"PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN!"

Anyone who's read The Wizard of Oz or seen the movie knows that the quote comes from the alleged all-powerful "wizard," who turns out to be a humble elderly gentleman. He conducts his business behind the scenes, the same way that outsourcers assist your customers. But unlike the doddering wizard, outsourcers (or service bureaus) go out of their way to be accessible and helpful. They work with you to provide the service your organization requires.

To be sure, many companies say that their experiences with outsourcers have been less than ideal. In the November 18, 2002 issue of sister CMP publication InformationWeek, the article entitled "Analyzing the Outsourcers" includes a survey of 700 IT professionals who evaluated the performance of their outsourcers. Nearly half of the survey's participants said that managing a working relationship with outsourcers, including negotiating service contracts and keeping contact with outsourcers to ensure that they're providing good customer service, was too time consuming.

But the client companies we interviewed all maintain daily contact with outsourcers, typically with a quick phone call. They call their outsourcers to check on issues, like their performance statistics; or to notify the bureaus about new products and services they'll need to provide customer service for. The clients visit their outsourcers on-site annually or semi-annually to deliver updated training on those new products and services.

The companies also consult outsourcers during their on-site visits about new technologies or processes they might want to use. For example, if a client and outsourcer agree to use new order fulfillment software, the outsourcer needs to install the app and train agents on how to fulfill orders. By visiting the outsourcer on-site, the client and outsourcer can effectively work together to complete the job as quickly as possible.

Another issue the 700 IT professionals raised was the hidden costs of outsourcing; 38% of them complained about unexpected expenses after signing contracts with outsourcers, like additional charges for labor and software licenses. The outsourcers we interviewed explained, however, that because their clients' needs seldom remain the same, the pricing for outsourcing services can also change.

But if a company isn't satisfied with its outsourcing partnership, doesn't that company bear some responsibility? Tim Houlne, CEO of Working Solutions (Plano, TX), says yes. In addition to managing an outsourcing firm, Houlne, also a member of Call Center Network Group (CCNG; an organization for call center managers), has spoken with many managers about how to work with an outsourcer effectively.

"You need to know what technical capabilities you need when you engage an outsourcer," says Houlne. He adds that by addressing technical requirements before you sign the outsourcing contract, such as media (phone, e-mail, Web chat, etc.) and agents' desktop apps, you're less likely to encounter unexpected expenses.

If you manage your own call center, odds are you already have an annual budget to cover costs, including software licenses, Internet service and your center's network. You can employ that budget to estimate the cost of the technologies the outsourcer will need. "When you're ready to outsource, you have to think of it in terms of, if you were to open another call center, what would you do?" says Houlne.

Houlne's advice applies equally to determining how much both you and the outsourcer must spend on human resources. To maintain consistent customer service, the outsourcer will probably require as many agents as you do at your center.

"You can't expect the outsourcer to pull a rabbit out of a hat," says Houlne. "If 70% to 80% of your calls end up in queue and you need to ramp up agents, you need to understand that that's what the outsourcer needs to do as well."

Houlne sees a growing number of in-house call centers working with outsourcers. And so does Frost & Sullivan. The market research outfit forecasts in a new report, "North American Outsourced Contact Center Services Market," that outsourcing revenues will hit $25.7 billion by 2009. That's a gain of 17% from the $22 billion attained in 2002.

Fueling much of the current growth are bargain-basement prices. Kowal Associates President Paul Kowal notes in our February 2003 feature, "Thinking Through Outsourcing," that outsourcing prices slid by 10% to 15% in the past year. Hourly rates now average $24, versus $27 a year ago.

Underpinning outsourcing's growing popularity is not only favorable pricing, but also flexibility: Most service bureaus handle overflow calls during peak call volume seasons; and they offer customers service after business hours.

Below, you'll read how two companies, CenterPoint Energy Minnegasco and LogiTech, balance customer service between outsourcers and in-house call centers.

By outsourcing, you can forego managing part or all of your calls. For example, Direct Marketing Services, Inc. (DMSI), International Masters Publishers and the department of Toshiba dedicated to hand-held PCs, successfully transitioned from providing customer service in-house to outsourcing entirely.

To learn more about how to establish profitable partnerships with outsourcers, keep reading. Here's a peek behind the curtain to show you how service bureaus do their magic.

TOSHIBA GETS A FIRM GRIP ON TECHNICAL SUPPORT FOR HAND-HELD PC PRODUCTS

When consumer electronics titan Toshiba debuted its line of PDAs (personal digital assistants) in 2001, the company followed the same strategy it used to provide technical support for other PC and PC-related products: hire an outsourcer. Toshiba was uncertain about what technical support questions PDA users might ask, so the company looked for an outfit that would know what questions to expect and how to answer them.

Toshiba found Telvista (Dallas, TX), a service bureau that handles support for wireless PC devices on behalf of another electronics firm. Jim Ryan, project manager for Toshiba, explains that Telvista had the experience to estimate support call volumes among PDA users.

"We forecasted how many units we would sell, but we didn't know how many calls we would generate," says Ryan. "Telvista had some of that mapping done based on similar products."

Since agents at Telvista already had experience resolving technical support issues for PDAs, Ryan says they required little additional training to assist Toshiba customers. He visited agents at Telvista's Marlborough, MA, call center to instruct them on the features of Toshiba's Pocket PC product line and on how Toshiba handles standard processes, like billing and product returns. Telvista began answering calls for Toshiba in November 2001.

By May 2002, Toshiba and Telvista set performance goals for Telvista agents, factoring in prior call abandonment and first-call resolution rates with Toshiba customers. As an incentive to meet these goals, Toshiba reduces Telvista's monthly fee when agents fall short of them and pays a bonus when agents surpass them. Ryan says that more often than not, Toshiba pays the bonus.