Start Up Starts Up Quickly By Outsourcing Its CRM

By Gary N. Bowen, Business Writer (Click here for Lessons from the Outsourcing Journal).

Sonos, Inc., a developer of retail digital music systems, was encountering a challenge many start-up companies face: staffing to service 12 hours of sales and support calls in American and European time zones with minimal capital investment. A key need was a call-handling process that could route a call based on skill and availability of the next agent without regard to geography since it had to service customers.

Sonos needed to harness both sophisticated on-demand contact center software and business telecommunication services to support its technical support and sales agents.

Chris Fowler, Director of Support and Operations for Sonos, knew that outsourcing was the only way to accomplish these integrated call management objectives. But as a start up, Sonos was beginning with only a few customer service agents although anticipated growth would afford expansion many times over in a relatively short time. “I wanted all these sophisticated features; every enterprise provider said, ‘Come back when you hit 5,000 seats.’ Our opportunity just wasn’t big enough to interest them.”

“Small-to-medium businesses (SMB) are the greenfield in the market,” says Chris Selland, Principal Analyst at Covington Associates. “The enterprise CRM suppliers have all taken passes at getting into the SMB market.”

Bigger Bang for Fewer Bucks

According to a recent article in the Harvard Business Review, companies that increase customer retention rates by as little as five percent can realize higher profits ranging from 25-to-95 percent. This underscores an important fact: businesses that place a premium on responsive customer contact retain a higher number of loyal customers. For start up Sonos, this was a vital key to its new business model.

As it was developing this model, the unusual customer service needs of the firm eventually brought it to the doorstep of UCN, an outsourcer of on-demand, integrated long distance voice and data services; many are specifically designed for contact centers of any size.

The solution that proved best for Sonos was UCN’s inContact, a network-hosted solution, supporting Sonos’ technical support and sales agents located in geographically dispersed offices via the provider’s long distance network.

The cost for this solution averages about $1,000 a month, which includes all customer relationship management (CRM) representative seats, supervisor log ins, and voice minutes across its 45 toll free numbers, which currently average over 21,000 minutes per month. This eliminates the need for a third-party long distance carrier, which, according to Fowler, “would have certainly cost us a lot of additional expense.”

To manage this network-based application, Sonos leverages the inControl programming tool. InControl empowers Sonos’ programmers to customize the system for specific call management needs. Sales and support personnel now receive calls on their work phone, their cell phone, or their home office phone. When the company is short on representatives in the office, the system automatically calls the leader of the sales or support group, who then calls in additional people to assist customers.

“It’s not just how many agents you have,” says Erin Kinikin, Vice President and Research Director at Forrester. It’s how many different locations and contact points — things like mobile phones and email — that come into play. A small company with traveling road warriors who answer customer calls often has more sophisticated needs than a larger firm with a single, shared office.”

“One of our advantages,” says Jan Johnson, Vice President of Marketing and Training for UCN, “is our ability to bring sophisticated, affordable call management solutions to small and medium-sized business, many of whom would not be able to pay the large up-front costs associated with the solutions offered by traditional phone system vendors and related add-on product providers.”

She adds the entire suite of services is scalable. Firms are able to grow but still pay only for what they use as used. This eliminates onsite equipment obligations and growth-related big ’step upgrades.’ “Many customers also appreciate our assigning a single UCN professional to shepherd them through all the sequential steps of the new customer experience,” she adds.

Speed to Market, Vital for a Start Up

Sonos and RealNetworks provide the popular Rhapsody® subscription online music service. Sonos customers can enjoy the largest legal collection of digital music, plus Internet radio stations, in every room in their homes by utilizing the retail players sold to the public that interface with their home computers. So the retailer knew that in order to capture significant share of this exploding market, speedy implementation of all sales and service aspects, including its customer care service, would determine success.

UCN’s suite took about a day to create the call handling processes Sonos wanted. “We were up and running essentially within a day,” says Fowler. He adds that the service allows his programmers to change call handling port capacity up or down on a weekly basis from a Web-based interface.

The company started with two ports. It has since grown to ten, a number that will continue to expand as the company grows.

Monitoring of representative activity and the time devoted to individual call events is also easy, according to Fowler.

Sonos has tied inContact’s call detail records to a trouble ticket number. On a daily basis, the support team looks at the call detail record, researching all calls that take longer than 30 minutes. Because the trouble ticket number is automatically inserted into the call detail record, the team can quickly pull up the trouble ticket and review the issues associated with that call for analysis and review.

This also allows Sonos customer reps to work from anywhere, even their homes–a customer management option that is becoming more popular and affordable. By using inContact’s ability to support at home and in-office workers simultaneously, Sonos’ is able to maximize its “lean and mean” support staff.

Every day certain pre-scheduled staff members located on the east and west coast log in from home. There they work for several hours until their respective local office opens. Then the early-at-home-workers log out, grab breakfast, then go to the office to complete their workday. “This ability to work from either location provides our people with maximum convenience and scheduling flexibility,” says Fowler.

