2009: A Bad Year To Be A Cost Center

I don’t know about you, but it feels like 2001 all over again.  The 2001 tech crash was a huge wakeup call to those of us in high tech who thought the Internet boom would last forever…or at least until the next round of options vested.  The current economic crisis is casting the same pall over Silicon Valley, where most large tech companies rely on the financial services (FS) sector for a chunk of revenue.  Even companies that don’t sell to FS sell to other industries that DO sell to FS.  We’re all going to feel this one, maybe now, maybe mid next year.

With most companies gearing up for their 2009 budget process I suspect we will soon find out if support budgets are remaining the same for 2009 or falling.  In general, I think we are much better positioned for this recession than the last one.  Why?

  • Support ‘cost centers’ are a thing of the past.  Tech support, professional services and field service operations are no longer seen as ‘a cost of doing business,’ they are increasingly viewed as the primary revenue engine of technology companies.  With no services you have no business value.  Without business value you have no customers.
  • Customer experience matters.  Many large companies have created a Chief Customer Office or similar role, and the customer experience is now a boardroom topic.  Support’s role in maintaining a strong experience is recognized today more than in the past.
  • Short term savings have long term impacts.  We tried every conceivable way to cut support costs 5-7 years ago, and customers voted with their feet.  Maybe I’m naive, but I think C level execs today understand the link between customer satisfaction and customer loyalty, and I’m hopeful they won’t make knee-jerk cost cutting moves that drive away customers.
I suspect I will be writing a lot about recession-proofing your support operation in the coming months, but here are a few quick-hits to keep in mind as you kick off those 2009 budget meetings.
  • You get what you pay for.  Low-bid outsourcing deals were seen as the savior of struggling tech companies in 2001.  It didn’t work.  The customer experience with these contracts was so terrible that many companies were called on the carpet publicly by customer advocate groups and the media. If you do decide that offshore is right for you, read our SSPA committee report on talent management in India.
  • Make self-service work.  The dismal results for self-service success should be corrected.  Fast.  With belt tightening going on, support operations need to be sure customers are using and being successful with self-service.  The current trend towards more reliance on the phone channel must stop.  If you have one thing  you can invest in, improve the number and quality of your self-service options.
  • Push communities.  If you have a vision for an engaged, collaborative customer community, you better get started.  A successful community initiative will help with self-service by enabling peer-to-peer support, but people are receiving so many invites to join communities that is harder to capture mind share.  If you are the last one to the Web 2.0 Party there won’t be anyone left except lurkers.
What is your tip to providing support during a recession?  Any war stories from 2001 you want to share? Please post a comment or shoot me an email.  And as always, thanks for reading!
Explore posts in the same categories: Enterprise Support, Professional Services, Technology

7 Comments on “2009: A Bad Year To Be A Cost Center”

  1. R "Ray" Wang Says:


    Great points. Will the success of Web 2.0 tools such as on-line communities and wiki’s help with Self Service in the enterprise or is that too much of an investment and leap of technology for most clients?


  2. jragsdale Says:

    Hi Ray;
    We have had some great presentations at SSPA conferences from members (Xerox, Novell, Microsoft, Sage and others) who have had some great ROI success from both internal (employee) and external (customer) communities. 49%of our members already have a customer community/discussion forums deployed (up from 36% in 2007), and another 22% have budget for new or additional forums this year.

    Wikis are another story. There are a lot of internal wikis, but so far in the B2B world there is still a lot of concern about customer authored content so I think wide adoption of true collaborative content development remains a couple of years away.


  3. Hi John:

    I believe that a person’s involvement in a community is directly related to how they perceive it benefits them. And you know what they say about a first impression!

    Before jumping into the fray, organizations must ensure that their community creates the kinds of benefits that motivate participation from the people they desire in their community. The benefits could come in the form of rewards for contributing, status in the community and/or belief that they need to give back to something that is making their life easier …….to help the community stay valuable if not for a belief general fairness.

    Getting broad staff participation in communities focused on customer care — or really any valuable internal or external initiative — should be much easier than getting involvement from people external to an organization, assuming that performance criteria can easily include metrics that reflect one’s contribution.

    The economy will indeed place even more scrutiny on the ROI of investment in customer care technology, which I believe is a good thing. Way too much noise about potential ROI exists out there and vendors that that are priced to provide clear benefits and return on investment will have greater opportunities to prosper.

  4. All the media stories that talked about outsourced tech support not working, were about consumer tech support. The overriding objective was only cost cutting. Nobody paid any attention to the quality of support. They paid the price for it. However, not all offshore tech support outsourcing engagements have failed. I run a tech support service with exclusive focus on enterprise call high-tech products. We were able to achieve substantial cost reductions with improved customer satisfaction for our customers. For example, one of our customers was getting a 7% resolution rate from their onshore (very big name blue chip) partner at Level 1 and Level 2 put together. Level 3 was insourced and they were handling 93% of the cases. We took over L1 and L2 and within a year, we increased the resolution rate at L1/L2 to 60%. One can imagine what this will do to customer satisfaction!! What customers want is their problems to be resolved with minimal interactions with support folks. If the front-line is able to resolve 60% of the cases, CSAT is bound to increase. If one selects the offshore partner very carefully and treats the engagement as an extension to their own support team, success is assured. That too a substantial cost reduction.

    On a different note, if self-help avenues are not working, I can think of another reason. An average technology user in an enterprise deals with at least 15 to 20 different high-tech products. With specialized products penetrating into the market, this number is growing. In smaller (SMB) companies, this number could be even large and skill levels would probably be low. Each product company has its own self-help solution with different design, goals, look/feel and approach. Different companies assume different levels of knowledge on users’ part. I have to adapt to 20 different self-help sites. Though I am technologically skilled, I wouldn’t be surprised to find myself reaching for the phone.

  5. jragsdale Says:

    Hi Srinivas;
    I agree with you that outsourcing can be hugely successful, and we’ve seen many success stories on the B2C and B2B side. The commonality in all these cases? Support management who views the outsourcing partner as an extension of their organization, with time allocated to be onsite at the offshore location. We talk about this in the committee report I referenced in the post.

    On your second point, are you calling for some sort of self-service design standards so there isn’t such a disconnect for customers? Sounds like a great idea to me.


  6. Jim Watson Says:

    Companies have clearly begun to view their customer support operations as a positive brand-building entity; a far cry from the “cost of doing business”, or cost center of the past. But many companies still struggle to take customer support to the next level – the profit center.

    One of the ways in which we’re beginning to see companies accomplish this is by going out of their way to tailor support programs and service level agreements (SLA’s) in a way that will deliver more value to their customers’ businesses. By actively engaging key customers, and learning how they can re-structure service programs to drive additional value into those customers’ businesses, these customer support organizations are creating new service offerings for which their customers will gladly pay a premium. If companies are able to do this effectively, and have the technologies in place to manage it, they’ll be far better positioned to weather to economic storms on the horizon.

  7. […] the tech crash of 2001, so they understand what budget challenges may lie ahead. But as I said in a previous post, support operations are no longer cost centers, and AFSMI, SSPA and TPSA members are much better […]

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