What a Startup Should Know Before Outsourcing Customer Service


The customer support rep role has travelled the world and back. It’s taken many different forms from outsourced, to remote work, and now it’s back to the office. Labor that was once seen as cheap and necessary is now a highly regarded role.

Here at Kayako, we were built in India. We had two main offices before our London team was even born, and we are in no way outsourced (if anything, we’re offshored to Europe!). Our teams around the world are in constant contact, and we’ve found some excellent ways to collaborate across four time zones.

In this post, I’ll walk you through the recent history of customer service, showing you why some companies have chosen to outsource customer service, (not to be confused with offshoring which is when the work is done overseas but still remains part of the business), and others prefer to keep their customer service team in house. I’ll give you some tips to help you decide whether you can afford to outsource, or whether you should invest the time in building your own in-house support team.

The birth of mainstream outsourcing: 2000 – 2010

In his book, The World is Flat, Tom Friedman showed that the world in the early 2000s was becoming more connected than ever thanks to economic change. The book described several “flatteners” which knock through borders (literally; chapter one is all about the Berlin Wall).

Flattener #5 argued how outsourcing to India and China is not just for carmakers. Specifically, ever since the introduction of fibre optic cabling, a new kind of support system evolved: the outsourced helpdesk (most notably in the healthcare, financial and banking sectors).

Just like the parts of cars that were being constructed worldwide (e.g. door handles, mirrors, and interior panels) to save on labor costs, large corporations began to disassemble their current structures and move areas overseas for a fraction of the price. Customer service was one of these areas.

At the same time, many entrepreneurs began to ask: “Is outsourcing reserved for the Fortune 500 companies and huge corporations?”

Some decided that it was not, and from then the exploration began, with many small and medium businesses starting to outsource. Entrepreneurial bloggers began detailing their experiences and experimentations with outsourcing tasks like online research, scheduling, managing email and more – primarily to free their time and focus.

A particular blog that went viral in 2005 was a more extreme example of outsourcing by AJ Jacobs, editor-at-large in Esquire. AJ Jacobs wrote about outsourcing his whole life to India, including asking his support rep to argue with his with wife over email.

Perhaps it was Tim Ferriss in The 4-Hour Workweek that highlighted more practically how outsourcing to India can be used for specific business purposes. His outsourced hires were acting directly as customer support reps for his old business BrainQUICKEN. They were tasked to deal with inquiries like these:

  • A customer didn’t receive a shipment
  • A customer had an item held at customs
  • A customer needs the product within two days. Can we ship overnight, what’s the charge?

The early to mid-2000s saw outsourcing become a mainstream business solution. The concept also took off in the media, with guides from the likes of Entrepreneur.com on how to make your call centers go virtual.

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But the primary focus of this era was getting rid of things that could clog up your day. Customer interactions were at the top of this list, and many entrepreneurs and small companies were considering why they should hire a support rep in house when they could outsource one for $4 or less an hour?

An example of where outsourcing has worked more recently is with a real estate company located on the US Pacific coast. They found they were extremely popular among Spanish-speaking customers seeking commercial and residential property. This meant that they needed to provide Spanish-speaking customer service agents to cater to their new customer base.

Slowly coming back home: 2010 – 2015

For the real estate company, having Spanish-speaking agents was essential to meeting the needs of their customers.

Recruiting local Spanish-speaking agents had proven to be a challenge, as there were not many bilingual customer service professionals, those who were bilingual commanded a higher salary than English-speaking customer service agents. They decided that the best solution was to outsource their Spanish-speaking customer service to an American-based partner who had Spanish-speaking agents available in a Central American location.

The company launched the project in early 2014 with a small team of six. A year and a half later, they now employ fifty agents with their partner customer service company.

But outsourcing customer service hasn’t always worked out this well. It was perhaps coming close to 2010, when some entrepreneurs’ needs grew beyond virtual assistance and they realized that not having English as a first language had some limitations, particularly when it came to the careful wording of handling customer issues.

Amazon's failed customer service outsourcing live chat conversation

Then the boom of US-based virtual assistants happened.

This coincided with the rise of websites like odesk.com and elance.com (before their merger to upwork.com in 2015) specializing in virtual freelance work. A great indicator of this is in 2008 odesk.com had 2,500 job postings 2,500 for “virtual assistant”, and by 2012 that number had risen to 25,000. Today Upwork.com shows 53,000+ for virtual customer service work alone.

At this point, virtual customer support was on the map as a legitimate job and articles were being released on sites on how to maximize their efficiency, and how to delegate tasks, such as customer support, technical support, live chat operating, phone support and more.

At this stage for most entrepreneurs and small businesses it was working well: they had the bonus of having first language speakers as well as working in the same time zone, albeit with the increased cost of employing native workers.

They finally found a good fit, right? No.

Here’s why.