Forrester’s Kinikin firmly believes the next wave of outsourcing is “home sourcing,” which takes advantage of cost-effective part-time or remote workers located far from a business center, is upon us now. “The ability to adjust a contact management system quickly to take advantage of labor shifts can save money and improve service coverage.”

Let’s Get Small(er)

Once the system was operating, Sonos learned some important lessons that enabled it to further maximize customer service operations. Initially, the firm opened three customer support centers: one on the east coast, one on the west coast, and one in the Netherlands.

If a customer was located in a country without an international number, they were routed to a Salt Lake City, Utah number, which then routed him or her to a European-based support person. Essentially, all calls came to the US-based inContact server center where the call’s origin point was noted as it was sent to the appropriate support center either in the US or Europe.

But this data revealed to Sonos that most support calls for its home-oriented sound system product were made in the evenings — after office hours in Europe but during office hours in the US.

In a short time, Sonos changed its strategy. It closed the European call center and routed all calls to the US-based agents. This enabled the company to convert its European phone support people to field support who then began focusing on the European-based distribution channels.

Kinikin observes that companies can’t ignore local cultural or language issues, but notes that the first requirement of good customer support is to answer calls quickly with a resource that understands the product and how it works. “Because of this,” she says, “we’re seeing a number of companies shift from a distributed service force to a mixed approach with a central service group and then distributed local experts for the local market.”

“In the final analysis,” says Fowler, “outsourcing this to a capable provider was really the only solution that met our needs because it was affordable, scalable, up quickly, and designed to grow along with us.”

Lessons from the Outsourcing Journal:

• Start ups turn to outsourcing for critical processes that required sophisticated expertise and significant cash outlays.
• Small-to-medium businesses can play with the big boys by outsourcing, which gives them access to costly CRM tools.
• Successful CRM requires a multitude of contact points.
• Today’s CRM technology allows providers to have their employees work at home or at the call center, which keeps costs low for buyers.

How a Manufacturer Created a Global Help Desk in Three Languages

By Beth Ellyn Rosenthal, Editor Moving a business is never easy. But change allows you to look at doing things differently. Essilor, which manufactures and distributes lenses for eyeglasses, was moving its Florida operations to Texas in 2001. Its US-Canadian help desk was located in St Petersburg, Florida. “We didn’t want to buy all the infrastructure needed to set up a help desk in Dallas,” says Paul Hayse, Director of IT Office Automation for Essilor.

In addition, Essilor, a French company, had outsourced a second help desk for Europe and Asia. The outsourcer rented space in Essilor’s manufacturing facility in Provins, France. “We didn’t have the space for the agents. And the contract was coming to an end, so it was a golden opportunity to combine our help desks,” Hayse explains.

The obvious challenge: language. Essilor had to find a supplier that had great English, French, and Spanish conversational skills.

Supplier Selection for a Global Help Desk Provider

Essilor, which manufactures popular brands like Varilux, Transitions, and Crizal, issued an RFP. Fifteen suppliers replied. Essilor whittled the list to three and then visited each supplier. There was a supplier in the Netherlands, one in Belgium, and another in France.

“You could really see the difference in cultures in the lunches we had,” says Hayse. “In the Netherlands, lunch was very simple. There was a pitcher of milk, sourdough bread, and thinly sliced cheeses and meats. In Belgium we had very nice sandwiches. The French supplier had elaborate meals outside in the restaurants. Lunch was fantastic.”

Although they loved the French food, Hayse selected TechTeam, located in Brussels, because of its language competencies. TechTeam’s help desk services clients in 22 languages.

The manufacturer also liked the fact that TechTeam was located in Brussels; its offices are close to NATO’s and the EU’s headquarters. Hayse says there are a host of native English speakers in Brussels because of these governmental bodies. “It’s not difficult to find people with the technical skill sets we need who want to work at 2:00 am,” says Hayse.

In addition, Essilor was impressed with TechTeam’s understanding of the intricacies of manufacturing. Ford and John Deere are on its client roster. The company was founded to serve Ford; 25 percent of its annual revenues come from this 25-year relationship, reports Robert Gumber, Vice President for Services Delivery for TechTeam.

Essilor signed a five-year contract with TechTeam in 2003 and moved its help desk to Brussels.

The Transition Challenge: The Gulf War

Essilor took six months to prepare TechTeam for the transition on its processes; the supplier needed to see them through the manufacturer’s eyes. TechTeam also needed that time to recruit the right personnel. There was also a construction component. TechTeam had to build out its facilities because Essilor wanted its own area in the Brussels building.

The relationship faced its first challenge during the go-live phase. TechTeam originally planned to have one go-live date. But the Gulf War broke out; Essilor US instituted a travel ban. So the supplier had to go to plan B: a staggered go-live. The French help desk went live first. The American help desk, which remained in St Petersburg, went live 90 days later.

Essilor sent five of its US help desk staff to Brussels for a month, arriving two weeks before the go-live date. “By the end of the first week they could log email tickets,” says Hayse.

Today Essilor has a help desk supervisor in the US who works with TechTeam on a daily basis. Claire Fromange, TechTeam’s Account Manager for Essilor in Belgium, spends one week a month in Dallas as well as two days a week in France.

