Back to Cost Displacement Basics
Easiest cost-saving measure to justify: replacing a manual process with a computerized system. Next easiest: upgrading software and hardware to increase scalability and performance. While it’s generally understood (with one notable objection!) that IT investments boost productivity, you won’t need complicated ROI models to justify remote agent software for your contact center.
For contact center managers, return on investment is a well-trod approach to analyzing communications hardware and software purchases. You account for cost savings and potential increased revenue and weigh that against the cost of the investment to come up with a normalized percentage. (For larger projects, managers and CFOs often use advanced models that take into account the cost of capital.)
IT boosts corporate productivity and output, right? Not so fast! There’s now a backlash—led by Nick “IT Doesn’t Matter” Carr—that technology commoditization reduces IT’s competitive advantages.
Any company, it is said, can buy the best practices that are embedded in enterprise technology—think shrink-wrapped e-commerce Web software-- and compete with the bleeding-edgers without taking on the risks of being first.
Note to self: Address major issues with Carr’s view in a future post.
For contact centers, a simplified ROI analysis, known as cost displacement, has taken on a new life. Everyone —even Nick Carr—agrees that technology investments that reduce energy costs will increase profits.
Cost displacement methodology is simply a back-of-the napkin calculation that tallies up costs for new systems, comparing them against the old (or displaced ) costs to derive the investment’s break-even point.
In our current economic climate, remote agent technology has incredibly favorable ROI. By allowing agents to work from home, businesses can displace construction and spiraling energy costs associated with satellite offices. Good deal!
For more insights into cost displacement and other cost-saving ideas for contact centers, listen in on this conversation between Nick Lippis and Eddie Jenkins, Vice President Consulting and Systems Integration.
Posted by Andy Green at 10:04 on July 17, 2008
Andy Green said..
Posted at 11:07 on July 18, 2008
Mike, thanks for you input. Most definitely, labor costs are the largest slice of the CC cost pie. Another payback of remote agent software is ability to hunt for skills anywhere and pay the labor rates of the agent's local market.
--Andy
Hein Hanssen said..
Posted at 14:54 on July 21, 2008
Andy,
Also consider a Balanced Scorecard approach:
http://jobfunctions.bnet.com/abstract.aspx?docid=94285 http://www.niwotridge.com/PDFs/DenverITBSC4.PDF
John Swanagon said..
Posted at 18:24 on July 21, 2008
Also... it can't be understated that the home agent model gives you the ability to source talent from anywhere. The traditional brick-and-mortar approach limits you to mostly local talent. If, for instance, you are a business that requires your agents have intricate technical knowledge of complex systems, you could lose out if you are limited to local only. Plus, you'll end up paying more in the end. Leveraging the home agent model will result in a cost savings (home model) and higher customer satisfaction (best people). To me, that is a "Win, Win".
Andy Green said..
Posted at 09:01 on July 22, 2008
Hein,
Thanks for the links to Balanced Scorecard. Measuring both financial and non-financial metrics gives you a better sense of outcomes than using just the ROI.
--Andy
Brian Langenberg said..
Posted at 11:08 on July 28, 2008
It depends upon who is buying, whether they've sorted out what they want to do, and identified specific deliverables. And IT spending is better suited to large, complex organizations with centralized functions. It depends upon the actual needs and culture of the business, not a "rule."
Brian Langenberg, CFA
http://www.langenberg-llc.com
Andy Green said..
Posted at 11:25 on July 28, 2008
Brian,
The "depends" part is the key. A corporate culture that views IT as a utility will, as Carr has argued, only achieve modest returns. Those companies that refine and use commodity IT components in novel ways can attain competitive advantages.
--Andy
Jim Ball said..
Posted at 22:41 on August 03, 2008
Andy:
If a cost displacement analysis shows remote agent technology to have an "incredibly favorable ROI" - and I believe it would - then the true ROI of implementing remote agents will be off the map - and I believe it is. Cost savings resulting from not building more physical facilities will be dwarfed by the value a company recognizes from the dramatically-increased quality of service it can provide using home-based agents. Increases in average order size; increased customer loyalty; improved net promoter index - those are the benefits of a home-based agent network that will make the investment in the appropriate processes and technology a real no-brainer.
John is right on target in his comment. The use of home-based agents is mostly about finding the talent you should have without being restricted by geography.
Mike Mladineo said..
Posted at 10:12 on July 18, 2008
Cost displacement can be helpful, but it depends on the cost assumptions.
I think the call center growth in the U.S. will be in the at home agent model, but that's being driven more by payroll costs than by technology costs.