Contact Center Cost Models Help Quantify ROI

FROM THE OCTOBER 2018 ISSUE

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Centers all bear the same types of costs to conduct their operations, whether they’re attributed to the contact center budget or to that of IT or other parts of the organization. So, analysis of contact center cost structures should consider the main elements that contribute to the company’s budget, not just the center’s budget.

Costs include fixed and variable costs: the former being ones that are not specifically tied to business drivers, and the latter being costs that vary with the workload those drivers create. You also need to consider one-time versus recurring costs. Good examples of one-time costs associated with an employee are the cost of hiring or the cost of new hire training. Of course, the recurring costs include their salary and benefits. A good understanding of these costs sets the stage for looking at cost savings and other benefits.

Frontline labor—including agents, team leads, and supervisors—is by far the largest contact center expense, accounting for roughly two-thirds to three-fourths of the overall operating cost. It also presents the greatest opportunity for cost management or reduction. The model can provide insights on this variable expense based on volumes and handle times, as well as factors that impact efficiency in the use of these valuable resources, such as occupancy and shrinkage. Leadership and support resources are another important labor cost that can vary with size but ties less directly to workload.

Hourly rates or salaries are not the only factors in labor costs. “Loading” factors for benefits such as health insurance, life insurance, 401k, and taxes (Social Security and Medicare, as well as unemployment and other local taxes) add up quickly. We typically use 30% in our models.

Core contact center technology is the big factor specific to contact center operations, and includes things like the ACD that routes and reports on (omnichannel) contact handling, IVR for self-service, and WFO solutions (QM, WFM, analytics, etc.). The costs of all these tools can vary tremendously based on size and sophistication of the center. They must account for purchase, implementation, ongoing support, and maintenance.

Network considerations include voice and data. Contact center-specific network costs traditionally include some dedicated networks for voice, toll free numbers (with per minute costs), and in some cases, network services for re-routing or percent allocation, for example. Some companies are using internet services for both voice and data, especially for those moving to cloud solutions.

While the remaining line items may seem small, they can add up, and can be heavily impacted by factors such as location and attrition. Facilities costs include rent, utilities, and taxes. Other overhead costs can include rewards and recognition, with each center having some budget for pizza parties, decorations, or other special activities that don’t fit into payroll. Hiring and training costs can be non-trivial if attrition is high. We typically use $2,000 per agent for each in modeling. Other miscellaneous costs can include travel and training for leadership (e.g., conferences), or other development costs.

Taken all together, here’s a sample cost structure for a typical center:

Armed with a detailed cost model that captures the baseline state of the contact center, managers can begin to assess the bottom line impact of new technologies and quantify the impact that it will have on labor and on overall costs.

For example, I used my model to evaluate a $25/month/agent investment in a cloud-based Knowledge Management tool that could reduce handle times by 5% (or more). The cost per contact in my theoretical 150-seat center dropped from $3.27 to $3.12 and offered the potential to reduce staff by six agents. That translates to an annual savings of about $362,000. And I haven’t yet considered the volume reduction if FCR goes up as well!

In sum: Getting a full understanding of your costs and cost structure can be a major boon to your quest to loosen the corporate purse strings for technology investment!

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