Task #2: Operations Monitoring

Essilor also outsources a portion of its operations monitoring to TechTeam. For example, if an Essilor server has a hardware problem, TechTeam logs the incident and follows set procedures to resolve it. “We monitor their entire IS environment,” says Fromange.

The consolidation helped improve service. Before TechTeam took over, two IT departments took care of the system, one in France and one in the US. Time zones and language were continuously a problem. If the system went down in France, it affected the US operations. “If we didn’t have the cell number of a person in France, we couldn’t call him. And he’d be asleep. When we woke him up, we discovered he couldn’t speak English and our technician couldn’t speak French,” recalls Hayse.

The consolidated monitoring has shortened resolution times by 70 percent, according to Fromange.

In addition,. Essilor standardized its ghost images. Ghost, an application from Symantec, creates images for PCs so they can be replicated. This allows a technician to quickly set up a PC each time the same way with the same applications already installed to specific company specifications. “We did this to improve help desk supportability worldwide,” says Hayse.

Sixty percent of TechTeam’s work belongs to the help desk with the remaining 40 percent devoted to monitoring and alerts.

Increasing the Scope

At the outset TechTeam had 19 agents working on the Essilor account. The head count is now up to 25. Hayse says Essilor has increased TechTeam’s volume every year of the contract. It needed more agents as it added more geography to the scope. New additions included Brazil, Canada, Mexico, and Puerto Rico. The French help desk’s role has expanded beyond Europe to Asia and Africa. “We sell our lenses in 45 different countries,” Hayse explains.

Hayse says initially Essilor enjoyed some cost savings by outsourcing. But they became inconsequential as Essilor increased its demand for TechTeam’s services.

Outsourcing’s Benefits

Cost savings paled in comparison to outsourcing’s other benefits. Most important, outsourcing “helped us mature our IT processes,” according to the IT executive. Now the procedures are “professional, producing more process-driven results,” Hayse reports.

For example, Essilor had to document and truly understand its processes before it could ship them to a supplier. “We couldn’t give them to TechTeam and say, ‘Figure this out.’ Outsourcing forced us to solve our issues problem by problem,” says Hayse.

Since the manufacturer outsourced, it has documented 1,500 processes. TechTeam provided the standard templates. For example, one document describes how to handle a specific alert. “Now we treat that alert the same way each time. We forced the help desk to follow our processes,” Hayse reports.

TechTeam has also brought ITIL (Information Technology Information Library) to Essilor.

Also, outsourcing allowed the manufacturer to grow. In 2000 it had 47 locations in the US. Today it has 100. “We needed scalability. TechTeam has been able to grow with us,” says Hayse.

Outsourcing also made Essilor a truly global company. “Even though our CIO was in France, we had few global initiatives to integrate the two main IT groups in France and the US,” Hayse says. Today the company thinks globally. For example, it devised a global PC policy. “The lessons we learned in combining our help desk allowed us to accomplish other projects more easily,” Hayse reports.

Offshoring

The warm working relationship can be challenged by the seven-hour time difference. “The challenges arise when you need to talk to someone late in the day,” Hayse says. TechTeam has minimized that difficulty by working Essilor’s normal business hours on Central Standard Time.

Hayse says his team enjoys working with the Belgians because they have a great sense of humor. Belgium, he says, is much like the US (and the waffles are fine as well as the beer!) It also helps that Hayse speaks fluent French; he was a French foreign exchange student.

The Importance of Partnership

Hayse says this global relationship works because “we view them as a partner.” He says he views TechTeam’s employees as his own. “It’s an attitude,” he admits.

Frequent interaction helped develop this camaraderie. Hayse makes periodic trips to Belgium. He also sends US technicians to Europe to meet their TechTeam counterparts. “We find it’s a lot easier to call someone with a problem after you’ve met them,” he observes.

Fromange says Essilor has worked hard on its end to make the relationship work. “They have been very supportive of us. They are really open to making a good relationship possible. They made sure we understood their infrastructure. They were instrumental in our training,” she reports.

Fromange says Essilor “has taken me into their management team. They’ve helped me help them.” On her part, she says she’s “committed to Paul Hayse. We are working together for a common goal.”

That’s how global sourcing is supposed to work. C’est vrai!

Lessons from the Outsourcing Journal:

• Change often allows companies to rethink current ways of doing things. A move caused Essilor to consolidate its two help desks on two continents into one global point of contact.
• Outsourcing allowed the lens manufacturer to mature and standardize its IT operations. It required documenting processes, which it had not done before.
• Learning how to do business globally helped Essilor make other helpful global corporate decisions.
• Both partners have to be committed to each other’s success for a global outsourcing relationship to work. Speaking each other’s native tongue helps, too!

Allied Irish Bank Becomes First Financial Institution in Europe to Outsource Global Trade Processing End-to-End

By Beth Ellyn Rosenthal, Editor We’ve all been in this position before. We use a software program for years. We’re comfortable with it and it still does the job. Then the vendor decides it won’t support the now obsolete program. The change forces you to look closely at the way you do business.

