Jessica: Hello and welcome to the WNS Business Insights Podcast Series. This podcast series brings you the latest trends and concepts in your industry and in the field of outsourcing so that you can make your outsourcing programs even more successful. I am Jessica Reinelt, your host for this podcast, with Todd Dirks, Vice Present at WNS, a leading global business process outsourcing company. With over a decade of experience in the Travel industry, Todd has unique perspective on how travel and leisure companies need delivered business process outsourcing to survive.
Hi Todd, welcome to WNS Business Insights Podcast Series.
Todd: Thank you, Jessica, happy to be here
Jessica: Great to have you Todd. To start off, IATA’s Director General and CEO, Giovanni Bisignani, described the state of the air transport industry as in survival mode and the landscape is harsh. Is that the sentiment that you are hearing during your conversations with CXOs.
Todd: Definitely. The only good news, and it is really only moderately good news, came in the recent rounds of earnings calls from the major airlines. The latest results show that while traffic is still off from 2008, the rate of the decline is lessening, so the percentage differences for June traffic year-over-year as opposed to April traffic year-over-year are decreasing, and those percentages are making some people have some optimism that if we are not at the bottom of the declines, we may at least be able to see it.
Jessica: What do you think Todd, do you think we are at the bottom?
Todd: Do you want my honest answer?
Jessica: Yes, please.
Todd: I believe that we are able to see it. Lots of prognosticators are claiming that we will start to see recovery in 2010. However I don’t believe that there is a lot of empiric proof that that is actually going to take place. It seems to be a figure that is thrown out to somewhat make us all feel better, and now with fuel prices on the rise again, somewhat driven by the oil speculation market and all of the controversy surrounding that and the continuing economic environment, most of the industry executives that I speak with are still bracing for hard times. Also, the load factor numbers that are coming out are generating from positive press, but they do require some scrutiny. Nearly, every airline has significantly cut their capacity which is by default going to improve your load factor. You will to also still pose a challenge - the percentage of lowering your fare has remained higher than anyone in the industry would like to see. Business travel remains markedly down, and without that sector showing signs of growth, not just stabilization but growth, any real recovery remains far off. Another factor to take into consideration is that this downturn, in my opinion, is going to have a permanent impact on business travel going forward. Companies have been forced to adapt to travelling less and therefore are now less dependant on it. I don’t see that ever going back to the way it was earlier in the decade. The whole dynamic really has changed and will continue to put pressure on the industry to innovate and manage costs, especially now as we are heading to the post-summer travel period, which is always a difficult time.
Jessica: So, you would use the same language, in survival mode and landscape is harsh.
Todd: Absolutely. I don’t think that we are out of survival mode at the moment.
Jessica: Ok. So, given the economic challenge, how can business process outsourcing help?
Todd: Well, obviously, BPO offers cost advantages in multiple areas - reservations, online fulfilment and back office processing have long been key BPO services provided to the industry. Now, we are seeing additional opportunities for outsourcing in areas such as customer relations, loyalty program management, strategic marketing analytics, and then overall shared services like finance and accounting and legal. While the opportunity for reducing your cost is the most recognizable benefit, BPO providers also offer greater level of accountability in travel retailers. Managing a BPO provider to deliver on specific matrix and drive improvement is always less challenging than overcoming legacy processes within your own operation. We being BPO providers can apply best practices, improvement process, improvement strategies to deliver benefit outside of just the labor hour charge and then immediate cost savings. Another factor to think about with BPO providers is scalability. As I just mentioned, we are still in survival mode and that survival mode has caused the entire industry to scale down their steps so far, a good example is just another 7% reduction year-over-year for May in the terms of total FTEs from 2009 as to 2008, but those staff reductions have cut so deep that if the business ever does come back, the industry may not be prepared to handle it. They may not be able to scale up to adequately handle the volumes. The last thing you would want to impede growth is prolonged wait times on a reservations call, for instance. BPO providers are better positioned to scale and react to seasonal fluctuations and provide options in their strategy.
Jessica: Ok, you mentioned strategy a couple of times there. In one of the perceptions that exist is that business process outsourcing takes time to deliver results and is largely a cost saving tool rather than being more strategic. So, how would you respond to that?
