The days of easy money are over for technology providers and buyers.

A slowing economy crimped corporate budgets in 2000 and 2001. And, as the economy now threatens to dip into recession - a prospect that September's terrorist attacks may well hasten by prompting jittery consumers and businesses to cut spending and investments - 2002 could see further belt tightening, not least among call centers. Indeed, for the rest of 2001, call center investments should substantially slow while businesses fund security and disaster recovery efforts.

Unconventional Wisdom

But by next year, companies should start thinking seriously about enhancing call center operations. That's because, in a recession, vendors are eager to sell products at bargain prices. And because 70% to 80% of call center costs are people-related, managers who are willing to sacrifice staff, in the short-term, for new investments will deliver savings. Enhancing call centers is the best way to reduce costs while improving quality. Investing now, while many competitors are paralyzed by financial constraints, will give enterprises a competitive edge, particularly once the economy recovers.

The objectives of most call center investments are to improve quality and increase productivity and/or revenue. Successful call center investments must simultaneously address people, process, and technology. Introducing a new technology or application, without analyzing its impact, can doom the effort to failure. Even in the best of times, call centers cannot afford mistakes; in a challenged economy mistakes are unforgivable.

This table shows typical returns from different call center investments. (The ROI calculation includes the development and implementation time.) The benefits are large for many of these investments, which is why they will be funded even when budgets are tight. Use this table as a benchmark for projected ROI, but modify the projected benefits to reflect your internal operating environment.

Select an investment based on a careful assessment of needs in conjunction with the enterprise's CRM strategy. For example, an enterprise replacing a mainframe-based transaction management system with a Web-based customer service and support (CSS) call tracking application will yield a different return from an organization swapping a three-tiered CSS for an n-tiered application. The first organization realized a 24-month return while the latter will have to wait three or four years before seeing the benefits.

As call centers evolve into contact centers that handle both phone and on-line communication, investments will increase in tactical e-service solutions: e-mail response management systems (ERMs), Web self-help, and virtual agents. When properly implemented, all three of these point solutions have improved quality and productivity in contact centers. Too often, projects fail because companies do not carefully analyze needs and buy the wrong application. Initiatives also disappoint when companies take short cuts, skip testing during implementations, and do not garner adequate knowledge and resources. These failures create incremental costs instead of savings.

For example, Web self-help products, which can pay for themselves in two months, might be a great idea for a call center. There's one catch: The success of Web self-help products depends on having a pre-defined database or library of answers or knowledge. To have the correct answers, enterprises must accurately anticipate the questions their customers will ask. During the last two years, many self-help implementations have failed because enterprises did not determine customer needs before building the application. This is a classic mistake of answering questions they wanted their customers to ask, instead of responding to what customers were actually asking.

This is a costly and sometimes fatal error. Customers confronted with worthless information will abandon a site and go to a competitor. Or, they'll revert to calling a customer rep, at a cost at least twenty times that of a Web self-help transaction. (See sidebar.) Minimize the risks by carefully planning and implementing the application. "Time to market" is no longer an excuse for taking short cuts.

Making the Case

There are many methods of justifying investments but the standard is return on investment (ROI). ROI is a short-term measure of the value that an investment brings to an enterprise. It addresses payback (i.e., how long before a given investment contributes to an enterprise's bottom line).

The ROI analysis forces an investor to assess the costs and benefits of a potential investment. The current ROI approval guideline for most call center investments is 12 to 18 months, though many tactical initiatives are expected to have a positive return in three to six months. Investments that companies properly justify will likely be approved.

Chief Financial Officers (CFOs) are looking for quantifiable numbers, not projections based on market expectations or vendor hype. Most call centers are measured based on productivity metrics; while such metrics aren't the best measure of call center effectiveness, they offer the hard numbers needed to get an investment approved. Investments that result in real dollar savings and/or cost avoidance are the only ones CFOs will accept. Acceptable investment justification metrics include:

1. Staff reduction (productivity improvements),
2. Call and e-mail deflection and/or reduction,
3. Reduction in training and hiring costs,
4. Real estate expense savings,
5. Telecom expense reduction,
6. Savings in depreciation expense,
7. Reduction in system development/ integration/maintenance expenses, and
8. Increase in customer revenue.