That’s what happened to Allied Irish Bank (AIB), an Irish banking and financial services organization with operations principally in Ireland, Britain, Poland, and the United States.

The result: AIB became the first financial institution in Europe to enter into a full-service outsourcing partnership to process its global trade finance transactions.

The history: In 2002 its software vendor informed AIB that it would no longer support the system AIB was using for its global trade document processing. “We were faced with a decision: how should we replace that system?” recalls Terry Danaher, Head of Trade Finance Services. In addition, the bank wanted to gain access to an Internet solution.

This was a major decision because global trade finance is an important business for AIB; it has a high market share in Ireland–up to 45 percent of trade import business in Ireland. As well as being a successful business in its own right, AIB’s global trade business is also an important part of AIB’s full-service offerings to its customers. “If we don’t provide trade finance, our customers will have to go to another bank. They might not take just that business but the entire customer relationship,” explains Danaher. That alone “makes trade finance valuable to us,” he says.

Buying a replacement system was the first option. AIB decided that was not the way to go since trade finance is a mature business without a huge growth potential. “Our margins here are continually compressed. So that makes it quite difficult to justify a large investment in a new system,” Danaher explains.

AIB looked at various options to replace the system, but they were all expensive. Then the bank considered outsourcing. Over the course of a year AIB looked at five banks that offered global trade services. “ABN AMRO was the only bank that could provide the complete end-to-end service AIB was looking for; the other banks were able to provide parts of the service only. So that eliminated them,” says Danaher.

But cost became an issue. “Outsourcing looked to be even more expensive than replacing the system. ABN AMRO had the superior offering, but we could not justify the cost,” he explains.

Offshoring Made Outsourcing Possible

Offshoring came to the rescue. While AIB continued to explore its options, ABN AMRO opened a processing center in Chennai, India. That led to a significant reduction in fees; “India made outsourcing economically viable for us,” Danaher says.

The initial investment AIB had to make to hook up to ABN AMRO’s global trade system was less than purchasing a new system. “We were able to compare their costs with the cost of doing it ourselves. They charge us by the transaction, so we would have ongoing savings in our operational costs. These savings swung it for us,” recalls Danaher.

Once AIB resolved the cost issue, it faced one more hurdle before signing an outsourcing contract: It was going to be ABN AMRO’s first European end-to-end trade outsourcing client. Fortunately, it would not be ABN AMRO’s first global trade outsourcing customer–that was KeyBank in Cleveland, Ohio. (Read the KeyBank story). Danaher and his team traveled to the United States and spent time with the head of the trade area at KeyBank. “We got a lot of comfort from the job they were doing. However, they were doing their processing in the United States and ours was going to take place in India, which was a new aspect,” he says.

AIB signed a five-year contract in 2003. AIB outsourced virtually every component of its global trade and finance business except sales–but included the front office, reports Terry Hubert, Director, Trade, Financial Institutions, Transaction Banking, ABN AMRO. AIB also private-labeled MaxTrad, ABN AMRO’s front-end Web-based platform as its global trade portal. The bank called its portal TradeAccess (http://www.fxcentre.com)

ABN AMRO handles all the back-office processing in Chennai, India, while ABN AMRO’s office in Dublin handles the front office.

Managing the Transition

One of the most critical aspects was transitioning to ABN AMRO’s system without negatively impacting AIB’s business customers. ABN AMRO sent experts from Dublin, London, and Chennai “to understand how they do their transactions,” says Hubert. “We had to identify the types of special requirements they needed.”

Then ABN AMRO developed business requirements for each specific process: letters of credit, check collections, import and export collections, standby letters of credit, and guarantees. “This helped us define the scope of the project and get our business model to align with theirs,” adds Hubert.

The partners decided the best way to do this was in phases, product by product, starting in February 2004. The staff at AIB managed the old business until the level of outstanding transactions became more manageable to migrate, which took three months. During that 90-day period, ABN AMRO managed the new business and AIB handled the old business.

The transition was further complicated by the fact that AIB’s software included a proprietary database that made it difficult to electronically migrate the information from its database to ABN AMRO’s. ABN AMRO was willing and able to migrate all the information manually.

After ABN AMRO went live with all AIB’s global trade products, the relationship faced another challenge: “They weren’t meeting their service levels and our customers were voicing their dissatisfaction,” reports Danaher.

There were a couple of causes. ABN AMRO had underestimated the level of personal touch that AIB customer services had afforded their clients. Also, there was a limited number of trade specialists available in Dublin. To solve the problem, ABN AMRO drafted senior resources from other offices; team members from The Netherlands, Dubai, Portugal, the United States, and the UK flew in to help their Dublin colleagues. “They resourced a team in reasonably quick time which quickly resolved the issues,” says Danaher.

“They accepted they were experiencing problems and then did something about it. They were eager to fix it,” says Danaher, giving him further reassurance that this would be a successful, lasting outsourcing relationship. He says no members of this SWAT team left until both parties were satisfied they had the right resources in place.

In hindsight, this potential storm cloud had a silver lining. During this time ABN AMRO reassessed how AIB managed its trade business and reengineered the workflow; “this had a positive impact,” says Danaher.

