Outsourcing customer service may seem like a bargain, but it can cost you some of your most valuable clients.

A 2005 Gartner study predicts that 60 percent of organizations that outsource customer-facing processes will see significant numbers of frustrated customers switching to competitors. The costs associated with these defections add up quickly, which helps explain why the same study found that 80 percent of companies that outsource customer-service functions fail to meet their cost-savings targets. No wonder all three of the companies cited above recently brought some of their customer-support operations back in-house after contracting them out to companies that weren't very good at providing help.

There are practical reasons why an outsourcer's service level is seldom as high as what you'll get from your own people. If outside contractors cut costs, it might be because they're more efficient. But it's far more likely that the savings occur because contractors pay their people less, spend less on training, or both. In the petrochemical and mining industries, for example, research shows that a disproportionate number of accidents involve contractors. Just as there's no such thing as a free lunch, there's no such thing as a free worker who's been properly trained to do a great job.

Full Story : CNN Money

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