Why more than half of Contact Center Outsourcing contracts won’t renew

Posted 2016

When it comes to the outsourcing buyer-service provider relationship, the conventional wisdom “more is better” has evolved quickly over the last few years.

Traditionally, having more BPO vendors meant greater redundancy and potential for cost optimization, but now buyers are becoming reluctant to spend the time and effort managing a large vendor portfolio that may bring less strategic value.

With buyers switching gears to a “less is more” mentality, contract renewals have taken a hit. A recent study by consulting and research firm, Everest Group, with support from TELUS International, found that less than 50% of end-of-term contact center outsourcing contracts were renewed between 2013 and 2014.

 

The study also highlights a clear opportunity, as well as framework, to address this challenge, including:

  • Reasons behind the evolution of buyer-service provider relationships
  • Six key factors impacting outsourcing relationship value
  • Benefits achieved through a more engaged model
  • Steps buyers and their service providers can take to foster an engaged relationship
  • The metrics of an engaged partnership; moving from operational to business outcomes

And it’s not just Contact Center Outsourcing contracts that are under buyer scrutiny. In fact, most BPO segments are experiencing higher rates of non-renewals than in previous years as the following exhibit demonstrates:

Higher termination rates over the last two years. (CCO = contact center outsourcing, HRO = human resource outsourcing, FAO = finance and accounting outsourcing, PO = procurement outsourcing)
Higher termination rates over the last two years. (CCO = contact center outsourcing, HRO = human resource outsourcing, FAO = finance and accounting outsourcing, PO = procurement outsourcing)

The changing buyer-service provider relationship

Less is more sounds good but what’s the catch? The deeper the relationship – and the more added services – the greater the investment of time, commitment and other vital resources required from both buyers and service providers. That means buyers and their partners are experiencing fewer but more meaningful relationships.

More and more, the scope of BPO engagements is expanding to include the entire business process chain, including more IT functions, business process improvement and other value-added services. We look to our frontline agents to be engaged, dynamic and resourceful, so why should a buyer’s relationship with their service provider be any different?

The move towards more engaged partnerships

So what separates the vital relationships from the dispensable?

Contracts that were renewed were observed to have a greater scope of services added, including expanded geography, lines of business and added processes. But it’s really when service providers go above and beyond to deliver innovation and efficiency and when buyers bring more focus and attention to the relationship that contract renewals are most likely. This creates a cyclical partnership where both parties contribute to each other’s development and have a greater stake in each other’s success.

It’s clear that the game is changing, and with fewer players, there’s a greater investment in those that remain. In the end, the winners are the buyers and service providers who view their relationship as a true partnership, learning from one another for overall success. For more information on the evolving outsourcing relationship including the key factors impacting BPO relationship value, download the full study:  

Achieving Maximum BPO Value

How smart buyers structure contact center relationships – with Everest Group

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