Strategic CIO // IT Strategy
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9/3/2004
11:35 AM
Rusty Weston
Rusty Weston
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Why Offshoring Transparency Matters

Chris Larsen is known as a business innovator and a survivor of both the dot-com boom and bust. A 43-year-old Stanford MBA, Larsen, who founded E-Loan in 1996, was never just a get-rich-quick-and-damn-the-consequences guy. He knows that growing his company into a sustainable, profitable enterprise is a constant struggle, one that won't always be propelled by the favorable winds of cheap interest rates.

When E-Loan rolled out a global-sourcing strategy earlier this year, it lacked one quality so many of its peers in financial services esteem above all others: stealth. Larsen's innovation was to give customers the choice of having their loan applications evaluated in the United States or India. What's the catch? The approval arrives several days faster if the application is evaluated offshore. With a sample of 50,000 applications since February, Larsen points with pride to the fact that 87% of the company's applicants prefer the offshore option. "I love the idea of the consumer having the choice or consumers agonizing over the decision," Larsen says. The consumer is getting "more power and more responsibility."

E-Loan is hardly the first in its industry to look overseas for operational cost savings or expertise. In a sector where 60% to 70% of costs are labor-related, nearly every financial-services company in America has a globally delivered services strategy, whether captive (company owned) or outsourced to a third party, typically in India. These services range from operational IT services, such as programming and infrastructure, to business-processing outsourcing, including back-office finance and accounting applications, to customer-facing call centers that handle service, support, or even outbound sales. E-Loan, a Wipro Technologies customer, is evaluating other processes to ship offshore as a means of controlling its operational expenses.

Do your customers care where a call center is located? Most do. That's a key finding of a new study of 500 business and consumer call-center customers fielded by two CMP publications, Managing Offshore and Call Center magazine. Only 30% of business customers say the location of a corporate call center isn't very important--indeed, 39% insist that it's highly important. Why? Once a customer realizes that the call-center agent isn't located at company headquarters, that's often the beginning of a less-than-satisfactory experience. There's another factor, too: 59% of respondents maintain that their business data is at a higher risk of compromise when it goes offshore.

Despite these serious concerns, offshoring often makes economic sense for U.S. companies, and it often can result in improved customer service. Companies shouldn't be afraid to disclose the location of their call centers. "Hiding it or failing to mention it isn't right," Larsen says. The pillars of Larsen's sourcing strategy are these: "efficiency, low cost, and transparency." His company doesn't outsource many processes--most are custom. "In our experience, things that are easy to codify make sense [to offshore]. The more complex it is, the harder it is to pull off."

Ultimately, the question that E-Loan and many other companies must consider isn't whether to try offshoring, it's how to succeed at it.

Rusty Weston is editor of InformationWeek Research and Managing Offshore. He can be reached at rweston@cmp.com.


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