We provide integrated solutions for investment managers to outsource their middle- and back-office functions. Our goal is simple — to make you more efficient.
OnCore enables you to select Asset Servicing technologies along an investment servicing continuum — from traditional software installation through business process outsourcing.
Our range of services include trade communication and processing, accounting, reconciliation, performance measurement, client billing, end client statements and data management and warehousing to create a comprehensive solution.
Outsourcing Services is one of the most effective strategies to help businesses navigate through times of turmoil and turbulence. It is one of the few processes that successfully address both the cost and revenue variables of the profitability equation. The ability to reduce cost and improve revenue is one reason why the global outsourcing industry continues to grow and prosper.
But not all outsourcing services arrangements end on a happy note. There have been arrangements which fell short on expectations and deliverables. If you are planning to outsource services, keep in mind these 8 mistakes clients make when outsourcing:
1. Lack of Research
In theory, outsourcing is an effective process for streamlining costs while enhancing revenue generation activities. But without proper research, the outsourcing venture may be doomed to fail.
Before you outsource, you should learn everything that you can about the process. In addition to online research, talk to businesses that have outsourced. Learn from their experiences and keep an open mind.
Do not be selective about the information you receive. You have to create an objective market study and gather reliable numbers for the financial study.
Create a project feasibility report and discuss its contents with your outsourcing team. The project feasibility report will be your reference point and should be subject to revisions when needed.
2. Prioritizings Pricing
Outsourcing reduces cost because you are capitalizing on comparative cost advantages and economies of scale. In outsourcing the largest cost advantage is in labor.
By outsourcing to remote locations such as the Philippines and India where the wage rate is approximately 1/3 of North American countries, you can potentially reduce costs by 40%.
But do not prioritize pricing. If you keep streamlining costs, you will arrive at an equilibrium point
where further cost cuts will compromise quality of work.
For example, if you get a proposal for US$4 per hour in India and the wage rate is US$1.50 per hour, how much would the service provider allocate to the other costs of production in order to make an acceptable profit?
3. Overlooking Cultural Differences
If you plan to outsource in remote locations, you have to be cognizant of cultural and social differences. Otherwise, there will be frequent misunderstandings and incidents of miscommunication.
Behavior, practices and traditions are all influenced by a country’s culture and this creates differences in perspective. If you contract the services of an outsourcing third party from the Philippines, you may find the people quiet, reserved or perhaps shy.
So when you ask, “Are my instructions clear? Do you have any questions?” They may not say anything or say “Yes” even when the instructions were in fact, unclear. As a warm and friendly people, perhaps the agent did not want to disappoint you.
Instead ask the agent to relay the instructions back to you and correct mistakes along the way.
4. Failure to Respect the Learning Curve
It doesn’t matter who you are; the level of experience and degree of expertise. You are still subject to the Learning Curve.
Even the best agents who have found success managing different campaigns across a wide variety of industries will need time to get familiarized and proficient with a new campaign.
When outsourcing, you have to be patient with the Learning Curve. Yes, you may fall below projections during the first few months but these losses are the currency you pay to get everyone moving up to speed.
Clients that do not respect the Learning Curve demand the agents to be replaced with “better ones” who will still be subjected to the same process. Replacing the team will only set you back longer and cost you more money.
Instead, you should continue to support development by maintaining the team and trust that the training programs will eventually pay off sooner than later.
5. Underestimating Security Risks
You never think it will happen you. But when it does, you are unprepared. Every second that passes by without arriving at a resolution will expose you to greater risk.
This is the reality of a breach in security data. It is a client’s worst nightmare. Customer records which contain confidential information are a goldmine for unscrupulous parties. If your data has been compromised, your customers, clients and end users will be at risk of identity theft.
Do not assume that putting up firewalls, anti- virus and malware protection programs are enough to protect the integrity of your data. Take data security an extra step by instituting measures at your network, encrypting important programs and providing limited access to your system.
Do not entrust the outsourcer with data protection. That should be one of your priorities and key area of responsibility before outsourcing services.
