19.03.2021

Challenges of Outsourced Call Center Development

Why isn’t the call center growing, and why has development slowed down? Let’s explore 4 issues hindering the outsourcing call center’s growth.

Challenges of Outsourced Call Center Development

Development of the Call Center

The first threshold of financial stability for an outsourced contact center is achieved when its capacity is increased to 120-140 agent seats (interestingly enough, the same number corresponds to the threshold of manageability: once you have reached 120 seats, you are ready to open a second platform). At this point, one can say that “the chassis is retracted, the machine has gone into a steady climb.” Business owners can relax a bit and breathe more or less comfortably. However, the phenomenon is that many companies literally get stuck at 80-90 (and those, incompletely filled) and thereafter the development of the call center just stops. They can’t overcome this barrier, and they are often still shaking with cash gaps. Let’s ponder on this for a moment?

The Magnitude of the Stability Threshold

Firstly, you are probably wondering about why we set a specific threshold for sustainability. Why 120-140 seats and not, say, 200 or 250? It’s quite simple. With effective management, the gross profit margins for a Contact Center (CC) typically hover around 25%. According to average market prices in February 2021, each agent spot brings in about RUB 85-90,000 per month. When the CC is filled to capacity, this amounts to a gross profit (forgive me for omitting the word “gross” to avoid repetition) of roughly RUB 2,500,000. If you set aside this money as a safety cushion for even a month in advance, then in case one of your customers doesn’t pay, these funds are sufficient to cover the payroll of an average project. With smaller profit margins, there will not be enough money to pay the agents’ salaries in such a scenario, people will scatter, and the operation will shut down. Bringing them back is quite challenging. I hope that explains the stability aspect.

Why Call Centers don’t grow beyond this size

Now, let’s look into the primary reasons why companies fail to reach this size. Firstly

This is about subcontracting (when we say subcontracting, we allude to the death of a contact center, and vice versa). As soon as a small contact center starts to take on subcontracts, it traps itself – there’s almost no profit, and the volume (see above) is not enough to cover the agents’ wages, if required. All the outsourcers the author has seen (and in 18 years working in and with contact centers, he’s seen quite a few) who got stuck in a ‘frozen pregnancy’ situation, had more than 15-20% of their seats engaged in subcontracting. In my view, even a 5% threshold is excessive. The only reasonable (and temporary) use of subcontracting is when a company suddenly loses a customer and needs to keep the trained staff until a new customer is found. Otherwise, it’s elongated self-destruction over time.

The second problem we can see here.

We’d take a decent project, but they won’t give it to us. Either competitors are undercutting prices, or we don’t meet the contest conditions – there are always some reasons. Sometimes it’s funny, sometimes absurd, sometimes it triggers both feelings, mixed like a shampoo and conditioner in one bottle. In other words, when company X plans to work on a subcontracting basis for 4.5 rubles a minute, while its competitor undercut a decent customer from 8.0 to 6.0 rubles, this is seen by the leadership of company X as a more accurate strategic choice. Well, if there’s absolutely no hope, but you really want this particular customer, drop to 5.0, there’s nothing to lose; ‘if the barn burnt down, let the cottage burn.’ It can’t be worse. Why this is not done – I can’t figure out. But in reality, they don’t give standard projects for these reasons. When I first faced this issue many years ago, I nearly wracked my brain trying to figure out why the company where I worked always won contests. We had similar prices to our competitors, similar technical equipment, and offices located within a kilometer of each other. But statistically we were much more successful, how did that happen? Now I know. Who gets projects more often and who gets rejected, this box, it appears, was unlocked… Simple as that. Not granted to those where the proprietor (or at the worst, the CEO) doesn’t sell personally. Where a girl or a boy sits at the company’s phone and email with a chat. Where the owner doesn’t want/cannot/doesn’t know how to sell. By the way, he can’t even teach that girl because he himself doesn’t know how to. But in such firms, they undertake completely wild marketing experiments in the spirit of “let’s merge a hypothetical million on advertising in … Facebook, despite the looming revenue chasm ahead of us.” Dear owners, nobody but you can teach your people to sell. And no one can sell better than you, they are only the hired ones, they might resign if anything comes up, leaving you to clean up the mess. Start selling yourself, trust me, it’s good advice. In all the stuck companies, the owners are constantly evading sales, but in growing ones, on the contrary, they participate in them.

Third issue. Improper distribution of money. It’s a cry from the soul. Sometimes, there are some amounts of money in the company, but they are distributed (I’ve already talked about the million and Facebook) as if following the logic of a maniac, not a businessman. Why, for instance, scatter these 80 (eighty) seats of persons in the contact center across 5 platforms in different cities, or even 7 platforms, it only incurs management costs in the already limited budget, and worsens control. There are few owners, but too many platform managers. And what they do at their locations remains unknown despite the presence of cameras and other means of objective control. Yet, they are doing things. Why do this? Improper money distribution devours the remaining profits like a boa constrictor feasts on a rabbit.

Fourth problem Perhaps it’s the worst of all the pitfalls, although… they’re all bad. It’s the presence of a key client, whose share in revenues (not necessarily profits) exceeds 10% (the orange zone), or even worse, over 15% (the red zone). “When we started the company, a friend who was a director was invited to use our services, they agreed, we have been working for 3 years. And for three years, 90 spots have been ours, for the third year they add zero to us”. The problem is not even that losing such a key client is incredibly easy, which can lead to the immediate destruction of your business. The real issue is that in such a situation, everyone is just waiting and hoping for the predictable amount to drop into the account at the expected date. And it will be enough to pay the wages and a little will remain. But it won’t, because the money within the company is distributed improperly. In summary, the secret is simple: sell personally, so you won’t have to rejoice in subcontracting, sell personally until you cross at least the 120 spot threshold and you won’t have a single key client but the development of the contact center will continue.➀➀

Dmitriy Galkin, Independent Consultant

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