Pillsbury Global Sourcing - Contact Center Outsourcing

1. Global Sourcing
Contact Center Outsourcing
Companies contemplating an outsourcing of their contact
Pillsbury’s unique combination of experienced centers face a number of challenging issues:
consultants and attorneys on a single team helps • What is the optimal balance between performance and price?
to ensure our client’s success and avoids the • What is the appropriate set of service levels to measure the
costly and risk-prone handoffs that often typify supplier’s performance?
complex sourcing projects. Our more than 20 • What are the best pricing metrics for the transaction?
years experience in the sourcing industry allows • How can planned and unplanned spikes in workload
volumes be addressed from a planning, service level and
our team to make extensive use of knowledge pricing standpoint?
management databases and training programs • What types of contractual provisions should be negotiated to
in representing clients on sourcing transactions provide an appropriate level of protection?
across a wide array of industries, suppliers and Pillsbury Global Sourcing has extensive experience assisting
transaction types. clients in addressing these and other issues in a wide range of
contact center outsourcing transactions, including back office
service desks (e.g., IT, HR, Facilities), customer service centers
and telemarketing. Our professionals assist clients in all
aspects of contact center outsourcing, including:
• Developing sourcing strategies
• Preparing Requests for Proposals
• Identifying potential suppliers and evaluating their proposals
• Negotiating the business, technical and legal terms of
the transaction
• Developing financial models for the transaction (both internal
base case and supplier pricing)
• Drafting contract documents, including scope, service level
and pricing schedules
• Assisting clients with post-contract issues
Pillsbury Winthrop Shaw Pittman LLP www.pillsburylaw.com

2. Global Sourcing
Lessons Learned Behavior
In establishing an appropriate set of performance metrics, it is
Pillsbury Global Sourcing makes extensive use of knowledge important for customers to understand how service levels may
management databases and training programs to capture the influence supplier behavior. For example, an aggressive
20+ years of learning that has taken place as we have repre- call-handle-time service level may lead agents to end calls
sented clients on sourcing transactions across a wide array of quickly at the expense of customer service. As a result,
industries, suppliers and transaction types. Some of the more appropriate quality measures are needed to guard against this
important “lessons learned” relating to contact center services behavior. The outsourcing contract should contain the right
are described below. combination of service levels to ensure that suppliers are
motivated to achieve the desired level of performance in all
Baseline Data relevant categories, including:
Providing potential suppliers with accurate and detailed
• Speed (e.g., call answer times, abandon rates)
historical and projected workload volumes and other data
concerning the outsourced environment is essential. Among • Efficiency (e.g., call handle times)
other things, the data should include:
• Quality / effectiveness (e.g., first call resolution, call
• Number of contacts broken down by type (call, email, web monitoring, user satisfaction surveys).
chat, fax, white mail)
Precision
• Hourly, daily and seasonal variations
It is important to define performance measures with precision.
• Handle times Even the most commonly used service levels can have a
variety of different measurement methodologies. By way of
• Spikes (nature, frequency, size, advance notice)
example, call answer time service levels can have a number of
possible start times, ranging from the time the call hits the
Twelve months of historical data is recommended. This data,
switch to the time the call is placed in the queue after the IVR
together with key performance requirements, will be required
option is selected by the caller. In addition, answer time
by suppliers to develop staffing plans and propose pricing.
service levels can be measured as an “average” answer time,
Without it, customers are more likely to receive proposals
as a percentage of calls answered within a specified answer
with generic descriptions of supplier capabilities and T&M
time (e.g., 80% within 20 seconds), or both. These differences
rates, all qualified by many assumptions to be validated after
can have a significant impact on supplier staffing and pricing.
contract execution.
Service levels should be defined in a clear and precise
manner as early as possible in the procurement process to
Performance Requirements enable the suppliers to design solutions that will meet the
Balance customer’s needs.
The cost of contact center services is driven largely by staffing
requirements, which in turn are driven by contact volumes / Pricing Metrics
patterns and performance requirements. Service levels such as
There are a variety of metrics that can be used to price contact
speed of answer and abandon rates in particular drive staffing
center services, including FTEs, productive work hours, contact
needs and can have a dramatic impact on the cost of service.
volumes or business units (e.g., per seat or per member).
Customers are advised to give careful consideration to the
There are also hybrid pricing models that combine various
trade-offs between performance and price to achieve the
elements of these metrics. Each pricing metric has advantages
balance that best meets their business needs. To better
and disadvantages in terms of financial incentives, predictabil-
understand the trade-offs, Customers may want to seek
ity, ease of administration and other considerations. It is
alternative pricing proposals from suppliers based on various
important for customers to understand and prioritize their
performance levels.
pricing objectives in establishing a pricing structure for contact
center services.
Pillsbury Winthrop Shaw Pittman LLP

