Balancing cost, the customer experience and revenue enhancement to truly differentiate the contact center.

IBM Business Consulting Services

deeper

Transformation in the contact center environment

Balancing cost, the customer experience and revenue

enhancement to truly differentiate the contact center.

Executive brief

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Transformation in the contact center environment IBM Business Consulting Services

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Transformation in the contact center environment IBM Business Consulting Services

Introduction

The contact center environment has changed dramatically in recent years. Early call

centers were cost centers, built to take advantage of the telephony technology of

the time. Typically confined to one physical location, they relied on interaction-based,

frontline support and had little financial justification of costs. Frequent handoffs

among agents created inconsistencies, as did paper-intensive processes and

product-based structures.

Today, contact centers are becoming increasingly customer-focused and are gearing

up to solve problems and generate revenue. A proliferation of channels is giving

companies a variety of opportunities to communicate with their customers. And with

more oppor tunities for up-selling and new ways to cut costs, the contact center is

transforming into a profit center.

As organizations make this transformation, they are faced with identifying areas

for change, reducing service costs, providing a differentiated service, increasing

sales, supporting a multichannel customer experience and leveraging technological

advances. The challenges, coupled with increasing customer expectations, have

created a renewed focus on transforming the contact center. As companies work to

manage these challenges, a number of trends are emerging.

Trend 1—Recognizing that contact center costs are too high

Companies are recognizing inefficiencies in cost structures and targeting them for

change across several key areas. Most significantly, too much work is coming in to

the agent—the highest-cost channel. Companies are noting a low use of self-service

and alternative channels to handle peak call volumes.

In addition, transaction costs are too high. Repeat calls, transfers due to narrowly

defined job responsibilities and low first-call resolution ability are creating an

expensive overall cost-per-customer transaction. Also, processes are too complex,

with agent and user errors creating expensive repeat work.

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Organizations are realizing that their resource investments are not effectively

distributed or managed from a “one company” perspective. This means that

service-level attainment and work distribution and alignment are negatively affected

by an inability to optimize resources across the enterprise. For example, an average

e-mail response time is 10 to 50 times higher than the best practice response time

of t wo hours.

Companies are also looking to information technology (IT) infrastructure

maintenance as an area for cost cutting. Disparate technology creates

inefficiencies and in many cases, will not scale to meet growing needs. And

nonstandard metrics and reports create a frequent need for manual reporting that

generates additional expense.

Trend 2—Consolidating contact center facilities

Three different types of consolidation are emerging as ways to reduce costs and

increase efficiency:

• Physical consolidation—Processes and technology are managed as a single,

physical item within an organization.

• Virtual consolidation—Technology enables customers to experience a single

contact center, regardless of disparate locations or channels of communication.

• Process consolidation—Companies are managing processes across different

physical locations and making sure that those processes are supported by

technology.

Consolidation enables a consistent customer experience regardless of where the

customer contact is handled. With greater flexibility in resourcing, customers’ needs

can be addressed using a pool of skills from across the organization, rather than by

using the skills available at a single physical location. Consolidation can also help

with handling incremental workloads. A contact center with common technology is

able to scale and grow much more efficiently. And consolidated operations result

in consistency that can make training programs more effective, leading to a better

customer experience.

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The advantages of consolidation, however, do not come without challenges. Many

organizations must make significant investments to standardize and redesign

contact center processes and technologies across centers. And consolidation

frequently requires changes to governance of global operations. The planning,

forecasting, and ongoing operations management of consolidated centers requires

global oversight, cross-functional management and coordination across previously

autonomous locations.

Trend 3—Focusing on measurement and benefits

Across industries, there has been a renewed focus on cost-effectiveness and

return on investment in the contact center environment. No longer seen as an

unavoidable but necessary expense, contact centers are now being viewed for

their revenue generation potential. With that new focus, companies are looking at

workforce optimization and service schedule forecasting capabilities. Measuring key

performance indicators (KPIs) related to contact center efforts is one of the primary

ways to gauge their effectiveness. Operational reporting metrics such as occupancy,

utilization and schedule adherence have been broadened to include measures of

overall business per formance, such as cost per transaction, percent of transactions

handled via self-service channels, transactions per paid agent hour, revenue per

agent and revenue per hour.

