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Customer success outsourcing is different from traditional outsourcing practices. There are many nuances to it. Let’s explore them in detail!
The basic idea that gives rise to outsourcing is when businesses deem a function less important that can be executed elsewhere rather than in-house. There are various reasons behind that. With customer success being a new function and companies not prepared for it, outsourcing it might seem like a wise decision. But will it help in the long run? Let’s explore that in detail.
It was not until 1980s when outsourcing became a new norm in software industry. IT giants like IBM already had the vast infrastructure capable enough to serve a wide range of customers. Companies neither wanted to invest in building infrastructure nor did they have the specialized workforce to operate and lead the IT division. Hence, outsourcing their need with a long-term contract worked well for both parties.
But, does that mean you should always outsource functions beyond your core operations? There are multiple factors involved in making that decision. Let’s have a quick look at those first.
Below are the reasons that make companies decide to outsource their business unit.
Multiple responsibilities come up when setting up a new business unit. You need to hire, train and retain talent along with setting up the process to lead it. It often becomes time-consuming and expensive when you need to start from scratch. This limits your time and band-width on your core business area. To give undivided focus on your core-competency, outsourcing becomes an obvious choice.
All the business units, although important, do not contribute equally to the overall business growth. A flagship unit might be adding more to the business than others. This is especially true in product-led growth companies where product management is the protagonist.
When companies have to spend time to grow all business units equally, it often slows them down. For a speedy growth, they often choose to fuel their flagship unit aggressively. And when the company starts scaling, the other units have to catch-up with the same speed for sustainable growth.
Product companies often lack expertise in leading the ancillary units like customer support, finance and back-office. Hence, hiring a third-party vendor like flatworld solutions whose day-in, day-out job lies in those areas with highest level of efficiency and proficiency becomes a good choice. They adapt to the growing pace of their customer giving them utmost scope for growth.
The answer is more complex than you think. To make it simple, first let’s be clear on the aspects which prevent you from outsourcing CS function.
The underlying goal of any customer success unit is to increase the lifetime value of your customers. This happens only when you have a long and fruitful relationship with your clients. Relationships develop between individuals. Hence, to retain your customers for long, you need to retain the individual who is developing that relationship on your behalf.
When you outsource customer success to a third-party, you would not have control on their staff. One day a CSM might be serving your client, another day someone else would replace them due to internal disruptions. Even though such situations can be tackled through CSM to CSM handoff process, ideally it should not arise at all.
Having no control on your staff could shake the foundation of your customer success goals.
Unlike others, customer success is not a siloed department. In customer success firms, the nature of this job demands extensive collaboration with other teams on various fronts. You need to interact with the product team to discuss or recommend features based on customer’s voice. Marketing team also takes input from customer success from time to time to craft more customized campaigns. Likewise, sales team has their own dependency on customer success.
When you have a customer success team of your own, you have complete control over their deployment for maximum impact at an organizational level. That’s why you need a Chief Customer Officer who can keep a holistic view of customer success’ contribution to the overall business.
A third-party customer success vendor would obviously lack that level of vision for your organization. Hence, they would not be able to collaborate across different domains. Their confined vision only to the customers becomes a deterring factor for customer success to operate at its highest potential.
Partnering with a third-party customer success vendor initially might seem like a quick solution for early-stage startups. They may want to focus more on product enhancements and customer acquisitions. And instead of spending time on building your own customer success team, outsourcing it to an experienced company might seem correct.
But think long-term. When you want to keep your customers for 10 years, you need to also keep the same personnel serving them for that long. This would create a long-term dependency on them. You need to always work around with setting up terms with the customer success providers to handle timely changes in their agreements and contracts. That again consumes your time and band-width and is quite a hassle. One day or another, you have to build a customer success team of your own. So, why not from day one?
Also, customer retention is not a back-stage strategy for a growing business. Instead, it is at the forefront because customer success is a growth function. You need to rely heavily on recurring revenues for the sustainable growth of your SaaS business.
“When you have to choose between the two, you may outsource acquisition, but never retention. Acquisition is a one-time process while retention is a life-long process.”
Before outsourcing you must examine if you have the right leadership in place who can manage the outsourced account. You must have clear performance metrics to track the performance of the outsourced account. To get started, you must hire the right candidate. Most common mistake startups make is by hiring a manager when they need a VP or an Exec. Hiring a senior CS professional and letting them drive this change would be the right place to start.
Next thing to decide is which parts of CS you must outsource. Customer success is a complex set of moving parts. Here are few components along with some suggestions on whether you can outsource them or not.
While starting a new CS function you need to:
You may not have the right expertise to do all of these on your own. Hence, it is ok to outsource this function of CS. Whatever function you are outsourcing, do it with an intention to learn them internally and bring them into full operation in-house later on.
CS operations demand highly complex functionalities that include:
Apart from these, CS tools technology are always in a state of evolution with respect to automation and intelligence. Developing such tool in-house would require extensive amount of expertise, knowledge and execution prowess. This would require a deviation from the core operations of the firm. Hence, choosing the right customer success tool by outsourcing this to a third party vendor would be prudent.
This is the core of your business. You might outsource it during the initial set up process but eventually you will have to bring it in-house for unleashing the full potential of your CS function. Reason being: building long-term relationship with clients, driving cross-functional collaboration and aligning CS function with your core business value. These goals cannot be met in the long run by outsourcing this function to a third party.
As the system ages, gaps creep into it that need to be dealt from time to time. Hence, CS optimization is important in the processes, structure, tool, personnel, skills, etc. to reinvigorate the function. If you don’t have the right leadership to drive this project, you may consider outsourcing it to a good customer success consulting firm, such as CSM Practice, Infinipoint, Success Chain, Mikael Blaisdell and Associates, and TheCustomer.Co. Here is a fuller list of the top customer success consulting firms.
Although this is not component of a CS function, yet it is an important criteria for deciding on outsourcing. The stage of the company also matter in making an outsourcing decision. Early-stage companies should refrain from outsourcing until they have stabilized their initial customer expectations. This allows them to learn about the customer challenges which would help them later in managing outsourced accounts. Outsourcing would be better only when they start scaling and need complete focus on their core operations.
The basic thought of outsourcing customer success arises from a common misconception people have of this field. It is usually viewed as a rebranding of customer support which is the most commonly outsourced function in organizations.
But having an in-depth understanding of customer success contribution to your company’s growth would tell you otherwise.34
It permeates throughout your entire organization and works at different levels for the overall transformation of your business. It is as much a philosophy or a value as a business unit. And to build the right culture in your SaaS business that propels growth, it becomes an integral part of your organization. Hence, keeping as much control over this function in-house as possible and outsourcing the rest would be a smart decision that will help you in the long run.
Shoeb lives and breathes Customer Success and SaaS. He has a passion to research on the latest innovations happening in SaaS and Customer Success. Shoeb hails from a Software Architecture background where he worked for many years with Indian Tech Giants like Wipro and ITC building software solutions for their MNC clients in the UK and Denmark.
Published 10 Feb 2021, Updated 20 Jul 2021
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