Since the launch of ChatGPT and subsequent proliferation of AI-driven technologies across the customer contact technology landscape, the pace of change has accelerated exponentially. From communication analytics, quality management and agent assist, to replacing IVRs with their omni-channel equivalents and real time translation services, the impact of AI on our industry has almost been as big as the invention of the telephone itself. Not only is this a source of organisational stress, are there implications for outsourcing and contract mechanisms?
While the telephone fundamentally changed human-to-human communication, AI technologies are transforming human-to-machine interactions. And given how we now communicate with each other, that can only mean that change is both permanent and ongoing.
This permanent change is putting increasing stress on organisations to restructure how they equip themselves to communicate with both their customers and their target market, irrespective of the sector they operate in.
We are seeing organisational stress in three areas:
- Understanding the impact of these changes across the customer and target market demographic
- Properly evaluating the ability of existing technology platforms to accommodate change and realign to new communication paradigms in the mid to long term
- Fully understanding the mid to long term commercial impact of bolt on technologies to deliver short term performance and cost reduction gains.
In helping organisations cope with these stress areas we see striking parallels to the changes seen when organisations first began to interact with customers remotely. The evolution which began in the 90s to get more value from data, media and communication spend resulted in specialist operational activity often being outsourced as few organisations had the specialist people, process or technology to support those functions as cost effectively as outsourced providers could.
As customer became core to operations and remote customer management became an operational necessity, organisations began to establish their own capabilities, leveraging existing data management infrastructure to control and drive insight. Customer contact levels boomed, the technology to enable customer contact saw similar growth and our industry was born as more organisations grasped the benefits of controlled and managed remote customer contact.
Considering those parallels, we ask “Should organisations be stressing themselves or does that same customer contact outsourcing industry ‘muscle up’ for this second cycle of permanent change to reduce organisational stress in the shape of Outsourcing 2.0, underpinned by end-to-end AI driven technologies and the accelerated levels of operational insight that provides?”
Observing change in the global customer contact outsourcing market
Outsourcing is a very broad church. Our global network of two hundred plus providers gives us a privileged view of the diversity of the services provided, service delivery and how services are contracted. Whilst industry pricing has generally reduced in real terms over time, the way that service pricing is presented has not really evolved that much, it has not been that complicated, clients have had a choice of:
- straight hourly rate,
- the hourly rate with outcome components,
- outcome with activity components and
- outcome alone.
Making money has not been that complicated either. As long as the effective revenue per hour outweighed the total known costs per hour, then outsourcers made money.
The outsourcers’ challenge has always been about packaging service and price to be more attractive than the nearest competitor. Of course, that global mind set has led to an incredibly diverse and attractive industry offering, but it is doing little to relieve the level of stress we see in organisations today. Especially as permanent change begins to impact on mid to long term business performance forecasts.
What we see in the global outsource community is the emergence of some clear lines of distinction between service offerings. Principally between those that have the capability (or plan to have the capability) to relieve mid to long term organisational stress and those that don’t. Whilst those customer contact outsourcers that don’t have (or don’t plan to have) this capability to de-stress, continue to be well placed to solve organisations’ immediate and short-term challenges, we have seen some significant levels of technology and skills investment towards an Outsourcing 2.0 capability, amongst those that can.
What we are not seeing enough of is an evolved, Outsourcing 2.0 contracting proposition. One that is equitable for both parties. A simple contract proposition that provides an upside for the technology and skills investment of the outsourcer and in return, long term risk and cost reduction for the client.
Striving to deliver an equitable position to accommodate permanent change
Our view of the customer contact world is that its typically the client that makes the decisions on how they want to automate customer contact to reduce friction and cost in their operations. We also understand that the client may also want to:
- know more about how changes in customer contact are going to flow through product and service delivery,
- be able to make active decisions on what those changes mean in terms of risk and profitability,
- identify service solutions that will de-risk their journey to deliver customer contact at lower cost,
- deliver value and benefits that justify the time, cost and effort in enabling process change
- potentially deal with specific customer use cases where they do not have the physical capacity or technical capability,
- do all this without compromising service delivery in terms of quality and data governance i.e. the regulatory and contracted controls supporting data privacy and data security.
We also recognise that the world of customer contact tech is changing faster than it probably ever has; and it’s hard to tell what the next few years will bring in terms of time saving and service enhancing technologies.
SaaS based technology is easier to deploy, easier to recognise ROI, is already impacting on the flow of low complexity tactical work into the global outsourcing industry. This trend is also evidenced by more work. being delivered via the client’s own technology, enabling them to leverage their existing back-end systems integrations and continue BAU without interrupting the established end to end data flows supporting their existing operational reporting and decision-making processes.
Whilst the outsourcer community is continuing to strive to deliver uncompromising value, to positively impact service delivery and comply with regulatory and contractual data governance, there is clearly an acknowledgment of the impact that customer contact automation brings to their core market.
Contracting to deliver mid to long term value by de-risking the transition to a permanent change in customer contact
Global outsourcing capability now has a firm dividing line across it. Those that have (or plan to have) the infrastructure and technology to deliver permanent change (2.0) and those that have not.
For those that have (or plan to have), we can see the opportunity for a new type of contracting relationship with clients. A contracting relationship that:
- de-risks the client from the turbulence of technology change whilst delivering the permanent changes we see in human communication and the impact that has on customer contact service delivery,
- will enable the outsourcer to deliver appropriate levels of automation without compromising the clients service objectives and targeted cost reduction when expressed as simply as a ‘cost per customer per annum’.
In the context of customer contact, clients find the idea of managing permanent change, de-risking the potential downside of getting that change wrong and doing that at a fixed and reducing cost very attractive. Especially when that contract properly considers how service quality is measured and underpinned as well as being directly linked to cost.
There are then two big variables in the client conversation that are both fundamental to a new contracting proposition.
One is the composition and contracting position of the legacy technology overhead that delivers existing levels of customer contact, especially how that customer engagement technology stack is connected into the ‘back office’ technology of the organisation.
The second is about existing costs. This is the client’s understanding of their current cost of managing their customers. Specifically, how that’s calculated especially in the context of a desire to express that as a ‘cost per customer per annum’.
Recognising the barriers to change
It is easy for us to oversimplify what we see as a new contracting paradigm. But we also recognise that the old contracting models don’t proactively and deliberately reduce the organisational stresses that put mid to long term business performance at risk.
Of course, some business verticals carry significant levels of technology debt. However, unless we explore, and explore deeply, what the possibilities are, then the weight of technology debt will drown organisations and fail as a lifejacket to guarantee ongoing survival.
Unless your technology is able to destress your organisation now, then the same technology stands little chance of keeping you afloat in the mid to long term.
Customer communication and customer contact management has changed permanently and is different from customer contact pre-the explosion in generative AI. This means new risk and new levels of risk for both client and the customer contact outsource communities. Our view is that contracting between the parties needs to change fundamentally.
Outsourcing 2.0 offers a mid to long term view of how both client and service provider can benefit whilst reducing risk on both sides. By looking at contracting differently, both parties can focus on their core strengths and experiences to set and deliver against service goals and commercial objectives. To do that mutually establishing, expressing and agreeing the existing technology stack directly supporting customer engagement and the cost per customer per annum to deliver growth and service objectives.
What next?
What are your thoughts on the future of customer contact outsourcing contracts? Do you think we’re thinking along the right lines, or have we underestimated the complexity of clients’ current position, especially in the context of technology debt? Whether you’re a client or service provider we’d love to hear what you think.