6. Belittling Talent
The problem with a client – service provider agreement is that it creates an arm’s length relationship whereby each party is relegated to what they are legally bound to do.
Of course the parties have to respect the provisions of the contract. But it should discourage mutual cooperation. Even if both parties have different interests, there is no question that each one wants the other to succeed.
For example, if you are outsourcing software app development to India you should not discourage their software engineers from stating their opinions and findings just because you are the client.
The last thing an outsourcer would want is to be accused of withholding information that could have crucial to your success. You are not only outsourcing to cut costs; you should also outsource to capitalize on talent and available technology.
7. Lack of Involvement
Another reason why outsourcing arrangements fail is lack of involvement from the client. If you believe you found the best outsourcing company, do not assume that everything will be perfect.
The client should be involved in the process at least from a management standpoint. You have to provide your own checks and balances to make sure the outsourcing company is staying within prescribed parameters and guidelines.
8. Too Much Micromanaging
On the flip side are clients who are too involved with the campaign that the services provider can no longer perform its tasks.
You should allow the outsourcing company to do its job and carry out what it is paid to do. After all, there are guidelines, benchmarks and metrics to keep everyone on the same course.
If you keep hovering over the outsourcing company, they will not be able to overcome the Learning Curve on their own. You will be delaying their progress and indirectly compromise the success of your own business.
Outsourcing is an effective strategy but it is not perfect. You are not guaranteed business success once you make the decision to outsource. Like all endeavors, you have to work at it and be patient enough to understand the process takes time to develop before it produces the desired results.
Creating value through procurement outsourcing
Before they outsource strategic procurement, companies must look hard at the true value drivers and long-term benefits of using third parties.
The rise of business process outsourcing (BPO) has transformed the structure of many industries in the last two decades. Companies now routinely hand over activities, processes, or whole operations to third parties. The BPO industry, in turn, has evolved to offer an ever-broader range of services, including many strategically important ones like manufacturing or R&D.
In procurement, the outsourcing process has followed the same trajectory, albeit more slowly. Outsourcing transactional procurement, like order processing or the management of invoices, is now relatively common. Only in the past ten years, however, has the outsourcing of strategic procurement activities, like supplier selection, contract negotiation or specification management, become more widespread (Exhibit 1).
Providers say that outsourcing these activities offers their customers a host of benefits. By aggregating demand from multiple customers, they aim to secure lower prices. In addition, large facilities in cost-efficient locations help them to reduce the cost of executing time-consuming activities like supplier assessment or processing RFQs. The providers’ scale also gives their customers access to expertise, especially in categories where low spend makes it hard for customers to keep the right sourcing expertise in house. Finally, outsourcing smaller or less important categories to a third party leaves in-house purchasers with more time to spend optimizing the procurement of strategically critical ones.
Some companies have certainly been successful in outsourcing some or all of their strategic procurement activities. One European utility outsourced its entire purchasing function to an external provider on a five-year contract, for example. The outsourcing provider was able to apply proven commercial levers as part of their strategic sourcing activities—like volume-bundling, introducing new suppliers and renegotiation with existing ones—and it was also able to use low-cost processing operations to save money on transactional activities. These changes helped the company to cut its overall operating costs by 19 percent, and improved its customer service.
Not every outsourcing agreement runs smoothly however. One large mining company entered a contract with a procurement outsourcing (PO) provider in which the provider received a percentage of the value of every transaction it managed. This arrangement gave the provider little incentive to reduce purchasing spend and the company captured far lower savings than it had hoped.
In another case, an electricity distributor decided to reverse a previous outsourcing decision due to frustration with its provider’s poor cost control and lack of focus on savings. The company set up a new central purchasing function with world-class processes and was able to capture average savings of almost a third in the first three major categories it tackled. That company wasn’t alone in reversing a decision to outsource strategic procurement. One European bank did just that after a multi-million Euro deal with an external provider failed to deliver the savings, or the service, it had promised. Another manufacturer disentangled its relationship with a major procurement outsourcing provider because the company did not manage to connect with, or influence, its fragmented internal user base, resulting in little impact.
