Adapt and thrive Featured

12:31pm EDT January 31, 2006

Surviving in a modern marketplace is no easy task, especially when your business focuses on serving others.

Changing customer needs, regulatory issues, labor costs, evolving technology and competitive pressure all can work against your chances for success.

John Brennan, chairman, president and CEO of Newtown, Pa.-based ICT Group Inc. understands the challenges an unpredictable marketplace presents, and he knows you have to adapt to survive — and adapt to thrive.

ICT is in the business of managing other companies’ customer relationships, and Brennan understands the same strategies he helps his clients with also apply to steering his own organization through a market rippled with competitive and legislative changes.

By using a strategy of proactively making changes to adapt to the marketplace, Brennan has led ICT first through a turnaround and then on a path of steady growth. From 2000 to 2005, he took ICT from $198 million in annual revenue to $384 million, and by continually adapting to new challenges, he hopes to continue this growth trend.

Adapt to survive
One of Brennan’s first adaptations was done to survive.

Initially, ICT Group was a marketing support organization for high-tech companies, providing sales leads and managing customer databases. Brennan entered the picture in 1986 as head of “change management” after a client that represented a majority of ICT’s business decided to move services in-house.

“With outsourcing, you not only compete with other outsourcing firms, you compete with in-house resources as well,” Brennan says.

A new direction was needed to reverse ICT’s fortunes.

“We needed to turn things in a new direction to alleviate losses as soon as possible and do what we need to do to get business in here fast,” Brennan says.

He noticed large corporations such Time Life and American Express had established in-house call centers to solicit customers, but most of them never launched significant internal telesales operations.

“[Telesales] ended up being something that was done off-hours,” he says.

This presented ICT with the opportunity it needed.

The company expanded into the budding telemarketing field during a time when few companies had the call-center resources necessary to carry out effective telemarketing campaigns. Direct mail was evolving into direct marketing over the telephone, and ICT took advantage of the change.

“We went after that, and we were able to break even because there was such a demand for those services at the time,” he says. “I looked at telemarketing as a strategy: How do I build this business and how do I cut ICT’s losses?”

Brennan invested in technology and developed contact centers staffed with personnel practiced in handling customer service matters. ICT identified a customer need and filled it, and these efforts helped Brennan turn the company around.

It broke even in one year, and Brennan purchased the company in 1987 and took it public in 1996.

“I never expected we would get as big as we are today,” he says. “My expectations were to be a $20- to $30-million marketing services business, and that goal was reached in two years. You raise to the next goal, and we began diversifying.”

Adapt to change
While the rise of telemarketing lifted ICT out of financial trouble and carried it through the late 1990s, the economy has worked in its favor as well. So have the need for computer tech support, the boom of virtual companies and the demand for industry-specific market research and database management.

“We adapted to [the trends] and shifted our strategies,” Brennan says.

Take downsizing, for example. When companies skim staff, they outsource. Lean sometimes translates to less in-house and more out-of-house. Investing in infrastructure to manage customers is not always top priority, especially if companies know they can outsource this service to firms such as ICT.

“Many companies set up customer service operations in downtown areas, where costs went up and quality of labor typically was going down,” Brennan says. “It became problematic to have the right people on the phones. Costs went up, and many of (the companies) were not interested in state-of-the-art technology, which was rapidly developing in this arena.”

These same companies failed to invest in relocating call center facilities to more cost-effective locations. Again, ICT was prepared with a strategy to tap into the outsourcing of business functions related to customer relationship management.

“Even large companies started to outsource part of the work,” Brennan says. “Because business goes up and down, they wanted to have a flexible options with some [labor] in-house and some through suppliers.”

As technology evolved, some companies began outsourcing everything but their core business, and again, ICT adapted to the demand to provide whatever customers needed.

“Virtual companies outsourced almost all of their data processing, customer service and acquisition, and back-office [support],” he says. “They could start out very small and really focus on putting in place the infrastructure to provide their product or service and depend on outsourcing for their support.”

For example, a medical device company that developed a blood glucose-monitoring device for diabetic patients outsourced functions it didn’t want to spend resources on.

“They spent their money on research and development and marketing channels, and they didn’t want to set up an operation that would provide customer support,” Brennan says.

ICT staffed the company with a dozen contact center employees the first year. When the company sold last year to a major pharmaceutical corporation for more than $1 billion, 75 ICT employees worked for the client.

“That was their strategy from the beginning,” Brennan says — invest in R&D, outsource customer relationship management, and sell for profit.

Moving away from a heavy reliance on telesales and into other areas of customer relationship management was necessary to diversify and, in recent years, to deal with the limitations placed on telemarketing by Do Not Call legislation.

ICT’s service mix is quite different now than it was in the early days — 30 percent telesales compared to more than 90 percent during the telemarketing hey-day in the 1990s. Customer care, tech support and market research comprise the majority of ICT’s revenue today as it has adapted to changes in the market.