“This was a difficult two months for us,” says Hubert. “It was our first deal in Europe of this nature and we had to work hard to meet agreed service levels. Now we vigorously check how much detailed attention our clients need to give their customers and we make sure we have the staff to make that happen.”

“We wanted ABN AMRO’s staff to view our customers as their customers. The feedback we get from our customers on a daily basis is that their people in Dublin now know our customers as well as we did and have developed strong relationships with them. They go out of their way to do what’s best for the relationship. This has really made this relationship a complete partnership,” Danaher says.

Business Benefits

The promised cost savings did materialize. Danaher says his department is achieving a significant cost saving against the in-house cost of global trade processing. “The move from a fixed towards a variable cost base has provided us with sizeable annual cost savings. We realized a payback on outsourcing within 15 months of implementation,” reports Danaher.

But there are other benefits. Danaher says ABN AMRO’s staff has replicated and in some cases exceeded AIB’s own high ISO 9001-certified processing standards.

“The very high level of accuracy means each transaction is smooth for every party involved–our customer and our customer’s customer. Our customers are not coming back to us complaining, questioning, and creating more work in tracing the problem,” reports Danaher.

In addition, outsourcing has streamlined AIB’s processes. AIB was able to replace its aging DOS-based, front-end system by private labeling MaxTrad. Now its customers can deal with the bank on the Internet, taking paper out of the system. “This enhanced product offering has elicited very positive feedback from customers,” says Danaher.

ABN AMRO’s Web-enabled trade portal is a thin client operation, which means no software needs to be loaded onto client systems. “Our previous system wasn’t as efficient and you couldn’t roll it out to as many customers. And it was difficult to maintain. ABN AMRO’s system is much more streamlined and helped us reduce our technology costs,” says Danaher.

Just as important, the Web portal gave the bank an edge in the market. “Our strategic aim is to maintain our position as the market leader. We now had impetus in the market because we offer customers a service other Irish banks can’t offer at the moment,” reports the AIB executive.

The supplier maintained high customer-satisfaction levels. “Our clients enjoy a very high level of customer service because of this outsourcing partnership. Direct feedback from customers and general market surveys endorse this,” says Danaher.

Outsourcing also reduced congestion in AIB’s branches. Using the Web reduced the number of customers going in and out because they don’t have to go into the branch to get forms or give them to the teller. They can now deal with the bank electronically.

Offshoring

ABN AMRO was confident about its offshoring capabilities; it sent its own trade business to Chennai years before it added AIB to its client roster.

“Since offshoring to India was a new concept, we were all slightly nervous about it. But we visited India in advance of doing this, so we were perfectly happy that they could manage our processing,” Danaher recalls.

Today there is ongoing contact between the two offices. “We talk to our counterparts in India on a daily basis,” he says. In addition, AIB sends representatives to ABN AMRO’s Chennai office every year. AIB has three people who manage the day-to-day interaction with Chennai.

The AIB executive says the quality of the staff in India is “unbelievably high;” all are college graduates. The bank measures its performance with a monthly scorecard. He reports they “consistently outperform the benchmark targets we’ve set for them. They are not doing the bare minimum; they’re exceeding the targets by quite a margin on a regular basis.” One of the service level agreements (SLAs) requires 90 percent accuracy and timeliness. The scorecards are almost always 100 percent. “Now, if we get anything less than 100 percent, we question it!” says Danaher with a laugh.

The team in India holds regular brainstorming sessions, discussing any issues that arose the week before and determining what they could have done better. On quite a few occasions they have proposed certain changes they believed would improve AIB’s processes; Danaher says many ideas the supplier implemented have come from this forum. They are constantly looking at the process to see how we can do it better, both for our sake and our customers, reflecting the close partnership approach we share with ABN AMRO,” notes Danaher.

Why This Relationship Is Successful

Danaher says the bank took “great comfort” in seeing how its supplier approached the staffing problem. Senior management got involved at an early stage. “We were impressed with how they were able to mobilize resources to address our problem. That gave us comfort to know that they will act promptly when things go wrong,” he says.

“The relationship has always been based on an understanding that the success of the partnership has to be mutual,” Danaher adds. Both banks meet regularly to discuss how to improve service and develop new cost savings and revenue opportunities.

“Both banks work as one team with one common goal–to provide the best level of service to AIB’s clients. Both parties take pride in delivering a first-class service. Working together has fostered mutual trust. The cultures and industry expertise of both institutions are truly aligned, which allows both parties to contribute to the growth of AIB’s trade business,” Danaher adds.

Hubert says both sides have a can-do attitude. “This is our baby,” he says of the relationship.

AIB also talks to other prospective banks who are thinking about outsourcing their global trade processing.

“We have been able to leverage the best practices of both institutions, creating a unique processing and service model that ABN AMRO can replicate in other outsourcing partnerships,” adds Danaher.

