Satyam, Sallie Mae, and call center outsourcing

Recession brings out the worst in us all. The jingoism in the USA over Satyam's currrent spot of bother is hypocritical in the extreme. Satyam could have used some SOX just like the USA badly needed it so few years ago. And bringing home the jobs is just cynical xenophobic PR.

Sallie Mae is to "bring 2,000 jobs to the U.S. within the next 18 months as it shifts call center and other operations from overseas". On-shoring already off-shored jobs will only add to the cost of services for already hard-up customers. I think it is a cynical move to wave the patriotic flag by an industry (finance and loans) that has a fair amount to do with getting us all in this mess in the first place.

While the jobs shift will cost approximately $35 million a year, Lord dismissed pundits that criticized the expense, saying the move will "enhance our franchise for many years to come."

That's $17,500 per job per annum subsidy that somebody ends up paying (and I bet it doesn't include the cost of the move and the training). A few more organisations will decide the increased cost is outweighed by the opportunity to chest-thump but I don't see this catching on enough to offset the layoffs. My crude survey recently on Twitter: Sun 1500 (5000 last yr) Nortel 3200 Nokia 1700 IBM 5000 Microsoft 5000 AMD 1100 Lenovo 2500 EMC 2400 Unisys 1300 Citrix 10% SAP NEC... Those are worldwide figures but a fair chunk of them will be in the USA.

Having worked for a US IT company whose CEO is probably out of jail by now but others ex-employees aren't, I don't see the point of gloating over one Indian outsourcer caught. But the crowing over Satyam's troubles never stops.

It's only one step from this tosh to full-on protectionism, which would likely drive the world into another Depression. America should remember we're all in this together.

The USA can't even play the "go-to-war" card like Margaret Thatcher did in the Falklands in order to revive a flagging economy and morale: they're already at about full fighting capacity now. But North Korea must be tempting. The world should be grateful Bush isn't still at the helm.



In general, outsourcing is a waste. This has nothing to do with protectionism. Most call centers have failure demand that they are outsourcing locking in the cost of waste. Failure demand is made of phone calls that follow-ups, problems, etc. because of poor systems (not just technology, the whole system). This failure demand makes up 25 - 75% of all call center demand (higher in the public sector).

Further, we treat call centers as something separate for the rest of the system that can be outsourced. They are integral part of the entire service and important to the entire system.

Am I agreeing with Gartner for once?

At one point Gartner's advice was that you should never outsource the help desk since it was the "diamond" of IT, because it was the best place at which to judge the health of IT and to identify emerging needs.

I was looking through some help desk figures today and well under 50% of their workload was failure led. To be honest I was quite surprised myself. Incidentally when you talk about the figure being higher in the public sector I presume you aren't talking about IT help desks? Even then I'm not sure that would be true in the UK. On the other hand I guess a lot of the thinking behind help desks being re-branded as service desks is the presumption that they provide added value. Would you pay a premium for a really great help desk service?

I've seen good and bad out sourced help desks, and don't forget out sourced doesn't have to mean either off or near shored. I've also seen outsourced desks that were seemed as well integrated with the customer's business as they were with the suppliers. Good supply chain management means we can and do integrate external suppliers into our value chain, often without it being visible to our end customers. In my last permanent service management role in financial services I don't think we supplied any services to the consumer that didn't involve at least five suppliers.

So I think my conclusion is a resounding "It depends"

someone on-shore pays the higher costs

Agreeing with Gartner? You can get banned from this site for that.

Like any supplier, outsourcing is only as good as the outsourcer, agreed. Good outsourced service desks make sure their staff understand the customer's business. but that undermines the outsourcers #1 differentiator: cost.

I think we need to distinguish between call centres and service desks. Many big organisations receive so much incoming call traffic they need a low-grade, low-cost callcentre buffer on the front ("Level 0"), feeding through to a service desk. Outsource the callcentre. Think twice about outsourcing the service desk. The more level 1 support the service desk provides the less likely it is you should outsource it.

but reality is that calls cost. A favourite quote, from Ray Macdonald, past CEO of Burroughs (anyone remember Burroughs?): Service level is right when customers are "sullen but not rebellious". Gold level service is only appropriate when it pays, and it doesn't always pay. Ask Microsoft.

