Companies that outsource customer service functions to reduce costs may risk reducing their client list as well, Gartner has warned.
In fact, the researcher predicted 80 per cent of organisations that outsourced customer service projects in the next three years to cut costs would fail.
This was because outsource centres often had very high staff attrition rates and many companies neglect to manage their outsourced operations, Gartner said.
"Companies are not looking at processes from a customer point of view and this is risky," Gartner research director, Alexa Bona, said.
Companies that outsourced internal functions such as human resources and finance didn't have the same level of exposure because problems were dealt with by their own staff, Bona said.
Customer-facing processes such as call centre services and technical support required specific training and management to prevent client loss, she said. Gartner also estimated 60 per cent of organisations that outsource customer-facing functions up to 2008 will face client defections and hidden costs that outweigh any potential cost savings.
And reduced costs were not guaranteed, Bona said.
Gartner found companies that employed outsourcing firms for customer service processes paid 30 per cent more than the top 15 per cent of global companies paid to do the same functions in-house, she said.
The analyst firm predicted the customer service outsourcing market would continue to grow, however, from $US8.4 billion in 2004 to $US12.2 billion in 2007. But it still represents a small portion of the total outsourcing market, accounting for less than 2 per cent this year and growing to just under 5 per cent in 2007.
While outsourcing key customer-facing functions carried a high level of risk, successful outsourcing of other non-core operations could reap cost savings of 25 per cent to 30 per cent, Gartner said. n