Success Equals More Business

In July 2006 AIB outsourced a further service to ABN AMRO: processing Dublin’s check collection payments. This consists of 10,000 annual transactions. It required no additional investment on AIB’s part because the supplier is able to leverage the same infrastructure it developed for processing AIB’s trade transactions. “When we decided to outsource this, we automatically gave the business to ABN AMRO. The agreement already in place has proved so successful we didn’t consider any other alternatives,” says Danaher.

Was outsourcing a good trade from its in-house operations? “Outsourcing has allowed us to ’stay in the game’ at a lower cost and with access to vastly superior technology and investment spend,” Danaher says.

Lessons from the Outsourcing Journal:

• Allied Irish Bank wanted to outsource, but buying its own system was cheaper until its preferred supplier opened a center in India. The new numbers made outsourcing the best solution then and in the future.
• One of the scenarios in which outsourcing makes sense is when a business process is important but mature like global trade.
• Outsourcing gave AIB a leg up in the market because it could private-label its supplier’s Web trade portal, which offered services its competitors didn’t have.
• When buyers are happy, they help their suppliers win more business.

RPO Supplier Helps BloodCenter of Wisconsin Find Hard-to-Find Talent Faster, Cheaper

By Beth Ellyn Rosenthal, Editor Looking for a strategic solution that would support all of HR’s stakeholders at BloodCenter of Wisconsin, Ildiko Huppertz, Director, Human Resources, chose to outsource. Here’s why: The hiring managers were dissatisfied with their recruitment process. The applicant pool was too small and the quality of candidates was poor. Additionally, it took too long to fill a position–up to 100 days when it should have taken just 45, she says.

BloodCenter of Wisconsin, which is the only supplier of blood to over 50 Wisconsin hospitals, knew it had to do something. So its executives talked to Pinstripe, a recruitment process outsourcer (RPO) that has a division that specializes in healthcare. “We work with healthcare organizations to improve their talent acquisition and management systems. This helps them reduce their overall labor costs and improve efficiencies,” says Jill Schwieters, EVP and leader of Pinstripe’s Healthcare Group.

To see if outsourcing could give BloodCenter the transfusion of talent it needed, it decided on a pilot. Huppertz says the HR department selected the donor services department and contracted to have Pinstripe recruit 40 employees from July to June 2006. These were high-turnover positions, having one of the highest costs per hire of any job at BloodCenter. And the hiring manager’s job satisfaction scores had hit bottom.

“If Pinstripe could fill these positions quickly, we knew we’d have a good return on investment,” says the HR Director.of BloodCenter, which also provides diagnostic laboratories services nationally and operates the internationally known Blood Research Institute.

RPO’s ROI

Pinstripe, which completed its transition, proposed a new recruiting process. Then it upgraded the applicant tracking system. The recruitment partnership found qualified people to fill all 40 positions–the first time in several years there was no vacancy. After six months, only four of the new hires had left–a 90 percent retention rate.

The HR department surveyed the hiring managers before Pinstripe entered the picture. Then the hiring managers filled out surveys quarterly thereafter. The satisfaction scores improved markedly because Pinstripe culled out the best candidates and only sent the top two or three to meet the hiring managers. In addition to high-quality candidates, Pinstripe was responsive and delivered high quality customer service.

Hiring costs fell markedly. Huppertz says outsourcing reduced the cost per hire 57 percent, The HR director points out that the time to fill almost met that level of savings as well.

“Cost savings are crucial to the financial health of healthcare organizations because they typically operate with very thin margins,” says Anne Nimke, Pinstripe Co-Founder and Chief Marketing and Business Development Officer. “Typically the chief financial officer gets involved in most outsourcing decisions.”

Pinstripe also automated the process. Huppertz says the BloodCenter had a paper-intensive recruitment process; the HR department routed paper requisitions and resumes to the appropriate managers. They only posted job requisitions once a week.

Automating the Application Process

Pinstripe’s system is real time. Managers post their positions electronically and can submit them the minute they need to fill a position.

Before, an applicant could apply at BloodCenter’s Web site, but it was a three-step process. The HR department printed out the resumes for evaluation. “This process was killing a lot of trees,” says Huppertz.

Now applicants can apply directly at the Web site, which uses Pinstripe’s technology. They have to answer specific questions. And they now get automatic responses from BloodCenter based on their responses. Pinstripe’s process culls out the mismatches and only sends BloodCenter candidates who are a good match.

In the past, BloodCenter had to interview four candidates to find one it wanted to hire. Today Pinstripe is finding much better candidates. Now managers only have to interview two people to hire one and usually the second candidate is the next hire. “This saves our managers time because they don’t have to block out time to interview people we’re not going to hire,” says Huppertz.

The technology allows the successful candidates to schedule their interviews online. “Now there’s no lag time,” says the Wisconsin HR Director. “Before, candidates had to wait at least two weeks before we could schedule interviews.” The benefit: a quicker time-to-fill cycle.

Since everything is online, BloodCenter has started to track where the applicants are applying from. “This has led us to other folks,” Huppertz says.

Huppertz says the application tracking system is easy to use. “Their technology enhances our image. It’s helped us brand the center,” she explains.

The pilot was so successful BloodCenter hired Pinstripe to handle all its non-executive recruiting needs. BloodCenter reallocated recruitment staff to other strategic HR functions.