Todd: Well, as I was just mentioning, outsourcing should be viewed as a strategic means of process improvement and not just a reactionary cost savings initiative. Travel companies need to focus on what is core to their business. If you are an airline, where should I be deploying my resources to increase traffic, generate higher yields, and improve customer retention? Travel management companies and online travel agencies need to focus on adding value to the booking process over that which a traveller feels they can achieve by booking on their own. Hotels must centralize their operations wherever possible to enable cost benefits and to deliver value to their franchises. No traveller makes a booking or chooses a travel supplier based on how that company pays their office supply invoice. BPO enables companies to focus on increasing their revenues while knowing their infrastructure is equipped to deliver. Also, travel, no matter how vehemently we all want to deny it, is fast approaching commoditization. The opportunities for differentiation are challenging due to their opaque nature of fares and rates with all the available means to purchase the trip. Think about all the options that are available to you if you want to purchase an airline ticket. You can go to an online agency, you can call a travel agency, you can go to the supplier website, you can go to a meta-search engine that’s going to look at all the online agencies and the pricing is just completely opaque. Having said that delivering a superior customer service experience at every contact point has got to be a strategic goal for everybody in the industry. BPO providers can implement various sophisticated and comprehensive customer satisfaction tracking methodologies and initiatives to deliver the best possible experience in all areas really outside of the airport. I think anything that can be done to improve the customer experience is definitely strategic, whilst I think I would point to the economic structure. So, BPO offers an immediate value by migrating the cash structure from fixed to variable, and that type of financial flexibility is critical not only now in this market but also going forward.
Jessica: Ok, I’m going to put you on a spot. Can you give us some specific examples of how companies have used outsourcing to deliver quick and strategic returns?
Todd: Sure. I don’t mind in the spot, and I think I can give you two. First, we transformed the baggage process of our large North-American airline, Top 10 North American airline, from a reactive call centre to more of a proactive customer service centre. Having spent a lot of my career managing airports, I can officially tell you that no passenger is ever thrilled when they and their luggage do not reunite upon arrival at the airport.
Todd: This carrier used to place the communication burden on the traveller when that would take place, so the traveller would file the report, then they would need to call him to find out the status of where their bag is located and when the delivery time is actually going to take place. When we took over the process, we assumed that burden of communication by providing outbound updates on the status of the traveller’s bag, and we actually ended up reducing the amount of complaints by over 60%.
Jessica: Ok, so question. They would come and say, “My bag has not arrived,” and then, then the airport would take it from there being proactive.
Todd: When this airline had their process, what would happen is the traveller would go into the baggage office at the airport, file their claim, and then they would be given a number, the claim number as well as the customer service number and the traveller would then have to call in to that number to find out the status of their claim. When we took over the process, the traveller still goes in and files their claim, but in this case, they now provide their number, and that claim is then handled by WNS and we proactively now reach out to the customer to where they no longer have any question about the status of their bag and they are no longer calling in to get updates. Obviously, they still can, but in making this a more proactive process, we were able to improve or reduce the amount of complaints by 60%.
Jessica: Well, ok.
Todd: And, you know Jessica, no airline is ever going to have a 100% baggage success rate, and I think most travellers and airline customers understand that. It is how you manage the process and the communication, which is critical to mitigating that negative impact and trying to have that passenger fly with you again.
Todd: And, I bring up a second example, is with a very large online travel agency. We worked extensively with our customer to review their processes in an effort to raise the customer satisfaction scores and therefore customer retention. We took a look at several key initiatives around average handle time and first-call resolution, realizing that both of those were critical to customer satisfaction, especially first-call resolution. What we ended up doing is recommending changes back to our customer that they needed to make in the front-end or on their actual web application that were going to reduce the amount of calls, and also, we retrained our staff on the areas that we identified and we were successful in driving that CSAT improvement. In addition, we also improved the conversion rate as well, which was a nice by-product.
Jessica: Well, I had a conversation recently with a senior executive from the travel industry, and he was explaining how complex the industry is, and then, also at the same time, companies are realizing that outsourcing is clearly a survival tool. In this scenario, what are some of the aspects companies should keep in mind when they are choosing an outsourcing partner?
Todd: I think the key is to work with a provider that brings domain expertise to the table. Travel is complex. It is not something that is scripted and can be handled with an average handle or call it can be handled with an average time under two minutes or it can be done with a training period of two weeks. It requires a certain aptitude to succeed in this business. If you as a supplier or a travel company not only have to train your provider on your specific processes but also on the industry dynamics as well, you are not going to realize the full benefits of migrating to BPO. Also, an inexperienced provider is not going to be able to bring any unique or industry specific best practices to the operation. You need to find a provider that really speaks your language at every level. Their commonality is going to enable the agent’s performing the work to serve as an extension of your brand and take ownership in the process. The provider’s operations managers are going to understand the company’s goals better and better interact with the team and actually serve as an extension of that management team, and then at the senior management level, they are also going to understand the macro issues of the industry and try to offer innovative solutions that you may not have envisioned. The provider really needs to have a horse in this race to fully embrace the challenges that we all are facing.
Jessica: Thank you Todd, for an insightful conversation. I am sure we will be hearing a lot about outsourcing and survival strategies for travel and leisure companies in the coming months. For more information on how travel and leisure companies can leverage outsourcing or other business insights on how you can improve your business performance visit us at www.wns.com.