Delta and US Airways Show Outsourcing is Out: Are They Right?

Flight delays, ridiculous security checkpoints, hidden fees–there’s much to complain about when it comes to air travel today. Airlines don’t seem to be doing much to alleviate these frustrations either. Forrester Research, a research and consulting company, found in it’s 2010 The State of Customer Experience report that airlines scored an average of 68% on its Customer Experience Index. This score is classified as merely “Okay,” which is the middling score on Forrester’s 5 point scale consisting of “Very poor”, “Poor”, “Okay”, “Good”, and “Excellent.” Airlines are suffering from the seeds they sowed earlier on, during a time of short-sighted cost cutting. 

Fly Away, Fly Away

Major airlines shifted call centers out of the country in order to reap cost savings during the last economic recession. In 2004, US Airways opened a call center in the Phillipines to save money. Delta did something similar, outsourcing to India and the Phillipines in 2003. Yet were these decisions actually costing companies more in hidden costs and less quantifiable metrics such as loyalty? Mary Murcott, a contact center consultant and CEO of outsourcing firm Novo1 revealed:

“The reason many executives were originally sold on off-shoring was based on a myopic view of the wrong metrics – such as cost per call and cost per minute. We know now those are the wrong metrics of success – especially when taking into account first contact resolution “

So then, is an off-shored contact center definitively worse than an on-shore one? Take a look at statistics published by The CFI Group, a customer satisfaction research firm:

2010 Contact Center Customer Satisfaction Index

Metric On-Shore Off-Shore
First Contact Resolution 67% 50%
Ease of Understanding 85% 54%
Overall Customer Satisfaction Index 79% 58%

Clearly, off-shore contact centers have a much worse performance record. It’s no wonder airlines are moving call centers back once you combine this information with the fact that 92% of customers form their opinion about a company based on their call center experience (Purdue University) and the fact that 68% of customers will switch brands based on a poor service experience (Gartner Group).

Moving Back Home

US Airways is planning on closing its Manila call center in 2011 and Delta says it’s going to stop sending American calls to South Africa by July. These airlines seem to understand the detrimental effect these outsourced call centers are having on their brands. In a 2006 interview with, Doug Parker, CEO of US Airways, announced that “Our reservations team does a much better job than those the work has been outsourced to… Despite our efforts to improve the outsourcing, it will never be as good as having our own employees do it.”

Recognize the hidden costs of a seemingly good deal. Due diligence is always necessary–even large corporations with armies of analysts sometimes fail to see the complete picture. If you are considering outsourcing or off-shoring a part of your business, conduct careful research and analyze the total impact on your business.

Don’t pinch pennies to lose customers.

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