The Problem CEO Gary Griffiths decided to move Everdream's call center from North Carolina to Costa Rica to cut costs--and attempt to turn a profit for the first time. To preserve Everdream's trademark customer service, he partnered with a top outsourcing firm and trained foreign workers in the U.S. for months before launching the overseas operation in June 2003. Despite his careful preparation, customer satisfaction dipped from 95 percent to the low 80s within a month, owing mostly to language barriers and phone static. A scant seven months later, Griffiths pulled the plug and moved the call center back to North Carolina.

What the Experts Said Jai Shekhawat, CEO of Chicago-based Fieldglass, said that pulling back was the only option. Amit Maheshwari, CEO of i-Vantage, based in Cambridge, Massachusetts, disagreed, saying that Everdream may have cut bait too soon. With outsourcing, he said, "there's a six months to a year period of inertia until you can see results."

What's Happened Since Ironically, the outsourcing fiasco helped strengthen Everdream's relationship with its clients. "Our customers were impressed that we took their concerns seriously," Griffiths says. Satisfaction levels returned to the high 90s in 2004 and sales grew 45 percent, to $10 million, in 2005. Last year, however, Griffiths decided to step down. Everdream's board of directors appointed a new CEO, Mark Hoffman, co-founder of the database-management firm Sybase.

What's Next Everdream is beefing up its IT service offerings and expanding its call centers in North Carolina and California. Hoffman expects sales of $15 million this year and hopes to turn a profit by 2007. One satisfied customer is Gary Griffiths, now VP of products at WebEx Communications, a Web collaboration company in Santa Clara, California. "I think I'm doing more good for Everdream at WebEx than I did when I was there," Griffiths says, laughing. "But I'm proud of my baby."