LESSON 3

perform mensuration
and calculation
page 180
 GLOSSARY
Conversion rate. A measure of
an agent’s sales proficiency,
representing the number of
sales made divided by the
number of calls taken.
Erlang C. A mathematical formula
that helps determine how many
call center agents you need to
meet forecasted demand.
Standard deviation. The average
amount that a set of numbers
varies from the average amount
that a set of numbers varies from
the average set.
CONTACT CENTER COMPONENTS
ACQUISITION
Hosting is a viable option for companies that are either unable or
unwilling to make a large up-front investment. Enterprises that chose to
host via the network or another application service provider (ASP) had to
sacrifice functionality. This is no longer the case. Network and ASP-based
offerings are feature-rich today. The business model selection should be
based on financials, timing, and staff availability. Enterprises should
conduct an ROI analysis comparing the different options and select the
one with the highest ROI and lowest total cost of ownership (TCO). There
are three basic ways to acquire your core contact center infrastructure:
 1.
purchase
 “
In this case, you acquire your own
infrastructure. If you intend to use the same
equipment for more than 3 years, it is almost
always cheaper to purchase. This also gives
you full control and in-house expertise. If
you are in it for the long haul and can afford
it, this is the way to go.
 2.
rent/host
When you rent or host, you contract with a hosting
company to provide access to the infrastructure you need.
The advantages of hosting are that it can be implemented
quickly and does not require your company to have or
acquire staff to support the equipment. The disadvantages
are that (1) if you need the infrastructure for more than a
year or two, it is usually cheaper to build it in-house, (2)
you need to depend on outside expertise to optimize the
environment as your requirements evolve and, 3) it may
complicate your data security issues.
 3.
lease
Leasing contact center infrastructure is more like
negotiating a financed purchase than a pure lease. The main
reasons to lease rather than purchase are (1) you need a
short-term (2 years or less) upgrade to an existing
environment, (2) your firm has no cash available for critical
infrastructure investment, or (3) your firm has a very high
after-tax cost of capital (15 percent or more). If you do
lease, make sure that you have a reasonably priced end-of-
lease purchase option (preferably at a fixed price) in your
contract. Otherwise, if you are not ready to replace your
infrastructure exactly when your lease expires, you will
likely overpay to extend the current lease.
Here are a few guidelines for determining if your company should purchase, host, or lease.

1. If your company is planning on keeping the contact center for five years or longer, purchase is recommended.

2. If you already own other ACDs and can get a large discount by buying a new one and will be keeping it for three years or
longer, purchase is recommended.

3. If your cost of capital is low, generally within a couple of points of what you will be charged by the bank, and are planning
to keep the technology for three to four years, purchase is recommended.

4. If you are putting up a temporary environment that will not be required after 12 months, hosting is recommended.

5. If you are going to greatly change your configuration and replace your initial investment in less than two years, hosting is
recommended.

6. If you do not have technical resources to support the contact center, hosting is recommended.

7. If you do not have the cash to make the initial investment but still require the functionality for a high ROI, hosting is
recommended.

8. If your company requires new or advanced ACD capabilities but does not want to carry the financial asset on its books or
has a very high cost of capital, leasing may be the right choice.
 Contact center
infrastructure vendors
There are many established vendors and a few new ones in the
contact center infrastructure market. The vendors and their
offerings are not equal, with substantial financial, practical,
functional, technical, and vision differences among them.
Functional differences are no longer directly related to a vendor's
business model. The rapid technological innovation has resulted
in new choices being delivered to the market. When seeking a
vendor, consider all vendors that can contribute to your
organization's bottom line, but limit in-depth analyses to three to
five vendors to keep the selection time frames reasonable.
After determining which vendors satisfy your organization’s functional
requirements, providers can be further differentiated based on many factors.
The selection criteria should include vendor viability, financial strength,
technology infrastructure breadth of offerings, ability to integrate, use of
standards, distribution model, systems integrator (SI) partnerships, mid-
market strategy, support resources, R&D investments, and future plans. To
streamline the selection process, develop an analytic framework that
assigns weights to criteria, based on organizational needs.
The information for the criteria can be gathered from industry analysts, web searches,
consultants, or directly from the vendor, either in phone conversations or through a
more formal request for information (RFI) or request for proposal (RFP) process.

Once three to five vendors are selected for detailed review, each should be invited to
present its offering and product functionality. After the vendor presentation, either
explain to or show each vendor the operating environment to ensure that the vendor
proposes the right solution. After meeting with the vendors, draft and issue a detailed
RFP that includes functional, technical, cost, and references sections. The RFP should
require references that are similar to your organization's operating environment for
example, if your organization needs to integrate a logging system with an ACD, a
vendor must have a proven ability to do this integration. If it turns out that none of the
vendors have the required experience, they can be invited to a lab (or your
organization's operating environment) to demonstrate their capabilities before
proceeding to the next phase of the selection process. This will slow down the selection
process and may cost a few pesos, but the time and cost saved during implementation
will rapidly cover these up-front investments.
Once you have identified at least 2 vendors who can meet your organization's needs,
select the least-cost provider through a competitive bidding process. Near-term needs
must be addressed at this stage. Some vendors give a low bid to get in the door and
then raise their costs for add-on hardware and future support services. Future pricing
and all service expectations in the contract should also be addressed. The agreement
should not be signed until all issues are addressed to your satisfaction. Once the
agreement is signed, you lose all negotiating power.

