‘I have an idea – lets outsource customer services’ – Could the quest for cost savings damage the customer experience?

A man works on the stand of mobile operator O2 at the CeBIT fair grounds in Hanover

Disclaimer!! Let me start this blog post by acknowledging that the subject is going to be controversial. There will be readers on both sides of the debate – that is healthy, and I hope you will get involved.

In May, O2 announced their intention to outsource their contact centre operation to Capita. The main reason cited for the move was to save a billion pounds over the ten-year life of the contract. A billion pounds! It has been reported that half the savings will come from “discouraging calls, web chat and encouraging customers to use self-service option online. Sending jobs overseas and closing sites will provide a third, with the rest expected to be derived from productivity gains”. You can read more about it, and the reaction of staff and unions here – http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/telecoms/10087909/Capita-plans-to-close-O2-call-centres-and-cut-thousands-of-jobs.html.

So what? It is not uncommon for organisations of all shapes and sizes to outsource their customer service function to well established ‘experts’ like Capita. Many businesses have hugely successful relationships with specialist outsourcers over many years that see desired costs savings and improvements in service to customers. I am sure that readers of this post will want to share some examples.

However…..you knew that was coming…….the decision to outsource one of the most significant parts of your business is a very difficult one – and one that is not necessarily made with the right motivation in mind. In all of the articles I have read about the O2 Capita deal, not once have I read anything that talks about the customer. O2 has millions of them. Not once have I seen anything that describes the benefit of this huge decision on the millions of customers that have been loyal to O2 for a very long time. The only references made are in the guise of making life easier for O2 by ‘discouraging’ the use of the telephone, and ‘encouraging’ customers to ‘help themselves’. There is no doubting that enabling customers to ‘self-serve’ is an ambition of most companies – but it is a big risk to do it in a way that prevents the customer from being able to choose the method of contact that they prefer.

The motivation for the O2 Capita deal seems to be financial – although that could just be the way it has been reported. It is a deal that is designed to generate savings that will benefit shareholders. The primary motivation does not seem to be linked to improving the customer experience. Do not get me wrong – I completely understand the need for companies to continuously improve their efficiency and productivity. Tightening belts is essential in the current economic climate. In the world of customer service, that often means businesses must re-evaluate the effectiveness of the business model. As the online/mobile world continues to evolve, the nature of the service function required to support it must do as well. It is therefore a sad but factual reality that if more customers are doing things without the need to speak to a company, that company may not need as many people sitting waiting to help. Leveraging the technology and capability of specialist outsourcers like Capita makes a lot of sense. That is why I have nothing against the principle of outsourcing – as long as the motivation has a dual purpose – improving customer satisfaction BY becoming more efficient and effective, thus realising cost savings.

Before I continue, let me dwell for a second on the company itself – not Capita but O2.

People forget that O2 used to be BT Cellnet. Remember them? Cellnet became BT Cellnet in 1999 which became O2 in November 19 2001. At the time BT Cellnet was rapidly losing market share to its rivals (Orange and Vodafone). Those that remember them will not provide ringing endorsements of their customer service capabilities!! Over the following few years, the company enjoyed what can only be described as an amazing transformation. It grew at a rapid rate, and was acquired by Telefonica in 2005. By 2007 the company had over 18 million customers in the UK. In 2008, O2 was ranked as the sixth best company to work for, and was awarded a three star accreditation denoting it ‘an extraordinary company’. In 2008, as Group Head of Customer Experience for an online retailer. I frequently cited O2 as an example of what we could achieve. I used O2 as benchmark – I know that others did  as well.

Interestingly, when investigating O2’s history, the page on their website that provides the detail stops there. It is almost as though 2009 to the current day did not happen – http://www.o2.co.uk/abouto2/history In 2008, I visited one of O2’s contact centres in Leeds. It was very impressive. Great facilities, brilliant layout, clear communication – the place was literally ‘buzzing’. I was introduced to their by now renowned approach to people. O2 believed that to have happy customers, they had to have happy staff. They even took it a step further. They believed that for their customers to be fans of O2, they first had to get their people to be fans of O2. It makes perfect sense – it is not complicated, but at the time it was revolutionary. Internally, they communicated this to staff through the O2 Fanbook. You can see the video of the Fanbook here  – http://vimeo.com/11352779

It was amazing to see for my own eyes a modern, innovative business that was genuinely so people and customer focussed. Their people loved them, and in turn, customers learned to love O2 as well. The days of BT Cellnet were long forgotten. O2 started to eat up the competition, and all was very rosy.

So why has a business that believed so passionately in the importance of people decided to outsource a huge number of the  to another organisation? What has happened since 2008 that has resulted in the company putting the responsibility for communicating directly with their customers in the hands of someone else? It is impossible for me to answer these questions – only those on the inside can say for certain. But it does seem as though a company that succeeded by putting people and customers first, is now potentially doing the opposite in the quest to ‘save money’.

