ANALYSIS
Call Centers: To Build or To Buy?

I got a statistic stuck in my head last week during a visit to a client in California. Sometimes you hear or see something so interesting for its oddity that it stays with you no matter what. For me, this was one of those times.

There are actually two closely related bits of information, and both relate to the call center. Ready? In the business-to-business (B2B) space, less than 40 percent of the companies have purchased a call center system for customer service; and in the business-to-customer (B2C), space less than 25 percent of companies have bought service call center solutions.

Just to be clear, much higher percentages of these companies have some form of call center directed at customer service. They simply build and maintain these centers themselves or outsource. I don't know what the full compliment of call centers is, but I would expect that close to all of the B2B companies at this point in time have some kind of function for taking customer calls.

Guessing Why

So the question that sticks in my mind, amazes me and even permeated my sleep briefly one night: Why? Why would a large (or small) company with other things on its plate decide to take on the rigors of building, maintaining and managing a call center infrastructure when it could easily enough ring up some software company and place an order? I have to say I don't know, but pundit that I am, I cannot help but to noodle on this and offer up some ideas.

• Idea No. 1: It's less expensive to do it yourself. That's somewhat credible if all you look at is the cost of the raw elements. However, a lot of what goes into a call center is labor and smarts in the form of software, and I have a hard time believing it's better to write code rather than buy it along with all of the best practices it encompasses. I'd call this the "IT-centric solution," since it no doubt gives people in IT job security.
• Idea No. 2: The call center grew organically. It started as a small mushroom and mushroomed into a big mushroom. Like anything that grows by accretion, before you realize what happened, this simple little system grew into a great big legacy application that people are afraid to mess with today. I call this the "Supportzilla scenario," and I can see how it could happen. Start with a small investment and every time you reach a make-or-buy decision, the "make" part always looks better than ripping out the whole thing and replacing it with a packaged system. This idea might have legs, but I call it the "management through avoiding decision making" approach.
• Idea No. 3: Customer service is expensive, and no matter what we spend on it, it's never enough. So we have to cap spending, and that means no new spending on those pesky customers. I call this the "pure finance approach."

There are probably other ideas but my brain is tired from not sleeping well because I am thinking about this idea too much.

Expensive Ownership

The truth is that call centers are expensive, and they don't usually show positive returns except for the fractional payback you get when you can boost productivity by handling more calls in an hour with a fixed number of agents. Also, with so many moving parts, it really is easy to believe that the system you've nursed along for years is as good as anything out there -- or certainly good enough. On top of all this there are the ongoing costs of constant hiring and training and re-training call center staff, which may draw attention away from the issue of infrastructure.

I guess there is one more alternative and it might be my favorite -- companies don't see enough value in packaged call center solutions, period. It's not that the things are expensive per se, it's that they simply don't provide a solution to the problem of dealing with customers. After all, these systems don't help customers avoid the need to call the vendor, they just manage the call flow. In the modern world, they are necessary like so many other things.

Half and Half

A few years ago I did some research on CRM in the insurance industry, and what I discovered then dovetails into this issue. The data showed that there was an almost perfect split between insurance companies that bought CRM packages and those that built their own. I recall even calling a few executives to verify the data and what I was told (and the data also confirmed) was that the products then available did not support enough of the business processes that the insurance companies needed covered.

The executives' logic was that they could either customize a package or build from scratch. However, when they did their own financial analysis, the insurance executives decided it was just better to start from scratch. I don't know if things have changed in the years since I did that research -- I left the company where I did it and never followed it up with another study.

Nonetheless, it strikes me that a similar situation exists in the call center. There are so many business processes that could reasonably need to be supported in a call center that no vendor has gotten its arms around the problem yet. If that's true, I wonder what, if anything, the vendors are doing about it. The chances are pretty good that it will require a good deal of investment, and with a market trained to build rather than buy, it might be hard to generate a return on the necessary investment.

I wonder if anyone else is losing sleep over this.

Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales , marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at denis.pombriant@beagleresearch.com.