We believe that the failure of many outsourcing deals was built into these agreements from start. A lack of understanding of the underlying drivers of value in the categories they outsource leads companies to pick the wrong partners, outsource the wrong activities and agree to the wrong incentives that will ensure sustainable long-term savings. To make strategic procurement outsourcing a success, companies need to take a highly systematic approach with three basic steps:
They outsource strategic buying only in categories where doing so offers clear value.
They have a precise understanding of the sources of that value and how to unlock them.
They choose outsourcing partners that have the capabilities to address those sources of value, then define and implement agreements that maximize the chance of capturing potential savings
Picking the right categories
Deciding whether to outsource strategic buying in a particular category requires the same thought and analysis as any other make-or-buy decision. The right decision rests on two factors (Exhibit 2).
What is the strategic importance of the category? Some categories may be a distinctive source of competitive advantage for the company, or of such significance to quality requirements or customer value proposition that outsourcing them would create unacceptable risks to the business.
Can the company manage the category effectively in-house? A company’s ability to capture the maximum possible value from a category depends on a host of factors, including the size and complexity of the supply market, the organization’s relative influence in that market, the existence of appropriate in-house expertise, and the availability of sufficient capacity to manage the sourcing process. In the case of non-critical categories, companies should ask themselves if another organization might be in a better position than them to manage that category. In general, therefore, outsourcing is a more appealing option for categories where companies spend less or buy less frequently, or where they lack the skills or resources to do a good job in-house.
As they undertake this analysis, companies need to consider the medium- and long-term implications of their decisions as well as the short-term effects. For example, one global food processing company deliberately retained the management of a number of non-core categories in-house. It used those categories to develop junior members of the purchasing function, helping to ensure succession within the organization.
Where is the value?
Once an organization has drawn up a shortlist of potential categories for outsourcing, it needs to decide whether it should. To do that it needs to understand exactly how outsourcing might deliver value in the category, then pick the right provider and the right deal that capture that value. The value levers available to strategic buyers—whether in-house our outsourced—fall into four main categories.
Volume aggregation. By bundling demands from multiple clients, outsourcing providers can often negotiate better prices, especially in areas where the company’s own spend is too small or infrequent to give it a strong position in the market. To capture the benefits of volume aggregation, however, companies must be sure that their own specifications and delivery requirements are sufficiently similar to those of the outsourcing provider’s other clients, and that they are willing to accept the provider’s sourcing decisions, such as in moving to lower cost suppliers. It is also worth checking whether volume deals always make sense. We have seen examples where small organizations were in fact getting better prices than much bigger companies because, as niche players, they were not as prominently on the supplier’s “radar screen.” By selling more cheaply to these customers, the supplier would not endanger overall market price levels, but would still capture the additional volumes.
Expertise. Their scale allows outsourcing providers to offer deep expertise and real-time market insights across a broad range of categories. Access to leading expertise doesn’t just provide direct benefits in categories where companies don’t have their own expertise. It can also help them to “learn from the best” and improve their own capabilities in other categories.
Labor arbitrage. Outsourcing providers offer a combination of scale, standardized processes and low-cost locations designed to reduce the labor cost of sourcing activities. While labor arbitrage often delivers significant benefits in transactional sourcing activities, however, the nature of strategic buying can limit the savings achieved. Many strategic activities—from negotiations around specifications, to drawing up contracts or managing on-going supply—require close cooperation with, and often physical proximity to internal customer departments in the company. As a result, it’s usually lower-paid internal positions that are outsourced, and savings are often offset by the increased costs of managing the external provider.
Demand and specification management. In the most successful purchasing organizations, 40 to 50 percent of the total savings achieved come from changes in internal factors, like optimizing specifications to minimize total cost of ownership or controlling demand. Such savings also tend to be the most sustainable over the long term. Capturing the benefits of demand and specification management requires close and on-going collaboration between the purchasing function and other parts of the business, however, which can be harder for an outsourced provider.