From a telephony perspective, metrics such as call volume, call duration, number of

dropped calls, average speed of answer and issue resolution time can provide the

data to suppor t business decisions related to customer service, customer retention

and service delivery improvements.

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Case study: new metrics drive business decisions and measure program impact

A leading global services company engaged IBM to conduct an analysis of its contact center

strategy and operations in order to better support its rapidly growing business. After careful

review of business strategy and processes, operational metrics and costs for the various

contact centers, several critical issues were discovered. First, despite the relative simplicity

of the business transactions performed by its contact center agents, the company had little

success automating transactions to self-service channels such as interactive voice response

(IVR) and Web channels. In addition, the company had a very high cost per transaction

across nearly 20 disparate contact centers. The company decided to initiate a comprehensive

transformation program.

The executive leadership team started by developing a program benefits scorecard. Because

traditional metrics were insufficient to gauge the success of the initiative, new metrics were

developed, and the global reporting process was redesigned to focus on new measures.

The new KPIs were cost per transaction, percent of transactions completed via self-service

channels and transactions processed per paid agent hour. With a focus on these business

driven metrics, a comprehensive transformation program has helped the company realize a

40 percent reduction in cost per transaction, a 50 percent reduction in the number of contact

centers and a 20 percent increase in transactions handled by self-serve channels.

Trend 4—Rationalizing contact center organization and governance structures

Organizations are taking a new look at governance of contact center functions

and the way calls are handled. Traditionally, contact centers have been organized

by geography and business unit. Advances in telephony technology present new

opportunities for streamlining call handling and routing. Virtual contact center

queues route calls to the appropriate agent, regardless of geography or department,

allowing calls to be handled based on factors such as customer need, the type

of transaction or function, the value of the customer or the par ticular customer

segment. This can help boost cost-effectiveness and bring more value to callers,

since they ’ll deal with the best-qualified agent for their particular issue.

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Leading companies are also adopting a cross-functional approach to the

organizational structure of contact center operations. In addition to geography-based

service delivery functions, companies are developing global “Centers of Excellence”

for self-serve programs, customer data management, workforce forecasting and

scheduling, metrics and repor ting, and global queuing and call routing. These

Centers of Excellence manage key processes globally, identify opportunities for

improvement and work with the operational service delivery functions to implement

transformation-related change programs.

Case study: redefining the governance structure to optimize service delivery

and revenue

A large telecommunications company was faced with a common problem: its product-

centric model had become a barrier to achieving companywide performance goals. Existing

measures of success emphasized the optimization of individual business units. This presented

a barrier to simplifying customer service and generating revenue from cross-selling products.

Integrating redundant contact center activities across business units provided an important

opportunity for cost reduction.

Enabling business transformation required a new approach to contact center governance. The

company replaced its traditional product-structured governance by restructuring operations

around customer contact processes. By aligning contact center groups with specific customer

events, the company simplified the customer experience by reducing points of contact and

greatly expanding cross- and up-sell activities.

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Trend 5—Leveraging global resources

The trend for organizations to establish contact centers in regions outside the U.S. is

growing, but there is still significant oppor tunity to be realized. Currently, only about

five percent of agents are based in areas that are geographically removed from

enterprises’ home countries.

IBM has seen significant advantages to locating contact centers internationally.

IBM contact center agents in India earn US$5–7,000 annually, and Filipinos are paid

US$8,400 per year. This represents a significant savings when compared to their U.S.

counterparts, especially considering the higher loyalty and lower turnover typical of

employees in other regions. Additionally, differing time zones allow easier around-the-

clock operations management. As an initial step toward expanding contact center

capabilities outside the U.S., some companies are utilizing geographically removed

resources to process non-customer-facing transactions such as faxes and e-mails.

Often these transactions do not require direct communication with the customer and

can be processed at a fraction of the cost of agents based in the U.S.

