Sales Outsourcing: No Longer a Hard Sell

Of the many business processes that companies perform on a daily basis, sales
is one that you might think unsuitable for outsourcing. After all, what's more
basic to business than selling the goods or services that an enterprise
produces?

But as companies face an increasingly competitive global environment,
constantly changing business conditions and the desire to enter new markets
around the world, a growing number is looking to outside firms to handle sales
and marketing.

When outsourcing sales, a company can place its selling operation, including
the recruitment of personnel, payroll processing, insurance, management of
commissions, sales training and general sales-management responsibilities
into the hands of a service provider. Under these arrangements, the service
provider assumes the responsibility for building and managing a sales team for
the client.

In some cases, the outsourcing partner provides no more than consulting and
best practices advice on how to develop and maintain an effective sales
operation. In others, the service provider supplies the personnel needed for
companies to rapidly unveil new campaigns or move into new and unfamiliar
territories or markets. And in still other cases, the outsourcing firm delivers
a complete soup-to-nuts sales operation for the client.

Why would an organization consider such a strategy? “One reason is a
greater or more immediate need for scale to attack new markets,” says Matt
Goldman, director, Research, Gartner. “It might be a time-to-market issue.
Another might be a new or different offering that requires different
selling skills. A third might be geographical, where they don't have a local
presence or experience.”

Instant Sales Team

One of the biggest potential advantages of sales outsourcing is that
organizations can hire an outside firm that's especially proficient in
selling, to gain quick expertise that might ordinarily take months or years to
develop.

A company-particularly a small or midsize business or the division of a
larger enterprise-might hire a service provider for sales in order to get new
products or services to market in a hurry or to quickly capture market share.

In 2003, TXU Energy was looking to quickly enter the newly deregulated market
for electricity services for small and midsized business customers in Texas.
Rather than develop its own sales team, TXU opted to hire Sales Focus  to
help in rapidly launching a sales operation.

“We were basically a startup within a 100-year-old utility company,” says
Odus Wittenburg, who served as director of Channel Sales at TXU when Sales Focus
was hired, and now runs his own events-management firm.

“Going to an outside sales expert gave TXU instant feet-on-the-street in
its new market,” says Wittenburg. “It helped considerably that Sales
Focus' personnel were familiar with the electricity market from a prior
engagement,” he says.

Some companies hire an outsourcing firm for help in boosting sales before
bringing the function back in-house. Newgistics, a provider of
returns-management products, in 2002, hired sales outsourcing provider
SalesLogic, when its own sales department failed to generate any new business
that year.

“We brought them in to help us understand the cause of the problem and make
recommendations on how to improve sales,” says Ken Johnson, SVP, Sales,
Newgistics. SalesLogic took over the sales operation for Newgistics, providing
sales management for about a year to implement new processes and run the sales
organization.

Newgistics garnered about $24 million in new business in 2003, and more than
$30 mn in 2004, Johnson says, and he credits the SalesLogic initiatives for much
of the improvement. “The sales process before was flawed and focusing on the
wrong people; it was ad hoc,” he says. “Now it's a very structured
process.”

Another potential benefit of outsourcing sales is that organizations can gain
greater stability. High turnover is common in corporate sales departments, and
outsourcing firms can often promise low turnover rates as part of the
arrangement. That, in turn, can lead to improved relationships between the
client organization and its customers.

The outsourcing of sales and sales management can also result in cost savings
by eliminating the expense of creating an internal sales force, including
salaries, benefits, training and other costs. With an internal staff,
“you're paying those people regardless of whether or
not they perform,” says Bob Trinkle, president, Trinkle Enterprises, a
consulting firM, and co-author of a book called Outsourcing the Sales Function:
The Real Costs of Field Sales.

A company might pay a sales agent a full salary and benefits for months
before the agent actually brings in an order, Trinkle says, whereas an outside
firm, depending on the contract, might not get paid until after products are
shipped. Outsourcing sales also gives an organization a predictable cost of
sales, as opposed to a variable cost with a captive sales force, Trinkle says.

Growing Market

Analysts and service providers say the sales outsourcing market is growing
steadily. “Sales Focus began business in 1997, and has seen 20%—50% revenue
growth each year,” says Tony Horwath, CEO, Sales Focus. The firm started out
by serving the high tech industry and now is seeing especially high demand in
the energy, telecommunications, financial services and advertising sectors.

Sales Focus provides whatever level of sales personnel a client needs,
including a program executive who acts as the vice president of sales and
manages a team of sales agents supplied by Sales Focus; a sales administrator
who manages all human resource functions for the sales group; and a financial
administrator who handles all expenses and commissions.

At the outset of an outsourcing engagement, Sales Focus assigns a
“transition and management team” that assesses a client's current sales
strategy, creates a marketing plan and develops a sales organization. The firm
in some cases conducts in-depth interviews with a client's existing customers,
partners and employees to better understand the perceived presence of the client
in its market.

Sales Focus also helps clients recruit personnel using its own database or by
working with recruiting organizations; creates compensation and commission plans
for sales agents; and provides customized training for the sales team.