The potential power of these various levers varies for different organizations and different categories. It also varies over time. Commercial levers, like volume aggregation, can often deliver rapid savings, for example, while demand and specification changes, while ultimately more valuable, often take longer. If outsourcing contracts fail to target demand and specifications, savings rates can flatten out over time. This can lead to customer dissatisfaction and ultimately to the termination of outsourcing arrangements.
Companies also need to be sure that outsourcing really is the best way for them to access the value they seek. Scale is only one factor when seeking price reductions, for example. Many companies achieve significant savings through smarter negotiations of strategic importance to their suppliers. Similarly, a company might be able to access favorable prices by joining a purchasing consortium, or reduce labor costs by opening its own service center in a low-cost region.
Designing and executing effective agreements
Once they know how the outsourcing of strategic buying can deliver value, companies must take the appropriate steps to see that it does. Ultimately, the success of any outsourcing arrangement is determined by the preparation and implementation of the underlying agreement. That, in turn, depends on selecting an appropriate provider, on establishing strong relationships between the provider and the wider organization, and on tight management of the process once it is underway.
To select the right partner, companies need to thoroughly assess the market, including the supplier’s experience, expertise, scale and existing customer relationships. Different players in the procurement outsourcing space have very different value propositions (see sidebar, “Picking the right partner”). Companies must also ensure that the provider’s geographic reach and culture fit with their needs. When one global mining company entered a procurement outsourcing agreement, for example, its internal purchasing department was forced to provide extensive support as the provider’s employees were perceived within the organization to be inflexible and difficult to work with.
To build an effective relationship between the provider and the wider organization, the company must ensure that the proposed agreement meets internal requirements. Resistance from top management or from business units can scupper an outsourcing agreement from the outset. Stakeholders across the business need to be satisfied with the reasoning behind outsourcing effort, and compliance with internal sourcing policies must be enforced. Most companies find it essential to appoint an outsourcing manager to monitor the performance of the provider and address issues in the relationship. Companies also need to ensure they are treating their outsourcing provider as a strategic partner—clearly communicating strategic direction and giving the provider sufficient control of categories and suppliers to work effectively.
The right incentives are vital to keep the interests provider’s and company’s interests aligned. Strong agreements focus on metrics that drive long-term savings, like continuous improvement targets. The associated targets must be clearly defined and measurable, and all parties in the agreement must understand the goals and expectations and how they are calculated. Misaligned incentives can result in failed relationships: by encouraging the outsourcing provider to focus on quick wins or on lowest-cost suppliers, for example, quality, service and total cost of ownership may be compromised.
Finally, companies need to thoroughly prepare the transition and implementation phases of the agreement. They need to back the implementation with a strong internal team that can support users through the transition, resolve issues as they emerge, and guide on-going refinement and improvement of the relationship. One global telecommunication equipment provider involved stakeholders in early pilots of a new outsourced e-procurement system, for example. Fine-tuning the system based on user feedback helped ensure high compliance when the system was eventually rolled out across the organization.
* * *
Outsourcing strategic procurement activities can give companies access to scale, expertise and capabilities they don’t have in-house. But it also carries significant risk. To make these agreements work, companies must ensure that the benefits BPO providers offer is clear, and that the scope and incentive structure of the arrangement is designed to capture value over the long term.
Cheaper, simpler, better for customers: Outsourcing without trade-offs
Instead of “insourcing” or “reshoring,” a revamped approach to outsourcing can improve customer experience, explains Vodafone Spain’s Carmen López-Suevos Hernández in an interview.
As a key player in Spain’s intensely competitive mobile-telecommunications market, Vodafone Spain had long worked with vendors in both Spain and Latin America to support its customer-service operations, until they were almost fully outsourced. However, as price competition increased and customer expectations rose, cracks started to emerge in the model. Managing a large number of vendors, often working on relatively short-term contracts, made customer-experience standards difficult to achieve—let alone to improve as the market changed. Yet despite leaders’ concerns about the company’s competitive position in service quality, relentless pricing pressures made moving the work back in-house a daunting prospect.
