employees are not sufficiently trained in the workings of company processes and other company related affairs, they may experience difficulties understanding callers and vice versa.

Secondly, miscommunication may arise from certain values attached to language use. Whilst a service desk employee may speak English, he or she may interpret and use certain words differently. Apart from the standard capacities that employees need to assist a caller, the ability to adopt accents and language nuances is for many a central issue. IBM has tried to tackle this by developing a web-based training program whereby service desk employees, alongside learning the correct grammar and vocabulary, are taught to speak with a specific accent to be applied in practice.

Cultural differences, in the realm of hierarchy and directness for instance, can also contribute to miscommunication. In some countries, workers are used to being told what to do, with little room for own initiative and decision-making. In some cases help desk employees are given a basic script, which leaves them little or no authority to improvise. ‘Western’ conversation partners however demand a faster solution and one that has been carefully considered. The caller expects the service desk employee to be able to think along the same lines, yet this is not possible without deviating from the script. One way of preventing this is by looking to outsource much closer to home, in other words nearshoring. In the United States for instance, customer-centric services are often outsourced to Canada where it is cheaper for the organisation to operate, while the language is the same and cultural differences are much less pronounced.

In some cases the media can also contribute to miscommunication and even instil a negative perception of offshore outsourcing. Mid last year the Australian Broadcasting Corporation (ABC) TV claimed that its reporters were offered the personal information of many Australians from customer databases in India, including bank account and passport numbers, and credit card details, in exchange for as little as $AU 10 (about 6 euros). Such events can lead to a decrease in trust of consumers in the offshore managing of information. 

Customer satisfaction

The potential for organisations to be accused of ‘hiding’ the fact that they have offshored certain departments also exists. The slightest provocation (of a language or cultural nature) can be reason enough for a caller to complain about the offshore help desk they are dealing with. Just as Outsourcing Monitor.eu (a platform for outsourcing for European organisations) indicates, the following principle often applies: the more the form of service management is geared towards the client, the more sensitive the client tends to be to the location from where the service is being delivered.

A lack of understanding from many customers seems to exist as to why services cannot simply remain onshore. The problem is related to the prejudice that people have towards offshoring in the service management sector. When American company Delta Airlines recently decided whether or not to go offshore, they investigated to what extent their clients would want to communicate with offshore service desk employees. Nearly 80 % expressed a hesitancy to do so and almost half admitted that they would rather pay a small fee in order to speak with an ‘American’. However unjustified, this does indicate that callers are reluctant to speak with a foreign help desk employee, even before they actually contacted them. On the other hand, a study by Ventoro, a prominent research and consulting firm revealed that although many clients show initial aversion to the idea of outsourcing offshore, when faced with the situation of actually speaking to someone overseas they are hardly bothered.

Outsourcing service management services offshore can provide organisations with numerous advantages. Costs can be saved, employees can be hired more easily and are less expensive, it opens up the possibility of expanding the company’s activities, etc. Even so, it is important to keep a close eye on customer satisfaction, as the customer’s attitude towards offshore ou tsourcing in the service management sector is often sceptical at first. Effective communication between the caller and service desk employee is therefore vital for a successful outsourcing venture.