Most companies that have outsourced their customer service functions have not realized the cost savings they expected, according to a recent CNNMoney.com article. In fact, employers like Dell, Capital One, and JPMorgan Chase all outsourced their customer-service jobs to contractors only to find that the "hidden costs far outweighed the potential savings in labor expenses" according to the article, and have now brought these functions back in-house.

The article cited a recent Gartner study which predicted that most (60 percent) of employers who outsource customer-service functions will lose "significant numbers" of customers who will become frustrated with a lower (or poor) level of customer service and defect to competitors. The costs from lost customers, the same survey found, translates into a failure to meet the cost-savings targets set by companies when they made the decision to outsource. The study concluded that a whopping 80 percent of companies that outsource customer-service fail to meet these targets.

The article explains that while using outside contractors cuts costs, they are often 'cheaper' because they "pay their people less, spend less on training, or both." Meanwhile, since a contractor's employees (customer service reps, etc.) aren't actual employees of the company who is outsourcing its function, these employees don't perform as well since they "don't identify with the organization on whose behalf they're working." The article explains that in-house employees have more incentive/more of an investment in "nurturing a good reputation among clients and customers."

Source: CNNMoney.com