Page 83 - DCAP307_PLANNING_AND_MANAGING_IT_INFRASTRUCTURE

Unit 4: Business Process and IT Outsourcing

Sun Microsystems is a case in point. When they discovered that this important revenue Notes
stream was eroding, they quickly identified the cause: Because their field sales force did
not have the “bandwidth” to provide cost-effective service contract sales to small-to-mid-
size customers, they were not adequately covering those accounts. This opened the door
to third-party vendors and also resulted in customers who were out of warranty or whose
contracts had expired. When they needed assistance, those customers would have to renew
before they could get service. Needless to say, these were not satisfied customers.
Sun decided to outsource the development of a dedicated TeleServices Center – in essence
creating a new distribution channel for this product. Working closely together, they
designed and installed an on-site TeleSales Center whose charge is to thwart third-party
vendors and to comprehensively target contract renewals in small-to-mid-size accounts.

Selling maintenance contracts requires TSRs who understand the service requirements of
each customer. The right TSR has a background in both inside sales and customer service
and can identify decision makers and close a sale. In addition, they must be “specialists” in
Sun’s service products. The typical sales cycle for a renewal contract is 90 days, involves
two decision makers, and six-to-twelve conversations with the customer. Each TSR can
contact and service 25-30 customers per day, far more than possible with field staff alone.
They developed a Renewal Program based on a 90/60/30-day strategy: Quotes are sent
out 90 days prior to the contract expiration date, a phone call is made 60 days prior to the
expire date, and the contract is renewed at 30 days.

Results of this program speak for themselves:
 Increased the contract renewal rate 24.6%
 Reduced the cost to retain customers 34.5%

 Lowered the cost of new customer contracts more than 33%
 Freed field staff to focus on major accounts
 Developed a renewal management database to efficiently handle the contract renewal
process

 Designed an instructional curriculum that reduced TSR training time by 40%
Question
Analyse how outsourcing helped Sun Microsystems in:
(a) Contract renewal rate.

(b) Contract renewal process.
(c) Reducing TSR training.

Source: http://www.callcentres.com.au/outsourcadv.htm
4.6 Summary

 Outsourcing is an arrangement in which one company contracts with another organisation
to provide services that could be provided by company employees.

 IT outsourcing can be used by most companies and, in fact, many outsource some key IT
services without actually realising it.

 IT outsourcing is also sometimes known as ‘managed services’. This is a very similar
system where generally, non-strategic IT functions are sub-contracted to a specialist third
party organisation.

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