Pillsbury Contact Center Outsourcing

Pillsbury Winthrop Shaw Pittman LLP

Contact Center Outsourcing

www.pillsburylaw.com

Pillsbury’s unique combination of experienced

consultants and attorneys on a single team helps

to ensure our client’s success and avoids the

costly and risk-prone handoffs that often typify

complex sourcing projects. Our more than 20

years experience in the sourcing industry allows

our team to make extensive use of knowledge

management databases and training programs

in representing clients on sourcing transactions

across a wide array of industries, suppliers and

transaction types.

Companies contemplating an outsourcing of their contact centers face a number of challenging issues:

What is the optimal balance between performance and price?•

What is the appropriate set of service levels to measure the •supplier’s performance?

What are the best pricing metrics for the transaction?•

How can planned and unplanned spikes in workload •volumes be addressed from a planning, service level and pricing standpoint?

What types of contractual provisions should be negotiated to •provide an appropriate level of protection?

Pillsbury Global Sourcing has extensive experience assisting 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•

Global Sourcing

Global Sourcing


Lessons LearnedPillsbury Global Sourcing makes extensive use of knowledge management databases and training programs to capture the 20+ years of learning that has taken place as we have repre-sented clients on sourcing transactions across a wide array of industries, suppliers and transaction types. Some of the more important “lessons learned” relating to contact center services are described below.

Baseline DataProviding potential suppliers with accurate and detailed historical and projected workload volumes and other data concerning the outsourced environment is essential. Among other things, the data should include:

Number of contacts broken down by type (call, email, web •chat, fax, white mail)

Hourly, daily and seasonal variations•

Handle times•

Spikes (nature, frequency, size, advance notice)•

Twelve months of historical data is recommended. This data, together with key performance requirements, will be required by suppliers to develop staffing plans and propose pricing. Without it, customers are more likely to receive proposals with generic descriptions of supplier capabilities and T&M rates, all qualified by many assumptions to be validated after contract execution.

Performance RequirementsBalance The cost of contact center services is driven largely by staffing requirements, which in turn are driven by contact volumes / patterns and performance requirements. Service levels such as speed of answer and abandon rates in particular drive staffing needs and can have a dramatic impact on the cost of service. Customers are advised to give careful consideration to the trade-offs between performance and price to achieve the balance that best meets their business needs. To better understand the trade-offs, Customers may want to seek alternative pricing proposals from suppliers based on various performance levels.

BehaviorIn establishing an appropriate set of performance metrics, it is important for customers to understand how service levels may influence supplier behavior. For example, an aggressive call-handle-time service level may lead agents to end calls quickly at the expense of customer service. As a result, appropriate quality measures are needed to guard against this behavior. The outsourcing contract should contain the right combination of service levels to ensure that suppliers are motivated to achieve the desired level of performance in all relevant categories, including:

Speed (e.g., call answer times, abandon rates)•

Efficiency (e.g., call handle times)•

Quality / effectiveness (e.g., first call resolution, call •monitoring, user satisfaction surveys).

PrecisionIt is important to define performance measures with precision. Even the most commonly used service levels can have a variety of different measurement methodologies. By way of example, call answer time service levels can have a number of possible start times, ranging from the time the call hits the switch to the time the call is placed in the queue after the IVR option is selected by the caller. In addition, answer time service levels can be measured as an “average” answer time, as a percentage of calls answered within a specified answer time (e.g., 80% within 20 seconds), or both. These differences can have a significant impact on supplier staffing and pricing. Service levels should be defined in a clear and precise manner as early as possible in the procurement process to enable the suppliers to design solutions that will meet the customer’s needs.

Pricing MetricsThere are a variety of metrics that can be used to price contact center services, including FTEs, productive work hours, contact volumes or business units (e.g., per seat or per member). There are also hybrid pricing models that combine various elements of these metrics. Each pricing metric has advantages and disadvantages in terms of financial incentives, predictabil-ity, ease of administration and other considerations. It is important for customers to understand and prioritize their pricing objectives in establishing a pricing structure for contact center services.



