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Scaling your customer service team: in-house or outsource?

Andrea Finnegan
September 20, 2023

Written by Andrea Finnegan, a customer success leader with 25+ years of leadership experience, currently managing customer support for Airbnb in EMEA. She serves as co-site lead and Executive Director for Airbnb Ireland. Prior to Airbnb, she spent almost a decade at Google in sales and operations. 

Kerri Johnston, Head of Delivery Centres at Stripe, has also participated

Making the decision to manage your customer service team in-house or to outsource really depends on a variety of factors including where you are as a company in terms of your lifecycle, size and complexity, what your strategic customer service vision & goals are, and finally, what your financial resources and priorities are. It’s less about progressing along a linear line from your first few initial team members to a larger team and then an outsourced team, but about where customer experience and service fits to your vision, strategy and philosophy. Some companies may outsource entirely from the start while others may keep it in-house and close.

Once you figure this out, then it’s about understanding the pros and cons of each approach and choosing the option that best matches your goals & priorities. 

To help in your thought process, here are  some key considerations below:


Building an in-house customer service team:

  1. Maturity & size: If you are still defining your customer service processes and they are still untested, are at an early stage or still evolving, it can be helpful to keep your customer service support in-house first to ensure all processes work well before scaling out to a vendor. It’s also generally more efficient to keep your customer service in-house when you’re at a small scale given the lift required to outsource successfully.
  1. Control & consistent service: Building an in-house customer service team allows you better control on delivering your customer service vision and ensuring a consistent customer service experience through directly hiring and managing the teams (management, recruitment, training, quality, process improvement etc…) that will be responsible for operationalising your customer service vision, translating company values into behaviours and delivering on your key metrics for success.
  1. Company expertise: An in-house team will know your service, product, processes and customers extremely well and this will continue to deepen over time, providing excellent insights into evolving trends, customer needs and improvement ideas. In-house teams are generally stronger brand ambassadors too.
  1. Evolving and adapting quickly: Over time as your company evolves or customers' needs change, you may need to roll out large changes to your customer services strategy. It’s generally much easier to cascade that new strategy & expectations and measure how that change landed to an in-house team.
  1. Sensitivity, complexity, data security: Depending on the industry and the sensitivity of customer information, data security and compliance requirements might play a significant role in your decision. In-house teams allow for tighter control over data, while reputable BPOs often have robust security measures and compliance protocols in place. Another consideration here is that due to normal levels of churn at BPOs (can be around 10%) it’s often better to keep high complexity work in-house as retention levels are generally higher and therefore you maintain a good return on your training investment.

Zappos is a company well known for providing world class customer service by having a clear customer service philosophy and promise and ensuring to deliver on it consistently by focusing on setting their internal customer support teams up for success. Check out a recent  Zappos case study.

Outsourcing customer service to a BPO (Business Process Outsourcing company)

  1. Cost efficiency: Due to economies of scale and expertise built up over time, BPOs can provide companies with a great solution to build out a customer service solution quickly, to a good standard and at a good cost point.
  1. Scalability & reach: BPOs allow a company to have a more global presence due to having offices and teams across the globe and providing support in a large range of languages. They also allow a company to scale up or down depending on need. Many companies can have a large seasonal demand (think of top travel companies for example) and BPOs provide the ability to scale up or down as needed.
  1. Product and technology: Many BPOs are strong at keeping close to changes in technologies and have invested a lot in building out products, tools, processes and structures to offer strong scalable customer solutions. Therefore allowing smaller companies to be at the cutting edge in customer solutions that may not otherwise have the resources to do so.
  2. Specialised expertise and knowledge: BPOs have gained a lot of experience in delivering strong customer service by working across a wide range of industries and businesses. They have dealt with many customer service challenges and have gained insights allowing them to develop strong best practices in areas such as hiring, onboarding, tooling etc.
  1. Work type/retention: Many companies decide to outsource low complexity and repeatable tasks to a BPO to be able to develop more opportunities for growth and development internally and to support higher employee morale and retention.

A hybrid model:

Another approach is to take the best of both worlds and involves building and maintaining an internal team and scaling out with the help of a BPO.

  1. Champion challenger model: This approach involves your in-house team and your outsource team doing similar work however your internal team sets the pace and expectations of what a BPO should aim towards delivering. This allows a company to know what is possible and keep the bar high on performance and the experience.
  2. Test, iterate, scale: The idea here is that as you business grows and continues to evolve, your internal team builds out new service lines before they are scaled out to a wide network, this helps mitigate any large negative impacts to your business as your internal team can help test processes, update workflows, seek feedback from customers and iron out any pain points before a scaled out launch.
  3. Specialisation versus generalisation: Many companies take an approach to keep very specialised knowledge and capabilities in house but to balance that by outsourcing more generalised capabilities to a BPO partner. This minimises risk, allows for a good cost model and allows for more focus on key areas of expertise.

Some key considerations if you have decided to outsource:

  1. Do your due diligence when choosing an outsource company/BPO: While cost may be one large consideration, there are other important considerations that are equally as important as you go through a formal RFP process. Other areas to consider include: Does this company share your company’s values and will they be a strong partner? Will they be able to translate those values into the customer service experience they provide? During the RFP process, ask the BPO to provide you with a list of their customers and contact names, request an introduction and use this opportunity to seek positive and constructive feedback about the BPO as a partner. I’d also strongly recommend visiting the sites in person to get a good feel for their company culture.
  2. Consider carefully how you will incentivise your BPO: A key strength of BPOs is that they are very focused on reaching the metrics you give them (they want to keep your business after all!) but remember that metrics drive behaviour. So, if you incentivise for speed and strong SLAs exclusively this may drive unintended negative consequences such as not providing the type of high quality support that you expect. Take the time to consider carefully your reward and incentive model and ensure that it  balances well your efficiency, quality and cost metrics but that it’s also driving the behaviour and experience you want.
  3. Clear communication and governance structures: For success in your partnership, it is crucial to be explicit in what good looks like and how that will be measured. Do not be vague on your expectations and avoid changing direction or priorities too frequently. It’s key to invest in robust training and change management, you can’t just outsource and then forget about it. As one colleague put it: ‘there are rarely bad vendors, just bad outsourcing’!
  4. Consider working with more than one BPO: working with more than one BPO allows you to diversify risk such as an entire operation in one location shutting down due to unforeseen circumstances (large outages, typhoons etc.) or underperformance with one BPO. It also allows for some healthy competition, sharing how one BPO is performing versus a network of BPOs can be a great motivator.

Where to start?

There are a large number of BPO providers out there and it can be challenging to know where to start and who to reach out to. Gartner is a great resource, they have developed a magic quadrant for customer service BPO providers that takes into consideration the strengths and opportunities of different providers and then plots them on a quadrant based on whether they consider them market leaders, challengers, niche players or visionaries allowing you to narrow down your search. Check out an overview of this here.

Ultimately, there is no right or wrong answer to whether you should outsource or not your customer service team. It really depends on what is the best approach for your company at a given time based on what you are hoping to achieve and the resources available to you. The key thing to also remember is that even once you have made a decision, it can be adapted and changed over time as your business grows and scales.

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