Rather than abandon outsourcing and offshoring, the company decided that the concepts needed a complete rethinking. Carmen López-Suevos Hernández, recently appointed Vodafone Spain’s director of customer experience, led a team that completely restructured the way the company’s outsourcing works. Three years later, the company raised its customer-satisfaction ranking from last among major Spanish mobile providers to first, even as operating costs fell by double digits.
López-Suevos spoke with Aura’s Raffaella Bianchi and Christian Johnson from her office in Madrid.
Aura: It sounds as though outsourcing has played an essential customer-operations role for Vodafone Spain. How has the model evolved over the years?
Carmen López-Suevos Hernández: Although outsourcing has always been strategically important for us, historically our approach to it was opportunistic. Each major subunit within customer operations, such as the customer-care help desk or customer retention, managed its own vendor relationships. As a result, across the whole customer-operations group, I’d estimate that we were working with at least ten major customer-operations vendors with dozens of different sites all operating very differently.
Aura: What caused the fragmentation?
Carmen López-Suevos Hernández: Initially, much of our outsourcing focus was on supporting rapid growth. But as a pricing war started to take hold in Spain after the 2008 financial crisis, cost became the overriding concern. Every subunit within the company was making practical decisions to try to rein in costs, moving contracts from vendor to vendor or from site to site, all in an attempt to stay within strict budget limits.
Aura: What effect did that have on customers?
Carmen López-Suevos Hernández: Our customer-experience scores were the lowest among the major mobile providers in Spain. Because we resolved comparatively few customer problems in one call—our “first-contact resolution” rate was low—our call volumes were growing. That meant our costs were actually increasing despite our efforts to control them.
Aura: How did vendors find working with Vodafone Spain at that time?
Carmen López-Suevos Hernández: Very difficult. The intense focus on cost meant that the governance model for our vendor relationships was almost entirely transactional, emphasizing volumes and fixed prices above everything else. Annual negotiations were very tough; vendors disliked the constant price pressures.
Moreover, vendors that had multiple contracts with us found it was like working with different companies. They could never be entirely clear on what our priorities were, because there was very little coordination among different subunits working with the same vendor.
It all added up to a black box, both for the vendors and, to be honest, for us as well.
Carmen López-Suevos Hernández
Aura: How did you start changing these relationships?
Carmen López-Suevos Hernández: We realized that we had to refocus on the quality of service that the vendors were providing, not just cost. That meant reevaluating our relationships with the vendors and, most important, with the frontline agents who were serving our customers.
Our goal has always been to reduce our overall cost to serve. On paper at least, one way to do that is to reduce the cost per call, which is what we had been trying to do in the past. But when you squeeze your vendors on price, they squeeze back, usually on the people side of the equation—reducing the qualifications of the people they hire, the amount of training and coaching people get, the ratio of team leaders to team members, and the attention given for development and retention. As a consequence, attrition increases while people’s skills fall—and you resolve fewer calls on first contact, damaging service quality. For us, it meant that whatever cost benefit we earned up front we ended up losing in the end because the volume of calls kept rising.
The other way to reduce overall cost to serve is by reducing volume. Better-quality customer service would let us resolve more calls the first time, so the number of calls would fall. We could then allow a higher price per call, which vendors could reinvest in further quality improvements—and we would still come out ahead.
But to make that switch, we needed to change a lot about how we operated. And we needed to change our mind-sets about the role of vendors, our performance expectations of them, and how to interact with them on a daily basis.
Aura: So this is more than just eliminating a few low-performing vendors.
Carmen López-Suevos Hernández: Much more. We certainly needed to simplify, to reduce the number of vendors and sites—and become leaner, more effective. But first we needed a new working model.
Fundamentally, in the end, we wanted contact agents who could turn customers into promoters for us, not just handle calls.