Confidentiality and Data SecurityContact centers often handle sensitive personal data, such as an individual’s account information, credit card information and social security number. It is therefore critical that there be appropriate safeguards designed to protect against the unauthorized use or disclosure of such information. These safeguards range from general contractual commitments by the supplier to comply with applicable laws, regulations and industry standards (e.g., Payment Card Industry) in accessing, storing and processing confidential information to detailed security procedures addressing how the data will be protected. Liability exposure for data security breaches has become a highly sensitive and heavily negotiated issue in recent years with many suppliers seeking very tight limits on their liability. The contract should allow customers to recover a substantial portion (if not all) of the damages they are likely to incur due to a security breach caused by the supplier, including fines and penalties payable to regulators, costs of customer notification letters and other reasonable costs incurred in handling the security breach.

Representative Contact Center Outsourcing Engagements

Pillsbury assisted a financial services industry client •structure and negotiate a three-year call center services agreement. Under the agreement, the supplier will make outbound calls to obtain marketing and credit information for the client in the U.S. and Canada and to sell the client’s products and services.

Pillsbury structured and negotiated a five-year agreement for •a financial institution that provides for the design, develop-ment, implementation and operation of customer service call centers in South Africa. The call center handles inbound calls of all types from the financial institution’s customers.

Pillsbury assisted a financial services industry client struc-•ture and negotiate a three-year agreement for call center services to handle consumer inquiries, as well as provide IT Help Desk services. The agreement contains a hybrid pricing model that provides predictable charges through call volume banding while enabling the client to capture cost savings resulting from future productivity improvements and efficiencies.

Underlying each of these pricing metrics is a staffing model and associated costs for delivering the services. Customers should require suppliers to disclose their proposed staffing model during the procurement process, together with the personnel rates and other costs that form the basis of their pricing proposals. This information will enable customers to validate (e.g., through their own workforce management tools) that the proposed staffing is reasonable and affords a direct “apples to apples” comparison of personnel rates across all suppliers (or, in the case of a sole source procurement, a comparison against industry benchmark data). Once the parties have discussed and agreed on the optimal staffing plan and associated personnel rates, the supplier’s charges can be converted into the desired pricing metrics.

SpikesSpikes in contact volumes can present a difficult challenge from a performance and pricing perspective. Spikes are either planned (e.g., a new marketing campaign that is likely to generate a surge in calls) or unplanned (e.g., a service outage).

Planned SpikesWith sufficient notice, most suppliers will commit to increase their staffing to continue to meet service levels during a planned spike. The central question for the customer is whether it is worth paying the additional cost for the supplier to meet service levels during the spike. The customer may determine that the optimal balance of performance and price would allow for some degradation in service levels during the spike. Mechanisms should be included in the outsourcing contract that will permit the customer to recalibrate service levels during the spike and require the supplier to justify any additional charges based on actual increases in staffing required to handle the spike at the specified level of performance.

Unplanned Spikes The initial position of many suppliers to unplanned spikes is that, if contact volumes during a month exceed baseline volumes by more than a specified percentage (e.g., 10%), then the service levels do not apply for the month. Yet, the supplier expects to charge the customer for handling the excess contacts. This approach is a “lose-lose” for the customer and can be avoided by establishing appropriate counting rules for excess contacts as applied to the relevant service levels (e.g., 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.

Global Sourcing

For further details, please contact:

Jeffrey D. Hutchings 202.663.8163 [email protected]

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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Pillsbury assisted a major food manufacturer structure and •negotiate a three-year agreement for a consumer contact center. The purpose of the contact center is to nurture relationships with consumers and build brand loyalty. The supplier’s responsibilities under the agreement include responding to consumer inquiries, handling product sample requests, consumer contact fulfillment, handling consumer complaints and claims, outbound calling, marketing enroll-ment activities, Internet marketing activities and crisis management services.

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 SourcingPillsbury’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 envision and achieve effective service delivery solutions, faster and more efficiently than other advisory firms in the field.

About PillsburyPillsbury is a full-service law firm with market-leading strengths in the energy, financial services, real estate and technology sectors. With offices in the world’s major financial and tech-nology centers, we counsel clients on all aspects of global transactions and litigation. Our multidisciplinary teams allow us to anticipate trends and offer a 360-degree perspective on complex business and legal issues—helping clients take greater advantage of opportunities and better mitigate risk.

Technology

Pillsbury Contact Center Outsourcing