When you think about the organisations you know of that have outsourced a part(s) of their business, it is very likely that the ‘contact centre’ is first in line. The question is why? Why would a business outsource the function that is often THE ONLY ONE that actually speaks to customers? Customers who generate the sales that creates wealth for shareholders. Customer service is fundamentally a critical stage in any customer journey. By outsourcing this stage of the journey to another company, you are immediately making it more difficult for the delivery of the journey to live and breathe the proposition of the business. Why are companies so quick to outsource customer service when they would never dream of outsourcing their marketing team?

Let us look at another example. Most retailers outsource another critical stage of their customer journey. For online retailers, it is the only stage of the journey that the business has direct physical contact with the customer. That stage of the journey is the ‘delivery’ stage. Whether it is Royal Mail, Hermes, DPD, or DHL to name but a few, the retailer is handing over one of their most important customer touch points to someone else. The company that has been fortunate enough to be granted the honour of making the delivery has a very important job to do. Not only do they need to fulfil the customer expectation by getting the goods to them on time, they also need to maintain the brand values of the company they are working for. Most John Lewis deliveries are done by John  Lewis – they can guarantee that the delivery service is in line with the in store service, the online service, the telephone service. They, up to now, have not handed this over to someone else. It is far more difficult to do when you put a touch point in the hands of a business that does not live and breathe your brand. Again, it makes economic sense to use specialist logistics carriers that have the size and scale to deliver to all corners of the country – if the economic benefits are balanced by customer experience improvements, then an outsourcing partnership CAN be very successful.

If the outsourcer fails to maintain the brand ethos of the company they are working for, it is most likely that brand that will suffer. If a retailers delivery does not turn up on time – it is the retailer that suffers (as a result of declining customer perception) – not the delivery company. Using this as an analogy for the O2 situation, it will therefore become a significant challenge for O2 to maintain the consistency of their brand when they handover the keys to Capita. It will become Capita’s responsibility to ensure that the employees working on the O2 contract continue to live and breathe O2. It will be Capita’s responsibility to ensure that they keep loyal fans of O2 in their contact centres (wherever they happen to be in the world), so that they in turn can help to keep the loyalty of O2’s customers.

As I said earlier in the post, this is not an impossible challenge – but it is a difficult one. The customer does not need to know that the contact centre they are interacting with is managed by someone else – they should never notice the difference. Hopefully in this case they will not. It would therefore be nice to see what the plans are to ensure that both people engagement and customer satisfaction will improve. It would be nice to know that both of these critical things are equal to the objective of saving 1 billion pounds.

It would be great to hear from outsourcing professionals and their views on this. What are the ways you embed the values of the brand you are serving? How do you get your employees to feel that they are working for the brand as well as for the outsourcer? What examples are there to demonstrate how improving customer experience and delivering cost savings go hand in hand?

I wish O2 and Capita the very best of luck. I hope that they can continue to be an example to others of how to collaborate to deliver better, more efficient customer service. Fingers crossed.

12 thoughts on “‘I have an idea – lets outsource customer services’ – Could the quest for cost savings damage the customer experience?

  1. A great post Ian, and very balanced!

    I am a fan of outsourcing in the right circumstances and done well (http://bit.ly/15Jlp52), but this feels like neither. Like you, all I can see is 02 thinking it can make some savings and Capita thinking that there are efficiencies to be made. I can only imagine the termination clauses, warranties, SLAs and so on that have been negotiated; I can’t imagine it will be an easy marriage.

    Like you, I visited O2 when they were a world class organisation and I will guess that the first casualties will be the engaged people that I met and soon after the customers who have been talking about the golden days of 02 service in the past tense for some years now.


  2. What happened was that O2 (a UK company) was bought out by Telefonica, and it has all gone downhill since then.
    O2 is no longer its own master, but has to dance to the tune of the parent company.


    • the deal with Telefonica should never have been allowed to happen. TEF were in debt even then, before the economic meltdown that has sent Spain’s economy into crisis. If I was in debt, they wouldn’t even let me take out a mobile phone contract, much less purchase a successful UK telecommunications company. There should be laws preventing any such deal.


  3. Ian, you just wrote my life story for the last 13yrs. I work in the Bury call centre which is reported to be closing in 2015. As well as a loyal employee dating back to the BT Cellnet days, I am a shareholder and a customer. Out of the 11 members on my team, we total 120yrs of experience serving our customers. Moving forward it is unlikely we will continue to take O2 calls for much longer and may be taking calls in the future for the likes of CPW, VW, Tesco Broadband, John Lewis……..that is assuming the call centre isn’t closed. It has been an amazing journey, helping to create a world class customer service and loyal customer base, but for those loyal staff, this is the end of the line. A very sad and disappointed employee………………..


