Customer Support is an integral part of a business operation, making sure that the customers have an available means of contacting the company to relay concerns about the products or services that they availed from the company. This is a crucial function that companies has to maintain to keep business with their clients. However, the cost of maintaining Customer Support is high and complicated that is the same reason that offshore outsourcing had flourished in the past few years. This is because the cost and the pressure of keeping it operational is generally lowered if the function is being contracted from a third party provider. E-Bay is not so much different from the companies that outsource customer support service. Considering the fact that E-Bay had significant growth of business since its inception in 1994, the demand for taking or their customers had been a great challenge for the company. Since 2002 the company has been experimenting on different outsourcing methods that would bring them bigger savings on expenses while meeting their required volume of customer assistance. Kathy Dalton, the Operations Director of E-Bay made a "three-tiered" outsourcing strategy proposal to CEO Meg Whitman in December of 2004. The focus of this case study to identify the key concepts and determine the risks involved in the newly proposed strategy.
The focus of this study is about the viability of the new strategy and apart from the fact that the outsourcing industry is currently on a hot debate between the business owners and the political community. The unrelenting growth of technology paved way for the growth of the e-commerce industry in which E-Bay is classified under such business category. E-Bay's ubiquitous nature of business and undeniable popularity among online shoppers got them on top of the e-commerce industry with an average annual revenue of USD9.154 Billion from 2007 to 2011 (marketwatch.com, 2012.). The number speaks for the success of the company and along with that is the immense market size, which E-Bay have to serve through Customer Service Support. Both the positive and the negative impacts of outsourcing to the business will be analyzed in order to assess if E-Bay's new outsourcing strategy would fit the company's business model and if they can anticipate positive results.
The proposed "three-tier" outsourcing strategy would actually work for E-Bay taking into account the different factors presented by Dalton in her proposal that are actually favorable to the company. First is the "tier" concept, Dalton classified the different types of General Support E-mails that the company receives in a month. The volume of less complicated support E-mails are less risky to handle. Therefore, increasing the volume of outsourced service offshore for the less complex support E-mails will enable the company to achieve its projected savings per unit and US$3 Million to the bottom line. Another beneficial factor that the tier one strategy could bring to the company is to reduce the volume that the local site is handling. Therefore, the cost of customer service operation in the local site would be reduced as well.
The same goes with the "tier two" strategy, although the savings is lesser than placing the volume farther offshore. The point of this strategy is that the emails to be processed in Canada service location is more complex than tier one, but cost-wise it is still 22% more economical than the local service site. Since the nature of support E-mails for Canada volume is more complicated than tier one, there should be an element of accessibility in the strategy. In this case, Camada is a perfect service location in which Dalton and the team can easily travel to and from any time needed. Another advantage is that the demographics of the location is similar to the local service location particularly language because Canada is also an English speaking country. Therefore, training and technical analysis needed for E-mail support would be easier to handle and will further lessen the volumes in the local site.
Finally, "tier three" which is the most crucial among the three tiers was proposed by Dalton to be maintained locally. This is because tier three involves more critical concerns such as billing. The most effective way of handling critical concerns is to concentrate it within the local service center. Since the resources needed for complex support E-mails are much more diverse and usually the local sites are the ones that has the facility to process. Reducing the volume being handled by the local site will also earn the company amount of savings in the cost. This is because the lesser the volume of E-mails to be served, the lesser the number of people the company needs to process to process them. Critical E-mails involve sensitive customer information to deal with. This is a situation when security is in question and to protect the customers from fraudulent activities online. It would be more feasible to process their concerns in the local settings where legislative policies and are well enforced when it comes to information security breach.
However, there is a notable problem with Dalton's proposal because she is aiming to add 20% more of the trust and safety volume to be outsourced in order to comply with the 50% target. Instead of risking security in the Trust and Safety division, it would be better to place the 20% volume to Canada service site as well. It was mentioned earlier that travelling to Canada service center would be easier than it is farther offshore. Therefore, the 20% additional outsourcing for Trust and Safety should be handled by Canada site instead. Another problem is the man power that E-Bay has in the local site that handles General Support volumes. If large percentage of the volume would be outsourced. It would mean marginal reduction of staff needed in the local site, which is the main point of several groups that are against outsourcing.
Outsourcing, drastically reduce the amount of opportunities available for the local citizens. Legislators are debating with business owners of such implication to the local job situation in the country. The fact that Dalton is planning to include percentage of the Safety and Trust volume to be outsourced there is also a risk of the standards being compromised. Although the company is posing significant increase in revenue. There would also be a possibility that it might be affected by the outsourced party's non-compliance to the service standard. If there would be a transfer of service E-mail volume offshore, E-Bay would also need to pay additional money for additional infrastructure in the remote site. This is because in outsourcing, the scope of work agreed upon by the third-party provider is only limited within the conditions predefined by the contract. Therefore, there is a lack of flexibility in outsourcing, which is also important when there is a change in the business model (Jazoap, 2011).
On the part of E-Bay CEO Meg Whitman, there are several management concerns that outsourcing entails. Number one concern would be customer security, fraud prevention, customer trust, quality, technology platforms, skills and competency of the customer service staff that the outsourced party has. Even though Businesses Processing Outsource impose standards based on client requirements, there is still no guarantee of 100% compliance. Customer Support is detrimental to E-Bay's growth, phone support is more expensive as compared to E-mail support. This is also the basis of Dalton's proposal to increase the volume on this channel because of the money they will save on E-Mail support. However, the integration of self-help and tutorials in the website helped reduce the number of E-Mail volumes that they need to process. Dalton is correct in proposing the strategy because it does not only diversify the options for their customers to connect, but it also keeps the relationship between the company and the customers intact. Having a bigger force in Customer Service whether outsourced or locally provided streamlines the service delivery system of any company particularly E-Bay.
Jazoap, (2011, May 5). The Positive and Negative Effects of Outsourcing. Outsourcing Autopilot. Retrieved July 5, 2012, from http://outsourcingautopilot.wordpress.com/2011/05/05/the-positive-and-negative-effects-of-outsourcing/
Marketwatch.com (2012). Annual Financials for eBay Inc.. Market Watch. Retrieved July 5, 2012, from http://www.marketwatch.com/investing/stock/ebay/financials