Why Offshoring and Customer Facing Functions Just Don't Mix
Corporations are always looking for ways to reduce expenses. What organisation, big, small or otherwise, would not want to have the ability to cut costs by more than 50%? Who would not want an army of cost-effective workers at their immediate disposal?
Looking at these factors, the benefits of offshoring are undeniable. The numbers do not lie. Nonetheless, for customer-focused functions, specifically within the finance and accounting sectors of business and within areas such as accounts receivables and collections, the benefits of offshoring can come with a hefty price tag. Namely, the most priceless commodity a company has, its reputation. The shortcomings of offshoring can be disturbing, ranging from issues with language barriers, demographic cultures and time zones to the shear resistance from both in-house management and customers. For many companies, the cost savings, although well-proven, may not be worth the difficulties encountered with transition. After all, keeping customers happy is paramount for good business.
Today, more and more organisations are looking to offshoring to reduce costs and, by and large, customers have come to accept this fact, although somewhat begrudgingly. Customers often have complaints ranging from the difficulty of understanding foreign accents, to feeling as if the person on the other end of the line does not fully comprehend the business situation. For customer-facing functions, companies are hearing a range of complaints and reputations are starting to suffer. No amount of labour savings is worth the potential of losing customers.
What is the best solution for the companies concerned with their bottom line, while also focused on providing superior customer service? For this growing breed, the answer is onshoring. Like offshoring, onshoring is targeted at reducing costs. Rather than moving jobs to foreign countries, the jobs are ‘moved’ to providers with the operational excellence to reduce costs though technologies and improved skill sets. Onshoring involves outsourcing of activities to the non-metro areas in the same country as the clients, where labour, technical and other operational costs are low.
Rural areas within many individual countries offer skilled employees that understand the culture but can offer considerable labour savings. There are talented employees in many smaller communities who offer strong business skills at a price reduced from those based in major metropolitan areas. Keeping the business nearby allows for ease of communication among providers, companies and customers.
D3Publisher of America, Inc. (D3P) (subsidiary of D3Publisher of Japan – gaming software publishers) was looking to penetrate the US market. With the primary focus of setting up direct distribution with major retailers throughout North America, the primary focus was to establish an accounts receivable process suitable to handle the current volume of business and increased volume going forward.
Sales took off quickly when D3P of America started US operations and the company quickly developed solid, direct relationships with several major retail customers selling video games and console equipment. This huge growth led to demands that stressed D3P’s infrastructure. The company had an accounts receivable (A/R) department consisting of one person. Staff were focused on ‘front-end’ work, building the D3P reputation and helping to meet overall corporate objectives, and the goal was to alleviate the finance team’s workload so that they could focus on the overall accounting infrastructure. The key to this goal would be driving down the cost of its A/R infrastructure and improve processes through technology, all while maintaining the strong relationships D3P had started to build.
Two months after shipping D3P’s first product, it was clear that a single person could not manage receivables for the order volume experienced by the company. They could not handle their current collectables, let alone the anticipated growth. D3P considered building an in-house A/R solution, but it would have required the company to hire additional staff and invest additional capital and training to support the business. Due to the seasonality of the gaming business, hiring permanent staff would provide challenges throughout the year and unnecessary expenses. The company needed a strategy where they could have a team of people focused on working on their receivables and scale to the number of employees to cover the volume when needed while the start-up staff focused on the other aspects. D3P felt that outsourcing the credit and collections function would be the best alternative.
While outsourcing seemed an ideal solution, D3P wanted to make sure there would be no disruptions in their relationships with retailers, especially after they had worked so hard to build those relationships. The key to the outsourcing engagement centred on a seamless workflow of people, processes and technology. D3P was seeking a partner that would take the time to understand D3P’s business, the retail gaming industry, the companies they work with and, at the end of the day, produce measurable results. Working with a business processing outsourcing (BPO) partner that would onshore their A/R business fulfilled this need.
By outsourcing, D3P is able to focus on core competencies and not build internal teams to handle receivables management. They teamed up with a partner that is able to scale to their needs and offer the onshore services necessary to the growth of the company in the US market.
Beyond the tangible ROI benefits of working with an outsourcing partner, D3P can now focus upon improving systems and growing to the next level and beyond. The benefits of onshoring allowed D3P to work with a partner that had a good understanding of the companies with whom D3P works and the internal corporate culture. D3P could expand and grow their business in the US and keep their customers happy.
Onshoring is now a viable means of improving transactions, rather than the end function. The expansion of many key offshore providers into traditionally onshore deals, when combined with the significant growth in wider BPO projects, means that 2007 may be the year when offshore and onshore become inextricably blended.
Offshore delivery models have forced suppliers to become more price-competitive; clients are becoming more sophisticated and market savvy; and there are more ‘experts’ to advise on correct approaches. These factors, along with the development of a variety of alternative sourcing options, means that sourcing in 2007 and beyond is, and should remain, a buyer’s market. The key to success for companies considering offshoring or onshoring is now how they wish to position themselves in order to maximise the value of the outsourcing market.