Aura: That’s a significant step up in the capabilities you needed, no?
Carmen López-Suevos Hernández: Yes, and we knew that we needed vendors who could work with us as partners along this journey; not all of them had that capacity. But the implications were much broader than that. For example, in the past, our managers evaluated vendors based only on a narrow set of efficiency-based key performance indicators [KPIs]. Changing the focus to quality meant that we needed a whole new set of metrics. Given that the vendors’ personnel are the closest people to our customers, we needed them to be measured and rewarded on quality metrics, and to be empowered to provide better quality to clients.
Aura: So you had to share a lot more about your business with the vendors.
Carmen López-Suevos Hernández: And we had to change our mentality about the vendors’ role, understanding that our customer relationships were too important to reduce to a yearly transaction based mainly on target cost per call. We needed these vendors to be our partners, and we needed them to understand that we were serious about treating them as partners rather than just fighting them on economics.
Aura: How did the change from transactional to relationship-based vendor management play out with respect to structuring the customer-service operation?
Carmen López-Suevos Hernández: Our new strategy centers on a smaller number of highly capable vendors. For most major areas, we identify a “champion” and a “challenger” to foster healthy competition and improve performance. We also worked with the vendors to articulate guiding principles for reducing the number of locations, again with the goal of improved customer experience.
On our side, we created a centralized, commercial-operations vendor-management team, which helps ensure alignment in working with each of our vendors. All of our customer-operations areas now participate in an annual vendor meeting, during which we spend a whole day with our vendors in refining our vendor strategy. The results are then the basis for monthly meetings, which each area conducts together with its vendors to evaluate the contract process. The data and expectations cascade down to the weekly and daily meetings that monitor ongoing performance, so everything happens in a smooth and coordinated way.
Aura: How has the day-to-day working environment changed?
Carmen López-Suevos Hernández: Almost everything is different now; the connections between Vodafone and the sites are much tighter. We revamped the vendors’ KPIs so they align more closely with our service-quality strategy. Then, to help the vendors monitor the same metrics for their agents, we built a database that the vendors can independently see and manage in real time, rather than waiting for reports at the end of the month.
In parallel, we developed a range of analytic tools to help the vendors manage their people more effectively, such as speech analytics that help the agents resolve questions more quickly and thoroughly. Together we’ve defined a new continuous-improvement methodology as well, using voice-of-the-customer data and frontline agents’ experiences. We provide the vendors with the customer-feedback data we gather, so that they can improve their policies and processes. And in turn, their frontline agents make suggestions to us on what we could change in our processes.
Finally, each site now includes a Vodafone representative who is evaluated on exactly the same metrics as the vendor. That person has every incentive to help the vendor improve its performance, and can also see day to day what is working well and what could be improved.
Aura: What does this mean for the agents?
Carmen López-Suevos Hernández: We pay much closer attention to their development, because high attrition rates are not compatible with high-quality customer service. We therefore set clear standards for all sites, regardless of vendor, for building employees’ capabilities, providing adequate supervisory support, and designing career paths.
Aura: How did you persuade the top leadership team to support this transformation?
Carmen López-Suevos Hernández: Look, this process won’t produce results in a month. My belief is always that if we do the right thing, we will get the results we want—but it takes some patience.
Our CEO is very focused on customer experience, so that was a good starting point for us. But we also needed the executive committee’s support, so that other functions, such as IT and marketing, would make it a priority to help remove potential barriers to reducing our call volume. We were therefore very clear with the executive committee: “These are the facts about our service and our costs, and this is what it will take to fix them for the long run.” We knew that some of the consequences would be painful, and we made sure the committee members understood our reasoning, so that they could explain it if asked.
The most important shift was the concept of investing now (in the form of a higher price per call) in order to allow vendors to work on quality, so that more calls could be resolved the first time. The committee had to understand that the price per unit might not be as low as it once was, but our total costs would fall in tandem with the call volume. They and the CEO became real promoters of this program.
Aura: What was the vendors’ response to the new relationship model?
