Why outsourcing customers are terminating their call center deals

No longer content with simply lower costs, call center outsourcing buyers are looking for providers to deliver emerging technology and improved business outcomes as well.

outsourcing call center ts

The contact center outsourcing industry has always been subject to greater provider churn than other areas of IT and business process services. Historically around a quarter to a third of call center deals up for renewal are terminated every year compared to just fifteen percent of non-voice contracts.

[ Related: 8 tips for choosing the right contact center for your business ]

But that termination rate has risen dramatically in recent years. Over the last two years, more than half of customers with end-of-term call center contracts decided not to renew their vendor relationships, according to recent research by outsourcing consultancy Everest Group, funded in part by business process and IT outsourcing provider TELUS International.

Meanwhile, those customers that decided to retain their providers often increased the scope of their deals—adding geographies, lines of business, or higher-value processes.

What’s going on, say Everest’s analysts, is that buyers have greater expectations from their call center providers today. No longer content with simply lower costs, they are looking for vendors that can partner will them to deliver improved business outcomes. They are seeking engagements that incorporate emerging technologies, automation, and big data analytics. And they’re showing the vendors who can’t meet these increased demands the door.

CIO.com talked to TELUS International president Jeffrey Puritt about the shifting dynamics in the call center outsourcing market.

CIO.com: Why are more than half of contact center deals being terminated?

Jeffrey Puritt, president, TELUS International: The global BPO industry, which has grown to $150 billion, has evolved significantly over the years. For most buyers, it’s no longer just a cost optimization play. Instead, buyers and their service providers are moving towards more engaged outsourcing models that foster strategic value creation. But getting there is not easy.

When the focus was more on cost reduction and risk mitigation, multi-vendor strategies worked well. But now [that] the focus has shifted towards business outcomes, buyers are expecting their outsourcing partners to address the entire business process value chain. This means adding more judgment-intensive, value-added services involving new technology, automation, or analytics, as examples. Call center outsourcing (CCO) buyers now expect their incumbent providers to go ‘beyond the obvious’ of the service-level agreement (SLA), especially after the first few years of the relationship. Contracts are not renewed because these relationships have failed to deliver meaningful, long-term, value.

CIO.com: How does this current state of provider churn impact customers in the short term?

Puritt: Having too many relationships can be counter-productive, because they each require time and effort to manage. As a result, buyers are looking to focus on fewer but more meaningful relationships. And while the end goal is more engaged partnerships, there are often pains along the way in the form of lost business for service providers and increased transition costs for CCO buyers.

That said, from an operational perspective, buyers already expect some level of transition stress at the beginning of any relationship. But if both parties are committed to a more engaged, meaningful partnership from the beginning, they can work together to proactively nurture the relationship to avoid value leakage. With the shift towards consolidation, there’s an opportunity to focus on building better, more comprehensive, outsourcing relationships from the start. The current industry trend towards consolidation is actually a good thing for both buyers and providers of CCO services.

CIO.com: There has been an evolution in the larger IT and business process outsourcing market from cost-focused, transactional relationships to those focused on long-term improvements and business outcomes. Is that taking hold in the CCO industry as well?

Puritt: The move away from a cost-focused relationship to a more business-outcome oriented one is already well underway in the CCO industry. And while it’s an exciting shift towards greater engagement, collaboration, and mutual business success, let’s not forget, outsourcing is still often about cost-savings.

The biggest hurdle is to stop focusing solely on costs-savings or cost avoidance. The evolved outsourcing relationship involves a lot more give and take. Service providers must deliver on the day-to-day operations while making time to understand the client’s overall strategic direction. And buyers must invite their service providers to the table, educating them on where the business is headed—even sharing more data and system access.

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