respice, adspice, prospice

Author- Sanjai Velayudhan

The world is forced to continue its crusade against recession as the fundamental reasons that aided its resurrection are yet to be fully addressed. Like the squeeze of an incubus, financial nightmare refuses to fade away and is forcing implementation of dramatic measures. In a catch-22 situation, there is intense pressure to dramatically cut costs, postpone strategic investments, and stretch budgets while still keeping systems compliant. Resource constraints are accelerating inabilities of organisations to maintain competitive advantages and retain customer loyalty.

It is during turbulent times like these that loyal customers take the centre stage as a captive source of revenue. Scarce resources are spent on epic battles fought to obtain the holy grail of customer loyalty. A successful loyalty strategy seems to be the secret weapon brandished by mature organisations. Thoughtfully designed, implemented & administered loyalty programs continue to lure evangelists who vastly outnumber doomsayers. By delivering better customer experiences, organisations try to engender greater loyalty. Compelled to strike a balance between righteous investments and spend rationalisation, an increasing number of companies are learning the virtues of strategic outsourcing.

Despite obvious benefits, traditionally loyalty programs were implemented on-premise and were a luxury only a few could afford even during times of plenty. By outsourcing loyalty programs, organisations are still able to generate better customer value, build enduring competitive advantage and simultaneously streamline and reduce operational costs. On the other hand, outsourcing organisations are also aligning their people, processes & technology to strengthen a strong brand-building loyalty proposition.

Historically, outsourcing simply meant cost-cutting. The organisation segregated its core and non-core activities, outsourcing only the non-core activities (also called commodities) resulting in substantial savings. Information Technology (IT) was always counted among core competencies. Emerging circumstances are now prompting many organisations to adapt the idea of retaining a small core team of experienced IT employees and to work through third parties. Thus, when outsourcing a loyalty program, an organisation seeks robust technology platforms and access to modern, secure, comprehensive CRM/Loyalty solutions that are used by established and profitable companies in their respective industries.

Outsourcing has its critics who believe that it subtly implies the surrender of control to external entities especially in organisations planning to outsource CRM/Loyalty and other customer-facing activities. The stark reality is that by outsourcing, an organisation attempts to offer better service to its customers by drawing on the abilities of external specialised parties. The emergence of BPO & KPO outsourcing is a testimony to this trend. While slicing out cost is still inherent to such deals, fundamental objective today is to create strategic partnerships that help in achieving sustainable efficiencies, innovation and improvement. It is a symbiotic embrace, between partners seeking financial paradise in the growth of each other. The inter transmission of dual expertise-technology & domain knowledge may have resulted in strategic ‘right-sourcing’.

The elixir that any customer centric organisation seeks is ‘monetisable’ loyalty of a valuable customer. With strategic loyalty outsourcing model proving its ability to strengthen relationships between the outsourcing and their customers, expectations of greater professionalism & capabilities from the partners have been on the rise. It’s a two-way race for excellence and providers of outsourced CRM/Loyalty services are upping their technology/domain capabilities and recognise that proven successes can have a viral effect.

Outsourcing CRM/Loyalty operations enable organisations in considerably reducing their cost of operations, achieving greater flexibility and empower them with the ability to respond nimbly. The basic objective is to enhance performance & relationships dramatically. The crux for this success remains the growing technological capabilities of outsourcers and their ability to provide quick access to leading CRM technologies. Contemporary outsourced service providers are expanding their arsenals with sophisticated offerings that include technology and business process capabilities, deployable intensive marketing technologies, managed analytics, customer profile management, campaign testing, promotions management, communications management including contact centre, member data management to mention a few. Outsourced loyalty services offered by leading companies may broadly include:

1. Loyalty consultancy

2. Loyalty technology platforms

3. Data management and analysis including reports (strategic, tactical & ad-hoc)

4. Marketing/Campaign Management and Analysis

5. Customer service management

6. Loyalty Business Process Outsourcing

Methodologies like service oriented architecture (SOA) allow better componentization of the IT system and have enabled the growth of outsourcing business. Increasing numbers of organisations are adopting SOA, thus lowering the barrier of entry for outsourcing providers. Software as a Service (SaaS) is an ultimate manifestation of SOA enabling the outsourcing of high-cost activities that consume operational bandwidth. The emergence of webservices has also boosted the outsourcing industry.

By smartly integrating applications, systems and processes via internet, they enable organisations to quickly and productively leverage the capabilities of service providers. Eliminating the need for spending on software, hardware as well as the need to maintain expensive infrastructure, webservices enable the reduction of IT administration costs including upgrades, maintenance, backups, recovery etc. Many companies are relying not on service providers but on hosted CRM software, sparing themselves the challenge of implementing the systems onsite. Many leading CRM vendors such as Oracle, PeopleSoft, SAP, salesforce.com, Microsoft etc now provide hosted versions of their software.

Outsourcing offers the prospect of reducing production costs as the outsourcer typically pays for functionalities/services used per transaction apart from regular software updates and in-contract customisations. Partnership, or strategic alliance, is frequently becoming a major feature of CRM/Loyalty outsourcing which is enabling technological migration. Sharing of risk and reward is a feature often emphasised. Outsourcing partnerships are a viable & sustainable strategy as they help in reducing/mitigating risks.