3. Contact Center Outsourcing
Underlying each of these pricing metrics is a staffing model Confidentiality and Data Security
and associated costs for delivering the services. Customers Contact centers often handle sensitive personal data, such as
should require suppliers to disclose their proposed staffing an individual’s account information, credit card information and
model during the procurement process, together with the social security number. It is therefore critical that there be
personnel rates and other costs that form the basis of their appropriate safeguards designed to protect against the
pricing proposals. This information will enable customers to unauthorized use or disclosure of such information. These
validate (e.g., through their own workforce management tools) safeguards range from general contractual commitments by
that the proposed staffing is reasonable and affords a direct the supplier to comply with applicable laws, regulations and
“apples to apples” comparison of personnel rates across all industry standards (e.g., Payment Card Industry) in accessing,
suppliers (or, in the case of a sole source procurement, a storing and processing confidential information to detailed
comparison against industry benchmark data). Once the security procedures addressing how the data will be protected.
parties have discussed and agreed on the optimal staffing plan Liability exposure for data security breaches has become a
and associated personnel rates, the supplier’s charges can be highly sensitive and heavily negotiated issue in recent years
converted into the desired pricing metrics. with many suppliers seeking very tight limits on their liability.
The contract should allow customers to recover a substantial
Spikes portion (if not all) of the damages they are likely to incur due to
Spikes in contact volumes can present a difficult challenge a security breach caused by the supplier, including fines and
from a performance and pricing perspective. Spikes are either penalties payable to regulators, costs of customer notification
planned (e.g., a new marketing campaign that is likely to letters and other reasonable costs incurred in handling the
generate a surge in calls) or unplanned (e.g., a service outage). security breach.
Planned Spikes
With sufficient notice, most suppliers will commit to increase
Representative Contact Center
their staffing to continue to meet service levels during a planned Outsourcing Engagements
spike. The central question for the customer is whether it is
• Pillsbury assisted a financial services industry client
worth paying the additional cost for the supplier to meet service
structure and negotiate a three-year call center services
levels during the spike. The customer may determine that the
agreement. Under the agreement, the supplier will make
optimal balance of performance and price would allow for some
outbound calls to obtain marketing and credit information
degradation in service levels during the spike. Mechanisms
for the client in the U.S. and Canada and to sell the client’s
should be included in the outsourcing contract that will permit
products and services.
the customer to recalibrate service levels during the spike and
require the supplier to justify any additional charges based on • Pillsbury structured and negotiated a five-year agreement for
actual increases in staffing required to handle the spike at the a financial institution that provides for the design, develop-
specified level of performance. ment, implementation and operation of customer service
call centers in South Africa. The call center handles inbound
Unplanned Spikes calls of all types from the financial institution’s customers.
The initial position of many suppliers to unplanned spikes is
• Pillsbury assisted a financial services industry client struc-
that, if contact volumes during a month exceed baseline
ture and negotiate a three-year agreement for call center
volumes by more than a specified percentage (e.g., 10%), then
services to handle consumer inquiries, as well as provide
the service levels do not apply for the month. Yet, the supplier
IT Help Desk services. The agreement contains a hybrid
expects to charge the customer for handling the excess
pricing model that provides predictable charges through call
contacts. This approach is a “lose-lose” for the customer and
volume banding while enabling the client to capture cost
can be avoided by establishing appropriate counting rules for
savings resulting from future productivity improvements
excess contacts as applied to the relevant service levels (e.g.,
and efficiencies.
speed of answer, abandon rates) and limiting the supplier’s
ability to charge for excess calls which are not counted in the
service level measure.
www.pillsburylaw.com

4. Global Sourcing Contact Center Outsourcing
• Pillsbury assisted a major food manufacturer structure and
About Pillsbury
negotiate a three-year agreement for a consumer contact
center. The purpose of the contact center is to nurture Pillsbury is a full-service law firm with market-leading strengths
relationships with consumers and build brand loyalty. The in the energy, financial services, real estate and technology
supplier’s responsibilities under the agreement include sectors. With offices in the world’s major financial and tech-
responding to consumer inquiries, handling product sample nology centers, we counsel clients on all aspects of global
requests, consumer contact fulfillment, handling consumer transactions and litigation. Our multidisciplinary teams allow
complaints and claims, outbound calling, marketing enroll- us to anticipate trends and offer a 360-degree perspective
ment activities, Internet marketing activities and crisis on complex business and legal issues—helping clients take
management services. greater advantage of opportunities and better mitigate risk.
• Pillsbury assisted a financial services industry client renego-
tiate a call center / customer care agreement under which
the supplier will answer consumer inquiries concerning cred-
it card accounts (e.g., balance, payment information, interest
calculations, merchant transactions) and make changes to
their accounts. Services are provided both onshore in the
U.S. and offshore in India.
• Pillsbury assisted an ISP structure and negotiate a customer
service outsourcing agreement for the provision of call cen-
ter services. The transaction involved the transfer of in-scope
employees of the client to the supplier. Pillsbury advised the
client on compliance with EU employment requirements.
Pillsbury Global Sourcing
Pillsbury’s Global Sourcing practice is an innovator in archi-
tecting, negotiating and implementing complex sourcing
solutions with the world’s leading service providers on behalf
of outsourcing customers.
We serve our clients through an integrated business, consulting
and legal services model. This unique combination of highly
seasoned skill sets differentiates us as the only professional
services firm able to guide clients through the full outsourcing
continuum—from formulation and supplier analysis, to
contracting and execution—with the depth of experience to For further details, please contact:
envision and achieve effective service delivery solutions, faster Jeffrey D. Hutchings
and more efficiently than other advisory firms in the field. 202.663.8163
jeffrey.hutchings@pillsburylaw.com
ATTORNEY ADVERTISING. Results depend on a number of factors unique to
each matter. Prior results do not guarantee a similar outcome.
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