"We are a $15 million business that sells through a network of dealers.  Our dealers are our customers though they do not use our products.  All our competitors outsource their customer service and we are now feeling the pressure to do the same.  How should we evaluate if it is a good idea for us to outsource our customer service?"

Outsourcing is a way of life if you do business in America.  I personally support outsourcing of anything that is not core to your business.  For instance, I see no reason for a business to manage its payroll or 401(K) plan or a range of other business processes that can be more cost-effectively done by someone else.  I do, however, have a serious objection to outsourcing of customer service for the following five reasons:

• Customers are your biggest assets.  If you lose your customers, you have nothing left.

• In today's information-rich economy, most customers can find a substitute supplier in literally no time.  If you treat them well (through customer service that delights) your chances of customer retention are higher.

• Excellent customer service is the subject of stories in the business world.  So use it to generate word-of-mouth marketing for your business.

• Business process outsourcing (BPO) providers, no matter how good they are, cannot do what you can do for your customers (which in your case are the dealers whether they are end-users or not).  Even if you put incentives and metrics into the agreement, there is nothing like your own employees doing it.

• Customers do not like it when they are talking to a third party rather than you.  Once they find out they are always disappointed.  (Related:  Dell customer service)

I can understand why you would want to do this, but have you thought of other alternatives:

• Relocating your office to a less expensive location.  If you want to take advantage of offshoring, then set up your own subsidiary rather than rely on a local outfit

• Using the web to provide as many as services as you can (e.g. online account management)

• Limiting the hours in which you provide service and the number of employees that you have in your customer service group (customers are likely to be more receptive to excellent service on a limited basis than shoddy service 24X7)

• Transferring some of the customer service functions to salespeople and account managers

Many BPO outfits have convinced business leaders in corporate America that customer service is not core to a company's business.  I totally disagree.  If you cannot and do not want to serve your customers by using your own team of dedicated and committed employees, you should not be in business.  I am even opposed to hiring telemarketers for outbound calls (howsoever you might hate doing it yourself) because when a potential customer receives the first introduction, it better be a pleasant experience because not only will s/he not do business with you, s/he might be motivated to say bad things about you to others.  Your brand is at stake here.