Off-shored outsourced call centres are cost competitive. All this sudden interest in on-shoring has little to do with quality and a lot to do with funding on-shore jobs, and resentment of money going to foreigners. That makes great press and buys votes but in the end someone on-shore pays the higher costs - you are lowering the overall efficiency of your economy. And protectionism fuels Depression which comes back home to roost. We're all in this together (yeah I've been watching TV with my son).

What about service???


I don't know the full details on this, but maybe there's more going on than meets the eye. Just *maybe* someone is trying to do something related to the quality of service being provided and this is just their attempt to use the move as a chance to get some press that isn't bad.

You are undoubtedly right about the added cost to the customer. Still, maybe it was a narrow view of cost/quality of service that drove the decision in the frirst place. In case anyone thinks this is new news, they should think again. Ideally, organizations would consider these things *before* they make the decision to outsource, regardless of to whom and where. Unfortunately, that is often not the case. While some service providers may not meet expectations and are due to take it on the chin, others just become the latest excuse for a bad decision in the first place.

Let's also not forget that xenophobia is neither an American creation nor exclusive to the nation.


exclusive franchise

No the USA certainly does not have an exclusive franchise on xenophobia :) NZ has a centre of excellence here too. But I don't recall anyone anywhere suggesting we shouldn't do business with the USA when Enron, Worldcom, CA et al were doing their thing.

I think you make an astute guess that this move was probably on the books anyway. More reason why I say I don't see this catching on. For any company to genuinely care enough about unemployed Americans to actually blow $35M helping them out without the PR or improved service benefits is unlikely indeed. There will be a few and we'll never hear about them.

Who Said That???

But I don't recall anyone anywhere suggesting we shouldn't do business with the USA when Enron, Worldcom, CA et al were doing their thing.

Where did this come from?? There was no reference to such an attitude in the article you referenced. From my read, Mr. Lord did not appear to be whacking all of the offshore firms or beating up the one they were moving from.

I think that the instructive part of the article is where Mr. Lord said:

"We were at the point where we couldn't make a student loan at a profit,"... "The company had to re-engineer itself. It had to cut jobs and it had to move jobs. At least that's how we felt at the time"

While I do not have visibility into their decision makking process or what they considered, I have seen similar behavior before where the consequences of only considering the effects for short-term time horizons have come back to bite the original decision maker. To be fair, we're only seeing a single quote from a larger conversation, still let's parse this out.

I would interpret it as "we couldn't make a student loan at a profit, therefore we need to whack the call center to do it". All in the name of re-engineering (apparently some didn't learn anything from the early '90s must-BPR-everything rampage). In a certain sense, you can start to see some of the "logic" -- "Ahhh, look at all those fancy call handling and customer record management systems -- that's a big number, let's cut there!" Gross oversimplification, yes. Far off the mark? Dunno. Either way, it's sounds to me like dodgy foundations on which the original "business decisions" were made.

Of course, while some readers here may give me grief for being an "armchair quarterback" (after all, it's easy to cast stones from the sidelines, isn't it?), I can at least take some solace in that for what part I am responsible for in my organization, I do my best to approach it from the whole and am accountable for my spending and the results we produce.

And, yes, I'd enjoy the chance to be king and put my salary where my mouth is! I think I can do as credible a job or better. Reasonable offers will always be entertained... :-)



Sorry I wasn't referring specifically to that article in regard to Satyam. I've seen several posts on forums etc about Satyam, the implication being it throws the viability of Indian outsourcing into question. If you think that mindset doesn't exist, I'd be hard pressed to prove it to you - it is a subjective impression.

Problem With Outsourcing Isn't Outsourcing...

OK. Understood.

Actually, I realize there are all sorts of prejudices and opinions on the subject. Some are more valid than others. I think your impression is probably right.

I have a problem with outsourcing in general. Not the concept or going offshore. Where I have heartburn is the foundation on which one makes the decision as to its viability. I think for the most part, the customer only gets what they contracted, not what they really need. Whose fault is that? Well, I think there's culpability all around! I think that until someone understands and can realistically apply the principles of service management, outsourcing is a dangerous proposition.

This is a whole conversation unto itself.


less compelling

Yup. In a similar context i said about The Cloud:

the supposedly lower costs of management from service providers is a myth that the outsourcing industry still manages to perpetrate. When all the hidden costs - including lost IP, risk, migration, delays (ironically) and provider overheads - are factored in, the benefits are less compelling.

Syndicate content