Carmen López-Suevos Hernández: At the beginning, some of them were concerned about the added complexity: it was no longer a simple matter of calculating the number of employees needed to handle a given volume of calls. Now they would have to change their mind-sets and focus their actions around quality.
Early successes built trust. One of the first areas we targeted, high-priority customers, achieved a quick quality turnaround. The vendor was very pleasantly surprised—and its experience showed the other vendors that the changes would make them proud to be working with Vodafone.
Aura: What do customers experience today, compared with before the transformation?
Carmen López-Suevos Hernández: There are actually four major changes that you should feel as a customer, starting with personalization. That doesn’t mean that the same agent will work with you every time, but it does mean that the agent will know more about your situation even as your call arrives. So, if you ordered a new handset two days ago, the agent will see that and be prepared to give you a status update on the order. If there’s a problem, that agent is responsible for resolving it: one customer, one issue, one agent, from beginning to end.
That leads to the second change: proactivity. The goal is for the agent to be able to resolve your question 95 percent of the time on first contact. But if that isn’t possible, the agent will call you back; you should not have to call again.
Third, you should never have the same problem twice. Customers can understand a mistake, but not the same mistake two times. If you call us with a billing question one month, we will contact you the next month to make sure the question is still solved.
The fourth and final change is “no escalation.” Customers should not have to wait for several levels of approvals, so a frontline representative is now empowered to solve all customer issues. The only limiting factor is that they are subject to auditing.
And one of the major benefits of better service is that empowering our front line in this way has helped reduce the number of refunds we have to give in order to retain our customers.
Aura: What parts of this journey have been the most surprising or rewarding to you and your team?
Carmen López-Suevos Hernández: The numerical results have been more than we expected: our first-contact-resolution rate has increased by more than 30 percent, and our call volumes are down by almost 50 percent. But to me what’s truly rewarding is that vendors and frontline agents feel proud of working for Vodafone customers, of what they’re doing and what they deliver. Agents will tell me that they want our customer-satisfaction score or our first-contact-resolution rate to rise even higher. I think many people would be surprised to hear that from a vendor.
Aura: How has this experience changed Vodafone Spain’s perception of outsourcing?
Carmen López-Suevos Hernández: I’ve heard many people say that you shouldn’t outsource for core operations, because it will never be the same culture and the same quality results. But we’ve worked hard to make sure that it’s one culture, not two, and what our vendors are achieving upends the stereotype of an unbridgeable gap.
We wanted everyone to feel they are part of Vodafone, and our color is red, so our vendors are our Red Teams. We wanted our vendor personnel to use our products and services, so we gave all our Red Team community the same discount we give our employees. We include them in the same concerts and sporting events that we host. And even little things, like sending everyone an SMS on their birthday—that’s a big change from when we were only negotiating on price and had no idea who the agents were.
Aura: When did you sense that the organization had really changed?
Carmen López-Suevos Hernández: It was the first time I overheard vendor people saying “we,” meaning all of us together, and not “you” referring to Vodafone and “we” referring to the vendor. And then I heard people from Vodafone and our vendors sharing pride in achievements they made together, such as a recent breakthrough in customer-satisfaction rates among our highest-value customers.
Aura: Now that you’re about three years into the transformation, is there anything you think you would do differently if you were starting the process today?
Carmen López-Suevos Hernández: At the beginning, people naturally hesitate, wondering if people can make the change. My advice: don’t be afraid. Especially right now, with so much upheaval—the pressures from digital and from new business models—the world is more open to change than just a few years ago, and keeps demanding higher and higher quality.
I also think this experience illustrates a larger lesson about how business is evolving: it’s more important than ever to have very good people and to invest in people. We decided to go for better skills and a lower volume of calls, and I’m sure this will happen more and more. Already chatbots can take care of a lot of really basic transactional work, so what people will handle will become more complex.
That means you will need to give people a lot of empowerment, with an attitude that you work jointly with them. And you will need very good managers as well, with skills in attracting and retaining high performers.