The primary system in any contact center is the ACD, which must therefore easily
integrate with other applications and technologies, particularly those that were in
place before the ACD was purchased. Although all vendors will claim that their ACD
is easy to integrate, this is often not the case. Buying an all-in-one/bundled solution
can minimize- but does not solve- the challenge because the ACD still needs to be
integrated with the company's customer information or sales system(s).
During the IP transition, the more forward-thinking
vendors developed non-proprietary, standards-based
applications that included a web services integration
strategy. While standards-based integration will reduce
integration costs and challenges, it's also important to
select a vendor with out-of-box APIs for the systems
that need to be integrated. (Vendors list all existing
APIs on their price list. If it's not on the list, it hasn't
been built.) The use of web services will reduce the
time spent on custom integration efforts by at least 60
percent, but it's still best to avoid any customized
development.
Contact Center Math

Most of the math that you use in contact centers every day is simple. Sure, you can get really
fancy, using sophisticated techniques such as multiple regressions, but your super-keen business
analyst will be only too happy to do the work and translate the results into English for you.

Most contact center analysis involves basic concepts, such as the following: Percentages and
cumulative percentages

Averages and weighted averages

Standard deviation Simple charts, such as bar charts and pie charts

Charts that illustrate variation, such as control charts and run charts I'll
After you establish your business goals and know what you need to do to
achieve them, you can use mathematical models to figure out what levels
to aim for, or create and analyze what-if scenarios for costs per contact,
per customer, contact center budget , and other measures.

You can calculate contacts per hour based on occupancy (how busy
contact center agents are while they're logged into the company phone
system) and average call length. Just use the following formula:

Contacts per hour = Occupancy × 3 600 ÷ Call length ( in seconds)

In this formula 3,600 represents the number of seconds in an hour. So if

your contact center’s occupancy is 75 percent (0.75), and the call length
is 360 seconds, your equation looks like this:

0.75 × 3,600 ÷ 360 = 7.5

The result is 7.5 contacts per hour

Direct payroll costs. Labor costs directly associated with handling customer calls, emails, online chat, and so
on. This category includes not only your agents' hourly or salary wages, but also the additional costs of
health benefits, taxes, vacations, and other payroll-related costs (which can add 10 percent to 20 percent to
wages, depending on jurisdiction and company policies).

Indirect payroll costs. Costs such as payroll for team leaders, managers, trainers, and people who fix
computers, as well as at least part of the cost for groups such as human resources. You also need to add
benefits, payroll taxes, and vacations, and so on to these costs.

Support and management costs. Costs related to supporting the department, such as wages and benefits
associated with senior management, reporting and analysis, meals, entertainment, food, travel, and agent
incentives. The person who manages the service center has direct control of all these costs.

Corporate overhead costs. Costs that typically are beyond your day-to-day control, including facilities (rent,
utilities, maintenance, and property taxes), insurance, security, software licenses, telecom maintenance,
phone lines, and Internet access.

Capital expenses. Costs of acquiring long-term physical assets such as land, buildings, or technology, which
appear in this year's operating budget as amortization and/or depreciation. Amortization or depreciation
reflects the portion of the asset that was "used up this year. How much you apply is regulated by accounting
and tax rules. Many one-time purchases such as technology include ongoing costs. You group these costs as
new operating cost ( such as licenses and maintenance).
Modeling the contact center budget gives you the opportunity through what-if scenarios, to see
the real effect on the bottom line of changes in various drivers The following formula. which is
a simplified version of the contact center budget model is an easy way to do a simple cost-
benefit analysis:

Call center budget = Customer base x Forecasted calls per customer x Average call length ÷
Planned occupancy at service level x Cost per hour

Assume the following:

Number of customers (customer base): 1 million

Forecasted calls per customer (annual):1

Average call length: 360 seconds

Planned occupancy at service level: 75 percent (0.75)

Cost per hour: $45

In this scenario, your equation would look like this:

Call center budget = 1,000,000 x 1 x 360 ÷ 3,600 0.75 x $45 = $6,000,000

If you could reduce call length by 30 seconds, your new calculation for the department budget would be

Contact center budget 1,000,000 x 1 x 330 ÷ 3,600 ÷ 0.75 x $45 = $5,500,000

This measure doesn't tell the whole story, however, if your contact center's cost per contact is low because your agents
are rushing off calls to keep their call length low, or if you have a very high percentage of repeat calls, cost per contact
can simply mask a problem.

You can calculate cost per contact by dividing the total cost of running the call center for a given period by the total
contacts to which agents responded in the same period. Even with the concern about short calls and repeat calls, you
want this measure to decrease over time. By using the formula for contacts per hour (which you can find in "Using
models in calculations," earlier in this chapter), you can easily calculate cost per contact if you know your cost per hour:

Cost per contact = Cost per hour ÷ Contacts per hour

If your cost per hour is ₱45 , for example, and your contacts per hour are 7.5, your cost per contact is ₱6 (₱45 ÷ 7.5). To
reduce this cost per contact, you have to reduce your cost per hour or increase calls per hour.

Models provide a simple but effective way to create and experiment with what-if scenarios. You can use models to do
very accurate cost-benefit analyses.

Cost per customer addresses the problems with cost per contact by eliminating the variable of call length as long as you
have a finite customer base. Cost per customer tells you more than cost per contact does, because it takes repeat calls
into account and doesn't penalize an operation that smartly took simple shorter calls and moved them to a self-service
interactive Voice response system (IVR) or Web site . You can calculate cost per customer by using this formula:

Cost per customer = Cost of running the call center for a certain period ÷ Average number of customers for the same
period
Thank You For Listening!