Global contact centers also make a difference when it comes to budget allocation.

Because U.S.-based contact centers spend 70 percent of their budgets on

personnel, agent costs drive margins. In India and the Philippines, infrastructure and

facilities make up 60 percent of operating costs, which makes managing operating

costs easier.

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Trend 6—Optimizing self-service

Since more customers are contacting organizations via self-service channels,

businesses are looking to these channels as a growing area for improved customer

service and cost-savings. Though many organizations have self-service IVR and Web

channels, lit tle has been done in most cases to learn whether they are providing

the right transactions to the right customers over the most cost-effective channel.

According to a December 2002 article in Investor’s Business Daily, use of Web

channels for self-service is increasing by 35 percent per year.

Some organizations have set goals to complete 70 percent of transactions through

self-service channels. In order to drive such aggressive self-service performance,

companies are investing significant effor t to identify customer usage patterns,

streamline IVR and Web capabilities, and implement self-service adoption programs.

Such programs often require close coordination among sales, marketing and service

to cultivate the desired aggregate patterns of customer and partner behaviors.

Case study: driving self-service adoption through comprehensive marketing

A Global 50 communications company wanted to be at the forefront of self-service adoption

by rapidly increasing the availability and adoption of its existing self-service capabilities. To

that end, the company initiated an aggressive plan to expand the capabilities of its self-service

technologies and develop a marketing plan to direct customers to the new service channels.

The company first analyzed customer usage patterns and segments to identify usage issues

and potential opportunities. Next, the company developed self-service initiatives to address

these key opportunities. After developing goals and objectives specific to each program,

the organization implemented aggressive marketing campaigns to support new self-service

capabilities. The expected duration of the effort was less than one year, and the company

expected a return of more than three times its investment.

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The desire to encourage customers to use self-service features, combined with

an increased focus on improving the human factor in customer service, has

prompted many organizations to consider speech-recognition technology. Recent

improvements in the technology and decreasing costs are making it a more and

more viable option. According to The Kelsey Group, “The global market for speech-

recognition products and services for enterprises is expected to grow to US$14

billion by 2005. Of that total, companies will spend up to US$11 billion on initiatives

that better manage customer relationships.”

Organizations are beginning to see the benefits of speech-recognition technology. A

large U.S. financial services company experienced a nine percent increase in system

call completion rates. A major global airline company saw more than a 50 percent

reduction in the number of callers needing to speak to live agents. And a leading

U.S. retailer reduced costs significantly by handling calls through speech-recognition

channels, which cost the company 87 percent less than calls handled by operators.

Trend 7—Enabling and transforming with technology

Recent advances in technology provide another important opportunity to drive

efficiency. Coupled with operational improvements, these advances provide the

potential to transform the contact center. Four key technologies have emerged and

continue to gain strength as the capabilities mature.

• Network-based routing—Technology allows customers’ calls to be routed at a

net work level, rather than reaching agents based on availability, so calls are routed

to the appropriate agent at the contact center level.

• Universal queuing—Voice calls, Web interactions, e-mail and other contacts can

all enter the same queue for service regardless of media. Businesses benefit by

eliminating the need for dedicated staff for different channels of communication,

making much more effective use of personnel.

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• Voice over Internet protocol (VoIP)—One line capable of handling both data

and voice is an emerging technology that is gaining momentum. VoIP will allow

companies to save money by having a single net work within the contact center,

which can extend the contact center via a digital subscriber line (DSL) to agents

who work at another location or even at home.

• Speech recognition—No longer just a way to replace button pushing with a single

word response, the technology is now able to recognize natural speech. This

expands the possibilities for cost-effective automated attendants.

Trend 8—Reevaluating the value of outsourcing

The “your mess for less” reasoning behind outsourcing contact centers has proven

ineffective in the last several years. Companies are realizing that contact centers are

frequently their primary, if not only, point of contact with customers.

