Outsourcing call centers and CRM in seven major European Markets
Introduction
Customer relationship outsourcing remains a key sector for both technology vendors and the call center market as a whole. For technology vendors, outsourcers are often the early adopters of technology and because of their visibility, they provide a proving ground for new features. For in-house call centers, they represent potential substitutes and the public standard by which their cost and effectiveness are judged.
Customer relationship management (CRM) technologies have radically changed the agent-customer interaction. These and other drivers have placed the call center, once thought of as a no-glory, cost-generating necessity, in the spotlight. The new emphasis on the call center is good news to service providers. CRM provided the necessary tools for outsourcers to give themselves a makeover. Traditional outsourcers, who used to be known for overflow and telemarketing activities, can now use CRM technologies to climb up the value chain.
Market evolution
Despite the slower than originally expected economic growth over the next few years, the number of outsourced agent positions will continue to grow healthily. The overall number of agent positions in Western Europe will rise from 96,000 to 176,000, by the end of 2005. This growth is partly new agent positions, but largely from the replacement of previously in-house agent positions.
As shown in Figure 2, the total European outsourcing market will more than double in the next four years, from $5.1 billion in 2001 to $10.5 billion in 2005. This growth is greater than the growth in agent positions for two primary reasons:
However, despite improving margins in the medium term, margins in the short term will be kept down by the difficult macroeconomic conditions. Worsening revenues for clients will in turn will lead clients to demand better value for money. Combined with a high level of competition in most markets this will depress the price of outsourced services. At the same time, the provision of increased value in both technology and consultancy will be pushing margins in the opposite direction. Over the full period this will be the dominant trend, resulting in faster growth from 2003 onwards.
Product development
Historically outsourcers have used their human resources expertise and telephony technologies to differentiate themselves, and these remain vital. However, increasingly call center outsourcers are expanding the range of services and applications that they offer into CRM and fulfillment. These services offer two different ways for outsourcers to expand the range of customer handling functions that they can provide for clients. Which services an outsourcer chooses to provide will depend on its client base. For example, within fulfillment, retail clients would be more interested in delivery services while telecoms companies will have more need of billing services.
Vertical markets
Outsourcers need to look outside the traditional telemarketing markets and the telecom and technology verticals, around which much of the industry still clusters. Much of the growth in outsourced services will come from those companies and sectors where customer relationships have always been handled in-house before.
All the vertical markets will have an increased proportion of agent positions outsourced by 2005, with those that are currently most under-represented growing fastest.
The market for customer relationship outsourcing remains very competitive and fragmented. Given the potential to provide a greater proportion of agent positions and higher value services, the potential is there for the most successful companies to grow significantly over the next four years.
Conclusions
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