Is outsourcing harmful? 2015 – onwards

There are some specific reasons why outsourcing tends to fail:

1. Customer feedback doesn’t make it back to your company.

Customer feedback can be a goldmine for product and marketing teams. But when customer support is outsourced, the two-way communication between support and the rest of the business is broken.

The support team is getting instructions from you, but they’re not sending any feedback back to you. This means that not only do you have very little knowledge of the operations that are going on in the support team, but you also have no way of knowing what your customers are saying to your support team about your product or service.

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2. The tools and metrics aren’t aligned.

If your support team isn’t using the same tools as the rest of the business this means it’s difficult to use the same tags, adhere to the same service level agreements (SLAs) and generate the same reports.

This makes it much more difficult to measure the performance of the team. Metrics allow you to align the success of the outsourced team with your business. If your support team isn’t contributing to business goals, and their compensation and renewed contract isn’t inline with your goals, you won’t succeed.

For instance, if their only metric is service level agreements, the quality won’t be in line with an inhouse team. If the outsourced team isn’t measured on customer feedback, this means they won’t be sending feedback to you at all.

3. You won’t get high-value customer service if you don’t put the time and energy in from the start.

One of the most effective ways to have one of the best customer service teams is by creating a work environment where the employees know the bigger picture they are working towards. But you can only do this through onboarding correctly, and that means treating them like employees.

It’s better to think of outsourced customer support as more of a partnership. It’s important to keep in mind you’re sourcing a long-term professional relationship and you need to choose carefully who you partner with.

Outsourcing poorly would mean you lose that close contact with your support center and that alignment in achieving your business goals.

The real estate company, who outsourced to Spanish-speaking agents, was a good example of implementing an outsourcing solution that aligned with their business goals. But there are still some limitations when it comes to communicating with the outsourced customer service team.

An internal leader for the company explained that their style of management is more face-to-face with team members and they like to personally deliver training to staff.

The leadership team is generally only able to visit the outsourced team once every quarter. While they have supervisors on the ground, it can be difficult to work in the way they prefer to and they have had to find alternatives.

But with the slight culture and language differences, they have to work around the customer service agents missing the overarching strategy behind ‘why’ the decisions were made, unlike the internal team who has the benefit of hearing the reasons firsthand.

Why you should care what’s going on in your support team

Most businesses are now realizing the effort they need to support the customer, with research revealing just how fragile a customer’s repeat business can be and how quickly bad word of mouth can spread. A 2011 American Express survey indicated more than two in five customers will tell people about a good experience, but three in five tell people about a poor experience.

Another study shows that customers are 65% more likely to become disloyal and spread negative word of mouth because of a poor customer service interaction.

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In our recent survey, almost 60% of consumers were unlikely or very unlikely to return to a business they had experienced poor customer service from, even if a trusted friend said the service had improved.

All of this indicates just how important it is that you are providing the best customer service at all times. You can only do this by building the best support team you can, and making sure that your entire team is working towards the goal of providing an excellent customer experience.

If you’re wondering what “excellent customer experience” means, it has been explored in a variety of ways across books, studies, news columns and blogs. There’s now a devoted conference (UserConf) dedicated to bringing education and insight to customer support professionals.

Your support system should be a well-oiled machine and this starts by employing the best people.

Keeping on top on top of today’s demanding customer environment is tough work. What keeps these people coming back every day, handling the challenging issues and emotionally charged customers?

Matt Dixon, Nick Toman and Rick Delisi of CEB conducted an extensive survey in The Effortless Experience, of 5,667 front line support reps across many companies. The survey looked at things like how people are managed, relationships with supervisors, the nature of interactions with peers, and policies within the organization.

They discovered that the fundamental difference for making companies world-class low effort service providers was giving support reps the support they need and provide them with a work environment conducive to doing their jobs well.

Conclusion: The benefits of in-house support

The service you provide is the service you will be remembered for, for a long time.

You just need to look at a company like Dell, which had a reputation for poor outsourced customer service, and despite spending years attempting to correct their mistakes, are still battling their negative reputation.

Compare Dell to companies like Virgin and JetBlue who are built around the customer and are consistently getting positive press because of their great in-house customer support.

It’s not necessarily just the use of in-house or outsourced support that is the differentiator here, and it’s true that there are some circumstances where outsourcing can be a good option.

But if you want to guarantee control over the level of customer service your company offers, measure the success of your support team and gather that incredibly valuable customer feedback, you’re better off building your support team in house.

Building your own support team can be tough, but if you start small and stay focussed on your business and customer service goals you can succeed. And the only way to make sure your customer support is memorable is by ensuring that it  aligns with your business goals and by hiring the right people.

We’ve got some great free resources to help you do this:

We’d love to hear what you think about this. How have you made remote support work? Have you migrated from outsourced to in-house? Share your experiences in the comments!

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