Strategic Benefits

The biggest benefit for BloodCenter: the HR department can focus on more strategic projects instead of focusing on the myriad of details required for recruitment. These new initiatives include launching a new onboarding process and improving the performance management system.

An important new project has been the creation of BCW University, a training institute focused on staff and leadership development. Huppertz says now the company has cured its recruiting challenges, the HR department is focused on improving its retention rate. One way to do this is to “develop the people who are here.”

Huppertz says it’s difficult to recruit in the healthcare field “because there are not enough candidates to pick from.” So BloodCenter’s employment strategy is to focus on retention and development. “That makes people want to stay. It also makes us the employer of choice,” she says.

“It’s our goal to make them competitive,” says Schwieters. “We can’t solve the people shortage problem. But we can help the healthcare organization become the employer of choice, then find and retain the best talent in their market.”

Overcoming Two Challenges

The BloodCenter executive says the change-management aspect of outsourcing was the most difficult. The HR department had to let go of recruiting. And the hiring managers had to learn a new system. “We needed buy-in from both groups,” says the HR Director.

Huppertz says she immediately got her staff to focus on their new, exciting initiatives. They also witnessed outsourcing’s positive results. “When they saw the hiring managers were satisfied, they were happy to let go of recruitment. They didn’t have enough time for everything,” she reports. “The HR recruiters were overwhelmed with recruiting,” recalls Schwieters.

As for the managers, Pinstripe partnered with BloodCenter to teach them how to use the applicant tracking system. But the sessions infused other knowledge as well. Pinstripe executives explained the importance of communicating with Pinstripe’s representative. “They understood they had to make her part of their departments,” says Huppertz.

The executive says the managers were excited about having new technology. “They saw immediately the new technology helped them with the recruiting process.”

The biggest change-management challenge was a change in the interview process. In the past someone from HR and the hiring manager interviewed the candidate together. Now, Pinstripe’s staffer does the culling, leaving the hiring manager to interview the candidate solo. The HR department held separate training sessions on interview techniques. “It was difficult for several of our managers,” say Huppertz. Now, however, they like the new process “because it’s a lot less time consuming for them.”

Huppertz says she values this outsourcing relationship; she includes the Pinstripe rep in many staff meetings. Pinstripe provides a monthly update and produces strong reports. “I view Pinstripe as an extension of my team,” she says.

Pinstripe’s Value Proposition

Co-founders Nimke and Sue Marks were part of the coterie that founded the RPO segment in the early 1990s. In 2000 they sold their RPO firm and Wisconsin’s largest staffing organization to a Fortune 500 staffing company.

Most RPO firms focus on the acquire and hire parts of the recruiting process. Pinstripe includes two other aspects: sourcing and engaging. Currently their value proposition, christened Requisition to Results® (R2R), has 1,500 distinct processes. “It’s our belief that the real success of recruiting is the success and retention of the employees placed–not just the filling of the job,” stated Nimke.

Lessons from the Outsourcing Journal:

• There is a shortage of qualified talent in the healthcare field. That makes it difficult to recruit. BloodCenter of Wisconsin decided to focus on training and development to retain the good people it has. It could do this because it outsourced the time-consuming task of recruiting to a recruitment propcess outsourcer.
• Technology that automates the recruitment process produces better candidates and saves time for hiring managers because they only have to interview the cream of the crop. Technology also helps develop new channels to ferret out talent.
• Outsourcing recruitment saves money two ways: it can cut the cost of recruitment and it can allow the HR department to devote fewer people to the task.
• Change management is a crucial key to success. Both the buyer and supplier have to get buy-in from the hiring managers and the HR department. It’s easier to help the HR department let go of recruiting if they have exciting, important new work to do. Training the managers in new processes is a must.

Publish Date: July 2007

How One Outsourcer Uses Another to Keep Its Work Onshore

By John Harney, Business Writer Offshore claims processing has traditionally been cheaper than in the United States for obvious reasons-the price of keying in data overseas is a fraction of what it is here. Antares Management Solutions, what’s known as a third-party claims administrator that processes claims “under the covers” for major insurance companies, was considering going overseas when it discovered a better solution from GTESS.

Antares was feeling competitive pressure from other companies that sent keying work overseas. Jim Harless, Vice President of Operations, Antares, says, “We’re competing with folks who send their work overseas to, say, India where they key and verify every single piece of data just like we do and they’ll do it as low as 25 cents a claim. Our average claim-processing costs were four to eight times that, so it was tough in some situations to compete with that offshore keying service.”

Harless went looking for a solution that kept the work in the United States yet allowed Antares to be competitive. In addition to the efficiencies of the GTESS technology, one of the benefits he especially liked with the GTESS solution was the fact that he can speak to the production staff and even visit the location where the work is performed if necessary. One of the biggest factors in the use of offshore work is also loss of control. “Once the claim leaves the building,” he explains, “a company has very little involvement other than to talk to a service rep-it is not involved with what goes on day to day on the processing floor.”

