ARO’s sweet success

In 1997, Michael Amigoni had plenty of reason to take his call center outsourcing company virtual. ARO faced turnover rates of 25% per year, costing the firm at least $87,000 annually to recruit and train its 50-agent staff. High turnover is a fact of life in traditional call center business, but because Kansas City is home to more than 90 call centers, Amigoni’s applicant pool was especially shallow. To stay competitive, ARO targeted clients in the insurance and financial sectors. But to win them, it required call center agents trained and licensed in those sectors, as well as licensed in states across the U.S. Last, to grow, ARO would need to move to a larger facility, which it couldn’t afford. It was already paying about $500,000 per year in facilities costs; about $5,000 per employee.

Transforming a traditional call center into a virtual one is no easy task. It took ARO five years.

First, the firm upgraded the technology. It uses an Avaya voice switch and contact center software from eOn Communications. For voice, at-home agents use a dedicated dial-up line for calls. The line is “nailed-up,” meaning it’s connected to ARO’s network at all times. For data, ARO’s proprietary intranet connects all agents to its data streams and IP phone.

Amigoni says he’s considered voice-over-IP equipment: “It’d save some extra line costs since agents could ride a cable modem for both voice and data. But I can’t buy the equipment that’ll support it at the quality I need. It doesn’t exist. There may be some Cisco stuff, but I think it’d be very expensive.”

With the equipment in place, Amigoni began running local print ads targeting baby boomers with the catchy headline: “Work without Pants.” The number of workers born between 1950 and 1963 is two and a half times the size as that born after 1973, which is the traditional market call centers have gone after, Amigoni says. With a new pool of work-at-home applicants, ARO began transitioning his staff.

At first, it sent one in-house employee home on a pilot basis, then hired two new baby boomers. After a year of sending both in-house and new employees home, ARO began hiring only at-home employees, let attrition dwindle the in-house agents, and converted its facility into a training center. The firm has also begun recruiting outside the Kansas City area, hiring two licensed insurance agents based in New Jersey.

Fast-forward five years. Today, all ARO’s agents work from home, and the company saves $1 million per year in operating costs over its previous model. Because the firm now attracts older, better-educated workers, turnover is down to 7%, saving about $126,000 per year. There are no overhead costs because agents supply their own equipment and communications lines, which saves $500,000 in facilities costs. ARO also reports a 15% productivity gain, based on the notion that tenured agents are more efficient call handlers. As such, the firm has reduced the number of call center agents from 100 to 85, saving an additional $375,000 per year.

Even with impressive numbers like these, ARO is the anomaly. Even in these tough times, don’t expect catalog retailers such as L.L. Bean or Spiegel to shutter their call centers and send everyone home. Too much money is tied up in the facility, either because the company owns it or is stuck in a long-term lease, Amigoni says. Today, the virtual model is best for expanding an existing call center – one of the many reasons outsourcers are thriving. It’s also perfect for new companies such as Jet Blue Airlines, which only has virtual agents, 600 in all.

Amigoni says the other reason call centers resist is one you’d expect. Managers are uneasy “when they can’t see the back of your head,” he says.

Next week we’ll look at Ineto, a company that provides hosted call center services.