What went wrong at Garlands?
I've always been a keen observer of call centre outsourcing businesses having spent my entire career working for them and even owning one. For a long time, Garlands was one of those companies that I admired. Garlands are claiming that their demise was because of low-cost competition in Asia. I have to dispute that. Despite the rapid growth in offshore, many UK vendors continue to prosper and the majority are in a far stronger position than 3 years ago. My belief is that Garlands simply stopped doing the things which had made it successful in the first place.
There are common traits in all of the successful outsourcers and for a sustained period of time, Garlands had those traits. In many industries, a successful organisation can stay successful for a long time without appearing to change much. However, the call centre outsourcing business is different for a number of reasons. Firstly, and most importantly, call centre outsourcers have no inventions. Of course, many will talk about their superior technology, low attrition or how they have packaged their procedures to ensure superior performance. In reality, even those things which a company might claim as intellectual property, really aren't what they think. Secondly, there are almost zero barriers to entry to this business. Even with a very limited budget, it is possible to start up some kind of call centre outsourcing business. The challenge, of course, will be to convince clients to use it. These limited barriers to entry make the whole industry incredibly cut-throat. All of these factors combined make the old saying 'you're only as good as the last call you made or received' very true.
So what are these common traits among successful outsourcers which don't exist in the unsuccessful ones? Well, there are a number. The first is the figurehead who would either by the CEO, MD or owner depending on the size and structure of the organisation. Many of the entrepreneur-run outsourcers can go downhill very quickly after that entrepreneur leaves after buy-out or when they become 'financially independent' of the company. It is the passion of this entrepreneur which drives the desire for quality through their middle management and on to those handling the calls. This was even truer for Garlands as one of very few outsourcers who bear the name of their founder. CheyGarland was instrumental in the reputation for quality that Garlands used to be known for. I've had very limited dealings with Garlands over recent years but I assume that Chey's input to the organisation or her desire for it to continue to succeed has waned. The second common trait is the desire and the ability to respond to change. The past 10 years have seen massive rises in the internet, self-service and offshoring. We've also seen huge changes in many all of the key sectors which use call centre outsourcers especially financial services, telco and utilities. With all this happening, any outsourcing business which is trying to operate in the same way they did at the turn of the century is probably not doing very well. Offshoring has probably had the most dramatic impact on UK based firms but the successful outsourcers did the following 3 things. Firstly, they created their own offshore offering either by establishing their own facility or partnered with an offshore provider. Secondly, they tailored their UK offering. Sometimes, this did now mean reduced margins but generally meant a greater focus on the area where they could differentiate against offshore. Thirdly, they set up a European presence. Another common trend is that companies want to be able to service multiple European languages which really isn't feasible in India or anywhere in Asia. There were a number of outsourcers who really wanted to stand up and be counted by stating that the UK was the best place for call centres and that they wouldn't venture to India or The Philippines. Not only do I admire them, I actually agree with them but no company can ignore what is going on around them and continue to be successful. The third common trait among successful outsourcers is how they sell their services. With a few notable exceptions, most of the Asian outsourcers are very bad at selling their services in The UK and they can be seen as how not to prosper here. However, the successful organisations are the ones who take the risk and adopt an aggressive sales campaign. By this, I mean employing people who can sell your services. Many of the outsourcers still employ unconnected sales people with limited knowledge of or passion for the industry. Some of the Indian vendors even bring in teams of people from India to sell (or not to sell) their services for them. I have not seen one example of where this has been a success. It appears that Garlands had become so confident in their ability that they had moved away from sales teams selling their services. I can tell you that many of my contacts who dealt with Garlands over the years were very impressed. However, in their final years, they were rarely even on the radar screen for call centre work being outsourced. The next area is to ensure that you are not too reliant on a limited number of clients. This is often harder to implement than it is to say but it is something which should always be part of the planning of an outsourced vendor. Many British buyers of outsourced services won't use a vendor where there is a dominant client (typically a client with 30%+ of the vendor's turnover) as the vendor ends up focussing too much effort and resource on that 1 client. From the vendor's point of view, the large client is a huge risk. If that client goes bankrupt, experiences trading difficulties or can't pay their bills, the vendor's entire business can be in jeopardy. In reality, these things are not as common as the dominant client 'abusing' their dominant position by driving down price and increasing what they get for their money. Of course, if the client does decide that they can get a better deal and take their business away, this can potentially ruin an entire company. The final area is that an outsourcer needs to be able to differentiate themselves with their 'company story' or 'offering'. To the untrained eye, call centre outsourcing services can be viewed as homogenous with nothing to differentiate themselves from the competition. If this really is the case, then the client will simply go for the lowest-cost option which presumably is somewhere in rural Pakistan. Vendors need to have a clear definition of what they are as an organisation and to be able to project that to potential clients. This isn't just a marketing message. This is an entire company philosophy which runs through their entire business and dictates how they operate. Without this, a call centre vendor has little chance of success.
I sincerely hope that Garlands doesn't become the first in a string of UK based outsourcers to go bankrupt. There are others who have made the mistakes of Garlands, believing that it is possible to rest on your laurels without adapting to changing market forces. Trading conditions for many are tough but it's simply not acceptable to blame this on low-cost offshore vendors or the economic difficulties. Vendors who ensure that there is a culture of passion and quality in their organisation and whose management instil these ideals every day will find that the next 5-10 years are very successful for them. It's also worth noting that generally speaking, the UK vendors are actually in fairly strong positions. The boom in offshoring slowed down capital expenditure and company borrowings. Many were forced into restructures which has led to those which remain having fairly high occupancy rates and therefore profitability. Many of the larger offshore-only vendors had planned their expansion based on triple digit growth forecasts and as such now have low occupancy and profitability rates. The multi-national (predominantly American owned global vendors) are in a different position. Many of them have very high debts which they built up restructuring their domestic locations in addition to investments and acquisitions offshore. Although low interest rates make servicing this debt cheaper than originally thought, many are now finding it difficult to find new lenders to take on this debt unless they can show strong profitability. It's therefore likely that the next bankruptcy we will see will be a large offshore vendor but it's not unfeasible to think that one of the multi-national vendors will also go the same way as Garlands. To contact the editor, call 0121 364 4000 or email firstname.lastname@example.org