Opportunity On The Line - InformationWeek

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10/17/2003
12:05 AM
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Opportunity On The Line

The promise of business-process outsourcing is tempered by questions of security, technology, and culture that customers will have to examine closely

Faced with declining passenger revenue and rising costs, Delta Air Lines Inc. launched a plan earlier this year to cut operating expenses (with the exception of fuel) by 15% by the end of 2005. Cutting its unionized flight-crew and maintenance personnel would involve thorny labor issues, so the airline--which posted a total net loss of $2.5 billion over 2001 and 2002-- looked to support operations for savings. In January, it moved part of its call-center reservations operations to service centers in India owned by Spectramind, a Wipro Ltd. subsidiary.

Delta says the move will save the company $12 million to $15 million, including IT-related service costs. It's an example of how more companies are willing to accept the greater risk of outsourcing revenue-generating processes offshore. Traditional outsourcing of application development to far-flung places might mean a project gets delayed if technology, miscommunication, or political upheaval cause a disruption. But as more businesses look for further cost savings, they're beginning to farm out entire operational departments--ranging from call centers to human-resources support to accounting--to contractors with facilities in lower-wage countries such as India.


Lee Macenczak -- Photo by Tova Barch

Delta halted plans for a Philippines call center because of security concerns, senior VP Macenczak says.

Photo of Lee Macenczak by Tova Barch
The Delta effort took meticulous planning, says Lee Macenczak, senior VP of sales and distribution. Delta knew that revenue could be lost if customers were frustrated with the offshore service provider. But factors such as a robust communications infrastructure in India and the ability to monitor operator performance remotely from Delta headquarters helped alleviate their concerns. Dedicated voice and data connections tie the Mumbai, India, operations to Delta's U.S. operations. Customer calls to Delta's toll-free number are routed to the Indian facilities and transferred to the agent with the skills most appropriate to serve a particular customer's needs.

To control quality of an operation that's thousands of miles away from its Atlanta headquarters, Delta uses contact-center-management software from Witness Systems Inc. The vendor's eQuality Suite automatically creates voice and screen-data captures from individual agents' workstations that can be viewed in real time or archived. "It's a tremendous coaching tool, and nobody knows when they're being monitored," says John Jacobi, VP of Delta Technology. The call-center performance thus far has exceeded learning-curve expectations, Macenczak says, and target call-handling times exceeded specific targets in the first three weeks of operations.

For business-technology managers, the emergence of offshore business-process outsourcing brings opportunities and raises questions. The promise is that these providers will help cut the costs of maintaining back-end or customer-facing IT operations, that they have the resources and the capacity to quickly implement new IT resources and processes, and that they can even spearhead process improvements based on their exposure to a wide variety of customers and their knowledge of particular fields. As just one example of increasing vertical-industry focus, late last year Wipro paid $26 million to buy American Management Systems' global energy practice.

But for some companies, concerns revolve around even the technology basics, such as ensuring that the provider's IT infrastructure is adequate to the task. That's a nonissue, at least as it relates to India, contends Jim Madden, chairman and CEO of HR business-process-outsourcing firm Exult Inc. "The infrastructure is now sufficiently mature and there are very few instances where this no longer makes sense as a business model," says Madden, who predicts 50% of all HR work will end up in India over the next several years. Exult, based in California, maintains a contact center in Mumbai.

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