“Under the Covers” Claims Processing

When we submit a health insurance claim, most of us assume the insurance provider processes it and cuts us a check. In fact, many insurance companies outsource claims processing to a supplier known as a third-party claims administrator (TPA) like Antares. Some TPAs even do it under the insurance company’s brand. These administrators even outsource part of the claims process to another supplier.

This is the relationship that Antares has created with GTESS for handling dental claims. Antares does “under the covers” claims processing under an insurance company’s brand while GTESS likewise is an “under the covers” technology specialist assisting Antares in its services to that end client. So both companies are suppliers to the insurance companies that pay the claims. GTESS processes dental claims and Antares all other claims for the insurance companies with which Antares contracts.

Instead of manual keying as in an offshore operation, GTESS receives the imaged claim by FTP from Antares and extracts the relevant data that Antares would have had to otherwise “key and verify.” It then returns an EDI (Electronic Data Interchange) record that Antares can feed into its adjudication engine. GTESS’s business process gives Antares faster, more accurate processing and helps lower cost so it can beat out offshore competitors. EDI is the electronic communication of business transactions like claims data in a standard format, in this case in compliance with HIPAA patient privacy regulations.

Out with the Past

Harless explains that processing a claim using key and verify was labor intensive. First Antares scanned the paper claim. Then it gave the paper claim to a claims processor who would do data entry into the adjudications system. The adjudications system judges the benefits the insured person is entitled to and applies them to the processed claim, which determines the amount of the payout. The adjudication system then applies the benefits that that particular member has, based on his or her dental benefits. Then it makes a payment to the provider or the member for that particular service.

The problem was Antares keyed 80 percent of the data fields off one of the many ADA (American Dental Association) forms in the marketplace. Employees entered data fields like the date of service or procedure codes. Then the quality-assurance department stopped as many as 10 percent of these claims for review, according to Harless. Typically another person pulled up the scanned document to make sure that the person who entered all the data keyed the data elements correctly.

GTESS’s Process

Using GTESS’s process, Antares now simply scans the paper claims and securely FTPs all imaged claims to GTESS. GTESS first applies the correct Optical Character Recognition (OCR) dental form template and has multiple OCR engines recognize and extract the data to create a second, processable form of the electronic claim. GTESS has almost 500 dental forms registered in its system that Antares would otherwise have to create to speed OCR.

GTESS then applies business rules the buyer and supplier jointly developed to look at claim fields and decide about whether, say, data is correct or accurate. At Antares, a person would have had to make decisions-for instance, to reformat a Social Security number so the claim auto-adjudicates when returned to Antares.

Then GTESS applies provider (dentist) and member (patient) filters to insure the data in these claims sections is correct and formatted. Otherwise someone at Antares must manually do it to enable adjudication.

Finally, GTESS formats the claim in an 837 HIPAA-compliant EDI format and then and returns it to Antares for auto-adjudication.

Critical Differentiators

The especially crucial arrow in GTESS’s quiver is its exhaustive business rules that govern how it treats data in fields. Usually a company like Antares has to develop rules from scratch. Or, if it’s using commercial OCR software, the software vendor charges to develop appropriate rules. This is called “registering” and could be very time consuming and therefore costly. Often the vendor is not a specialist in healthcare and a buyer like Antares has to educate its programmers to help build the rules. Harless says Antares had experimented with these methods in the past with little success.

GTESS, by contrast, “already knew each and every box on the claim form and the issues associated with them. It had written various business rules for them, knew how they were commonly applied, and asked us which ways we preferred to have them applied,” Harless says.

The GTESS system is also almost completely automated. The only time a claim goes to a person at GTESS is if they don’t get a perfect match to tables of possible data fields or an unclear character, according to Harless. When this happens, GTESS has an exception-processing routine where a manual review and decision-making process occurs. At this point, someone identifies, say, a difficult-to-read character and makes a decision about its correctness.

To speed throughput and simplify decision-making, no one person sees the entire claim. Instead it’s broken into segments; for instance, someone examines the provider section, someone else the line-item detail, and a third person the header record. Less than five percent of claims require exception handling.

Big Benefits

In doing quality assurance of GTESS’s performance, Antares routinely examines claims batches. On average a batch of 400 documents with 100 characters in each yields one or two data errors. That superlative accuracy dramatically expedites auto-adjudication. Even with keying and quality assurance Harless admits he would be hard pressed to surpass that level of accuracy.

The addition of the GTESS process has allowed Antares to be more price competitive too, which has allowed it to keep its business in the United States. “We can now compete much better on price with those competitors that use low-cost keying overseas in their service offerings,” says Harless. “With GTESS as a business partner, we feel that the application of technology gives us a competitive solution.”

Lessons From The Outsourcing Journal:

• Outsourced key to verify work for healthcare claims processing abroad can cost eight times less than in the United States, so the only way US claims-processing companies can compete is with more efficient technology.
• A supplier with appropriate OCR forms and business rules for the specific healthcare claims being processed can radically expedite processing and improve quality.
• Keeping claims processing in the United States also helps maintain control over personnel and business processes. Managers can interact with production staff and visit the worksite.

Publish Date: July 2007