My recent experience with FiOS got me thinking about outsourcing again. While I am left figuring out the services that I am supposed to get and what I have to pay for, I thought I should try to highlight the problem.
I recently switched my cable and internet provider based on a door-to-door sales pitch. After what was seemingly a good sales pitch, I decided to switch providers and enroll with Verizon.
Things were going well until I got my first billing statement. I realized that I was being charged for services that I had considered to be free. After much of back and forth with Verizon, I realized what the problem was – the door-to-door sales rep had mis-represented the deal offered by Verizon. In his eagerness to get me to switch, the sales rep had led me to believe that I would get many services for free that weren’t really free.
The original idea from management may have been to cut costs and increase lifetime value by getting third parties to do the sales job and Verizon working on managing the relationship. This strategy may have back fired in this instance. It is typically not a smart idea to outsource a customer contact point. Most of the intelligence about what a customer likes, dislikes and key concerns can be garnered while paying attention to this edge of the enterprise. By using contractors, Verizon may have lost this intelligence. Furthermore, the incentives and objectives between the corporation and the contractor may not be aligned. This may manifest itself by one party focused on closing the sale and the other going after life time value.
An example of a company that manages customer expectations well is Apple. This company owns their value chain end to end. I am sure that they outsource some of the production work to third parties, but this is not a customer contact point. The retail outlets and the iTunes store are closely held by Apple. This has allowed them to offer a superior value proposition that the customers appreciate. There are many, many examples of companies have successfully outsourced back office work. A customer contact point is a whole different story.
Something for comapnies to think about before outsourcing.