Contact centers provide a communication link bet ween customers and numerous

functions within the organization. Leading companies have developed sophisticated

methods for communicating customer feedback to product development and

engineering teams. In addition, more and more companies are utilizing contact

center interactions to measure the effectiveness of sales and marketing programs

and even capture information on customer perceptions of competitors. With the

realization that customer information is a core area of emphasis in service-related

industries, companies are focusing efforts on contact center transformation. While

cost-saving efforts are still of primary importance, companies are finding that a more

effective approach is a transformation that focuses on reducing agent costs within

an overall process-driven optimization program.

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Case study: reclaiming ownership of customer care

A Global 1000 Telecommunications company had engaged multiple vendors in complex

outsourcing arrangements. These agreements encompassed nearly all contact center

customer interaction functions. The breadth and complexity of the outsourcing relationships

caused a number of critical issues. First, the company was investing significant effort

in managing multiple vendor relationships. In addition, customers were experiencing

inconsistent service delivery due to the numerous groups that were responsible for servicing

customers at various points in the lifecycle. Most importantly, the company management felt

as if it had lost ownership of customer service. The outsourcing arrangements had placed the

organization, and a large part of its reputation, at the mercy of service providers.

Careful analyses lead the company to make significant changes to its service delivery strategy.

Realizing that customer care was a core competency, the leadership team chose to limit the

services delivered by outsourced vendors. The company reduced both the number and scope

of its outsourcing relationships. While most functions were brought within the control of the

organization, some outsourcing relationships remained. Specifically, the organization decided

to continue using outsourced relationships for sales functions and for overflow customer care

during periods of high call volumes.

Trend 9—Responding to the impact of “do not call” legislation

With no-call lists significantly reducing the potential customers for outbound

telemarketing efforts, companies are switching gears to increase their focus on

inbound customer contact centers and other opportunities for cross- and up-

selling. As part of this shift, there is a renewed emphasis on retention marketing.

Organizations are analyzing data to learn which customers are most likely to leave,

and are proactively trying to retain them. This targeted approach using direct mail

and other offers will require better data about customers and a change in skill-sets

for contact center agents.

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Trend 10—Transforming your business using the three contact center levers

There is no single formula for developing a contact center transformation program.

Three critical levers direct transformation of the operating model and while differing

emphasis can be placed on each lever, they require careful management and

effective balance for the most beneficial impact.

• Cost reduction—Redundant outbound and other support operations are inherently

inefficient. Collections, telemarketing and support functions such as hiring, training

and workforce management are strong candidates to benefit from integration.

• Customer simplification—Cer tain customer events result in multiple contacts.

Establishing consolidated move and billing queues, for instance, can simplify the

customer experience by providing a single contact point.

• Revenue generation—Consumer pilot programs have generated revenue through

a better understanding of customer segments and package offers.

Before undertaking transformation programs, many organizations are conducting a

contact center diagnostic project. These projects help companies understand their

existing contact center competencies, identify new target capabilities and build a

balanced roadmap to realize transformation objectives.

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Transformation in the contact center environment IBM Business Consulting Services

For more information

To learn more about the capabilities of IBM Business Consulting Services for contact

center transformation, call your IBM sales representative or visit:

ibm.com/bcs

Lead Author:

Andy Pritchard is the America’s CRM leader for IBM Business Consulting Services

Contact Center Optimization practice, based in Costa Mesa, California. He

has several years of experience in the delivery and direction of large-scale

implementation projects, with focus in the last 14 years in the definition and

delivery of complex contact center solutions. Andy has been instrumental in the

development of IBM’s thought leadership in this area, particularly in the areas of

integrated, multichannel contact centers, the contact center diagnostic, and the

contact center method.

Contributing Author:

Troy Deering is a Managing Consultant within IBM Business Consulting Services

Contact Center Optimization service area, based in Denver, Colorado. He has 10

years of management consulting experience across CRM strategy, process, and

technology transformations in Contact Center environments. Over his career, Troy

has worked with clients spanning several industries. Troy received his MBA at the

University of Georgia and his BS at the University of Colorado at Boulder.

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References

Bonasia, J. “Self-Service Drawing A Crowd,” Investors Business Daily

(December 27, 2002).

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