Another firm, SalesLogic has seen huge growth in demand for its sales
outsourcing services. “It's an exploding market, particularly in Western
Europe, where companies are looking to establish a sales presence in the
U.S.A.,” says Bob Howard, CEO, SalesLogic.

SalesLogic, which plans to soon change its name to Sales Overdrive, provides
everything from complete end-to-end sales and marketing outsourcing to more
select services such as strategic consulting, recruitment of sales agents and
management and training. Howard says the hottest markets for its services are
technology, including software development, professional services such as
consulting and outsourcing and logistics and supply-chain management.

Experts say organizations evaluating sales-outsourcing providers should use
much of the same criteria they would when analyzing service providers for other
types of outsourcing projects. “The service provider must have a viable
business plan and be financially healthy, and be capable of scaling up as
needed,” says Goldman.

“Since the firm will represent the client to customers, it's important
that agents and managers have a high level of professionalism and a good
reputation in the market,” says Trinkle.

An especially important consideration is whether the firm has experience
selling products in the client's industry or one like it. If the service
provider lacks knowledge of customer preferences, product-development trends and
other factors, that could mean disappointing results for the client. Goldman
recommends speaking with existing clients before signing with a
sales-outsourcing firm.

The cost of sales-outsourcing services can vary widely, depending on the
scope of the arrangement, types of products and services being sold and
geographic region. Some service providers offer clients a fixed cost through an
agreed-upon rate for an entire project, including recruitment, training, salary
and benefits and other aspects of the sales function.

Horwath says Sales Focus charges up-front fees for services such as training,
scripting, lead generation, recruitingand fixed fees that cover salaries and
commissions, overheads and administration.

Managing Risk

As with any outsourcing endeavor, there are risks associated with sales
outsourcing. One concern is that companies will lose direct contact with their
customers. “Providers are getting better at making that appear seamless to a
customer, but there's fear on the part of organizations that they are
putting too much distance between themselves and their customers,” says
Gartner's Goldman.

Wittenburg says TXU managers were initially uneasy because Sales Focus
personnel were not employees of the utility company. “They might be off
message and make promises we couldn't keep,” he says. TXU mitigated the risk
by working closely with Sales Focus' management and providing lots of training
to sales agents.

There are also risks associated with information security and privacy. For
example, an organization might have to provide access to sensitive customer data
to an outside firm. Goldman says concerns about security might be keeping some
organizations from moving ahead with a sales-outsourcing initiative. To address
some of the security concerns, organizations should have outsourcing firms sign
nondisclosure and confidentiality agreements where appropriate.

Trinkle says there's a risk of selecting a firm that isn't a good match
with the client organization. For example, the service provider might not have
strengths in the client's particular industry or the two companies might have
different philosophies for approaching customers. A good relationship requires
“very compatible people who think along the same lines, who want to do
business the same way,” says Trinkle. “If your product requires a great deal
of technical competence, you'd better hire a firm that has technically
competent people.”

Sales-outsourcing relationships need to be closely managed like any other
outsourcing arrangement. “Any time you outsource, you need to be an active
participant in the process,” says Goldman. That includes “continual
interaction with the provider to ensure that objectives are being pursued and
are being met,” he says.

Clients and service providers should set clear objectives at the outset and
develop effective service-level metrics to ensure that goals are being met.

“During the early stages we find out what things are most important to client>; what their objectives are,” says SalesLogic's Howard. Then the firm
collaborates with clients to establish which metrics should be tracked that most
closely align with the goals. “We spend quite a bit of time making sure we
a great partnership, so that when the market shifts or a new product
is introduced or a management change is effected, we can continue to high> performance.”

Sales Focus ensures that it has clearly identified goals from its clients
before embarking on a sales-outsourcing engagement. Within the first 45 days of
a program, the firm and its clients have an operational-level agreement. “We
say we will hire a certain number of people, develop scripting and profiling and
deliver sales training. This is all documented in the contract,” says Howard.
“There is a separate service-level agreement in place for the actual sales
program launch,” he says. “That states that we will knock on so many doors,
sign so many contracts, make so many presentations, generate so much revenue,”
he says. “We base the service-level agreements on what our clients'
requirements are.”

“Sales Focus serves both U.S.-based and foreign customers,” says Horwath.
The firm has developed partnerships with sales-outsourcing companies outside the
US to provide services in Europe, South America and South Africa. The firm is
looking for partners in Southeast Asia,” he adds.

“SalesLogic recently opened offices in Mexico and Germany, and is expanding
its operations in Asia, Europe and the Americas,” says SalesLogic's Howard.
These facilities provide services to local companies and to U.S. companies
looking for help with offshore sales.

There are examples of call center providers in onshore and offshore locations
engaging in outbound sales. Most of these providers are paid on an full-time
equivalent agent basis. While some of these providers are willing to work on a
risk-sharing model, the sales expertise and training is typically provided by
the client. Most outbound sales to US customers are performed
domestically-mostly for reasons of cultural compatibility and return on
investment.

Bob Violino

vadmail@cybermedia.co.in

Republished with permission from Global Services

(www.globalservicesmedia.com)