Adapt to globalization
The computer age ignited the need for customer support to back up software and hardware products, but much of today’s telesales activity is outsourced to international operations.

This introduces another dilemma for ICT: How do you balance home-based and offshore services so customers get the best value and the highest quality customer service?

“Everyone is looking for the right balance of quality on the goods they manufacture, whether clothing or consumer electronics or automobiles,” Brennan says. “They would like to build it at the lowest cost but with the right level of quality. The same balance applies to supporting your customers after you sell products to them. We have the same issues our clients have.”

About 80 percent of ICT’s telesales activity takes place at overseas call centers; approximately half of customer service-oriented work is handled in U.S. call centers.

Brennan says the industries that ICT targets explains this strategy: Many of its customers are in health care, government and pharmaceutical industries.

“Health care has been reluctant to move much work outside the U.S.,” he says. “We have a growing interest in the government, and they obviously don’t want to move business offshore.”

Brennan says its ideal balance of U.S.-to-offshore contact centers will evolve to a 60-40 split in the next couple of years.

“Some of our clients want to have a risk-mitigation strategy,” he says of moving work overseas. “For example, they only put so much work in Asia and so much in the U.S. and so much in South America. No one wants to put all of their eggs in one basket.”

So ICT has adapted to meet that customer demand. In 2004, the company opened its second call center in the Philippines, which accounted for 13 percent of total company call volume in the second half of 2004, compared to just 2 percent during the same period in 2003.

Customers needing low-cost telesales can be served by the foreign-based call centers, while those needing U.S.-based agents can be served by domestic centers.

The call centers can be utilized in any market where there’s an opportunity. In developing markets such as Mexico, a growing middle-class and surge of U.S. and Spanish banks with financial products to sell are sparking demand for telesales, even as such demand has faded in the United States.

“Each part of the world is on a different level of maturity or sophistication for the need for that type of service,” he says.

Adapt to attract the right people
Providing high-level customer service for clients requires product knowledge and relationship skills. ICT employees must identify with their customers’ customers. This critical element explains why one might find a hodgepodge of furnaces, windows or doors around an ICT call center.

After all, how can you troubleshoot a faulty furnace if you don’t understand its anatomy?

“Our client put a half dozen different types of fuel- and oil-heating systems in our call center so we could train,” Brennan says. The same goes for another client, a leading supplier of windows and doors.

For pharmaceutical products, ICT will recruit specialists and train a staff of customer-savvy representatives.

“A number of people will be product specialists — a nurse in one case, a computer technician in another,” he says. “For example, in supporting a typical pharmaceutical client, a given number of employees will have sales or service backgrounds, but they may not have handled a customer service call.”

People skills trump product knowledge during the hiring process, but once on board, ICT employees must engage in four- to eight-week training sessions to learn about products. This gives ICT the mix of people it needs to be able to answer any questions from the end user.

To get this mix, ICT uses a dual location strategy to position ICT in markets where it can attract the best possible candidates.

“Some of our centers are in moderate-sized cities,” Brennan says, naming locations like Colorado Springs, Buffalo and Spokane, Wash. — places with populations of 1 million or more. Recruiting and training employees in these markets is challenging because ICT’s help-wanted ads share space with those from similar organizations. Competitive salaries and benefits give ICT an edge.

“The retention and turnover we do have is often based on managers at these locations and how well the supervisors relate to people,” he says.

The second component of ICT’s location strategy is to establish call centers in markets where it does not compete with other businesses for employees. Someone may drive 30 miles to a contact center because ICT may be the best job in town. Lockhaven, Pa., and Wilton, Maine, are two such cases.

“There are not a lot of other available jobs [in these locations],” Brennan says, noting the strong work ethic in these less-populated towns generally produces loyal, long-time employees that works to the advantage of both ICT and the customers it serves.

Meanwhile, a third dimension ICT will concentrate on this year is expanding its at-home agents programs.

“Home-shoring,” as Brennan calls it, allows employees to work from home, and it extends employment opportunities to qualified workers who might not seek employment in a physical office setting.

These types of innovations are part of the business life cycle, too, evolving to meet customers’ changing needs, and adapting technology to attract clients and employees alike. In effect, the definition of customer relationship management — at least how it is delivered by ICT — changes every day, depending on what the customer needs.

“We’ve reached the next level,” Brennan says, reflecting on growth that hasn’t slowed since he took the helm at ICT. In some ways, he feels like he’s back to square one, launching ICT into another era.

With only 20 to 25 percent of companies outsourcing customer relationship management services, there’s plenty of room for ICT to grow.

“I think we have a platform now that could make this a much larger company that offers a much more diverse base of services.

“We’ve reached that next plateau,” he says. “There is a lot of opportunity for ICT.”

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