Frontier Airlines continues to get it right on outsourcing

* Keeping customer related functions in-house is key

Back in September I praised Frontier Airlines for their decision to keep their customer call center in-house. A reader recently brought to my attention that in early November, Frontier decided to outsource their revenue accounting function, which resulted in 50 layoffs. I think Frontier has exactly the right idea about what to outsource and what to keep in house.

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Back in September I praised Frontier Airlines for their decision to keep their customer call center in-house. A reader recently brought to my attention that in early November, Frontier decided to outsource their revenue accounting function, which resulted in 50 layoffs. I think Frontier has exactly the right idea about what to outsource and what to keep in-house.

I am still amazed that so many companies have chosen customer facing organization as a good candidate to outsource. As I have said before, simple support functions after the sale are a good candidate for outsourcing or offshoring. But customer interactions at the point of sale or complex technical support should be performed by in-house staff with a stake in the game and a management chain that has clear authority to make decisions for the business. Staying in control of point of sale customer interactions or technical support interactions is the best way to ensure customer satisfaction. This is why Frontier has kept those functions in-house.

Revenue accounting operations, on the other hand, do not touch the customer. It's important they're done accurately to stay in compliance with Sarbanes-Oxley, to pass audits, and to make good businesses decisions. But this is a very specialized expertise that can easily be handled by an outsourcer. Frontier had outsourced this function in 2002, then brought it in-house. They have experience with both modes. They have determined that it is far cheaper to let specialists outside the firm handle the function. They appear to be using sound and consistent judgment with respect to which functions to outsource and which are key to keep in-house.

As organizations become more experienced with deciding what to outsource and what to keep in-house, outsourcing and offshoring of customer facing functions will slow. Check out this recording from earlier this year from NPR on slowing call center outsourcing. Several companies clearly articulate the challenges with offshoring include having to make cultural adjustments. They also discuss the problem with scripting complicated support functions rather than have more knowledgeable employees in the loop.

NPR also raised the subject of “Home Shoring,” using work at home American workers who can be as much as $10/hour cheaper than office based call center workers. This is covered further in a second show that is also worth a listen – ‘Home Shoring' an Antidote to U.S. Firms 'Off-Shoring'?. Cultural issues are eliminated and costs are still reduced. Home Shoring is being done as a way to staff U.S.-based outsourced call center providers as well as companies that choose to run staff in a home based way. JetBlue, like Frontier, decided that more control over the call center was important to customer service and have used the Home Shoring model.

What is most interesting to me is that large major carriers like United, Delta, and others have addressed their financial problems and bankruptcy situations by going offshore with their customer facing call centers, while the upstart carriers like Frontier and JetBlue are valuing customer service and finding other ways to be cost conscious. These smaller airlines are also putting more emphasis toward onboard entertainment and other customer focused initiatives. Yet these are the low cost providers. They outsource things the customers do not see and use other backoffice automation to be more efficient behind the scenes to keep costs down. But they spend a bit where it matters…on the customer experience.

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