  4. I too have been a proud employee of O2 since the BT Cellnet days, I was amongst the first intake of advisors, they were exciting times. We moved onwards and upwards until the day we were taken over by Telefonica, we all knew it was a bad move from the start. You only had to Google Telefonica to see that they were synonymous with outsourcing as much as possible of their workforce, sadly it was just a matter of time.
    What I don’t understand is why O2 UK haven’t made a stand against it, the ‘powers that be’ know only too well how the majority of employees are (were) proud to work for O2, has that been the case since the take over? I very much doubt it judging by the response I get when speaking to colleagues. O2 UK was/is a profitable arm of the company, we are extremely customer focused and enjoy the work we do, but it is O2 we give our all for and the way Telefonica have ridden rough shod over not just customer service but many other areas of the business means that this may no longer be the case. Sad times and this will undoubtedly have an impact on our customers,


  5. I work at the Bury Call Centre also, and have done for the past 13 years. O2 held on to its customer service personnel in a way that bucked the trend towards high churn in a call centre environment. This was because they paid decent wages, expected excellence from their staff and rewarded them accordingly. Just as you wrote in your article, O2’s policy was staff centric, using its staff’s loyalty and passion for the brand to make its name. As the first point of contact between O2 and it’s customers I have always thought mine was a very special role and I felt I contributed a great deal to O2s successes, and until recently, O2 regularly recognised this, organising festivals, awards ceremonies, and things like Fanbook. We were PASSIONATE about O2. We won numerous awards for our customer service, and would like to opportunity to continue winning them.. however, O2 have made it quite clear that they no longer value me as an employee as they want to hand me over to another company. It’s like asking a lifelong Man United fan to suddenly switch allegiance to Man City. I have no doubt at all the quality of O2’s Customer Service will suffer.


  6. From personal experience, having moved into an outsourced customer service environment, I would have to say that the impact on overall customer experience has been positive. Everybody is extremely passionate about improving the experience being offered to our customers and the collaborative approach being taken ensures that the client’s ethos is very much central to everything that is delivered.

    By leveraging the collective knowledge of the brands, customers and Serco’s wider industry expertise, the quality and rate of change has noticeably improved and the undercurrent of continuous improvement feels stronger now than at any time in the past.
    One of the fundamental cornerstones has absolutely been that the customer first ethos, that you were instrumental in affecting throughout the organisation, is now sufficiently mature enough to accommodate the change – without this I imagine the transition would have been somewhat more painful.

    Just one point on your comment “It will become Capita’s responsibility to ensure that the employees working on the O2 contract continue to live and breathe O2.” I have to say that I disagree – in a BPO partnership it is a joint responsibility and employee engagement is viewed as a key priority.

    A successful relationship is a solid, fully collaborative, approach – a true partnership – anything less than this won’t work.

    If a BPO arrangement is done for cost benefit alone and full responsibility handed off, it is doomed to failure; however, in the case of O2, they have a significant and long standing customer service outsource relationship, extending back 20 years, with Capita (via the purchase of Ventura). It could be the case that expectations regarding customer experience and employee engagement are sufficiently embedded within the existing joint contract leadership, that the principle focus has been on the potential efficiency and financial benefits of the arrangement – at the very least it will be interesting to find out.

    When I visited Ventura in Rotherham a number of years ago, I spent time with the O2 teams and they were fantastic – and some of the strongest brand advocates I have ever met.


  7. To my mind, the issue isn’t the impact on the customer experience of using outsourcing, it is the impact on the customer experience of o2’s drive to realise huge cost savings.

    I believe that their need to reduce costs is an imperative. I think it’s fair to assume that labour arbitrage and efficiency savings are key parts of that mix. Using an outsourcing partnership that has been established for decades mitigates the risk of setting up new operations in an offshore location (thereby increasing ‘speed to quality’) and should also accelerate the productivity curve across the estate; from operational know-how and from their current embedded state as part of o2’s operations.

    o2 aren’t immature in this area and I don’t doubt that there will have been a keen eye on quality throughout this decision making process. I suspect the alternative to buying in an outsourced global delivery platform that could be stood up quickly would be even more site closures and job losses along with the profoundly negative consequences for the customer experience that this would bring.

    It is arguable that o2 could not meet speed, cost and quality requirements without the support of an outsourcing partner.

    The fundamentals of outsourcing are about concentrating on core competencies and leveraging the expertise of third parties in order to drive competitive advantage. Many blue chip businesses have outsourced their customer functions in their entirety to do so. Rather than “making it more difficult for the delivery of the journey to live and breathe the proposition of the business”, they have been able to deliver a customer experience that is some way above and beyond what they could do internally, through buying in expertise, best practice and infrastructure.

    With that in mind I would argue that rather than looking at the use of outsourcing as a means of achieving cost savings as being the enemy of customer experience, you might potentially want to consider outsourcing as its saviour. Hyperbolic, admittedly, but you get the picture. As an o2 customer who agrees with you about how excellent they have been in this regard historically, I certainly hope so.


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