All of these metrics result in productivity enhancements, quantifiable savings or incremental revenue. Unacceptable ROI justification measures include:

1. Increase in customer loyalty,
2. Enhanced customer satisfaction,
3. Decrease in account attrition, and
4. Sales referrals.

The above measures can be included in an ROI analysis. But call centers cannot use them solely for justification because they are "soft" numbers that are difficult, if not impossible, to quantify.

This table summarizes the justification criteria acceptable for different types of call centers.

When justifying investments, separate the savings categories. Do not lump the savings, avoidance and revenue numbers into one benefits line. Most CFOs accept cost avoidance in an ROI analysis. But many, constrained by budgets, will reject requests for funding or ask for additional information - a common delay tactic.

The days of easy money are over for technology providers and buyers.

A slowing economy crimped corporate budgets in 2000 and 2001. And, as the economy now threatens to dip into recession - a prospect that September's terrorist attacks may well hasten by prompting jittery consumers and businesses to cut spending and investments - 2002 could see further belt tightening, not least among call centers. Indeed, for the rest of 2001, call center investments should substantially slow while businesses fund security and disaster recovery efforts.

Unconventional Wisdom

But by next year, companies should start thinking seriously about enhancing call center operations. That's because, in a recession, vendors are eager to sell products at bargain prices. And because 70% to 80% of call center costs are people-related, managers who are willing to sacrifice staff, in the short-term, for new investments will deliver savings. Enhancing call centers is the best way to reduce costs while improving quality. Investing now, while many competitors are paralyzed by financial constraints, will give enterprises a competitive edge, particularly once the economy recovers.

The objectives of most call center investments are to improve quality and increase productivity and/or revenue. Successful call center investments must simultaneously address people, process, and technology. Introducing a new technology or application, without analyzing its impact, can doom the effort to failure. Even in the best of times, call centers cannot afford mistakes; in a challenged economy mistakes are unforgivable.

This table shows typical returns from different call center investments. (The ROI calculation includes the development and implementation time.) The benefits are large for many of these investments, which is why they will be funded even when budgets are tight. Use this table as a benchmark for projected ROI, but modify the projected benefits to reflect your internal operating environment.

Select an investment based on a careful assessment of needs in conjunction with the enterprise's CRM strategy. For example, an enterprise replacing a mainframe-based transaction management system with a Web-based customer service and support (CSS) call tracking application will yield a different return from an organization swapping a three-tiered CSS for an n-tiered application. The first organization realized a 24-month return while the latter will have to wait three or four years before seeing the benefits.

As call centers evolve into contact centers that handle both phone and on-line communication, investments will increase in tactical e-service solutions: e-mail response management systems (ERMs), Web self-help, and virtual agents. When properly implemented, all three of these point solutions have improved quality and productivity in contact centers. Too often, projects fail because companies do not carefully analyze needs and buy the wrong application. Initiatives also disappoint when companies take short cuts, skip testing during implementations, and do not garner adequate knowledge and resources. These failures create incremental costs instead of savings.

For example, Web self-help products, which can pay for themselves in two months, might be a great idea for a call center. There's one catch: The success of Web self-help products depends on having a pre-defined database or library of answers or knowledge. To have the correct answers, enterprises must accurately anticipate the questions their customers will ask. During the last two years, many self-help implementations have failed because enterprises did not determine customer needs before building the application. This is a classic mistake of answering questions they wanted their customers to ask, instead of responding to what customers were actually asking.

This is a costly and sometimes fatal error. Customers confronted with worthless information will abandon a site and go to a competitor. Or, they'll revert to calling a customer rep, at a cost at least twenty times that of a Web self-help transaction. (See sidebar.) Minimize the risks by carefully planning and implementing the application. "Time to market" is no longer an excuse for taking short cuts.

Making the Case

There are many methods of justifying investments but the standard is return on investment (ROI). ROI is a short-term measure of the value that an investment brings to an enterprise. It addresses payback (i.e., how long before a given investment contributes to an enterprise's bottom line).

The ROI analysis forces an investor to assess the costs and benefits of a potential investment. The current ROI approval guideline for most call center investments is 12 to 18 months, though many tactical initiatives are expected to have a positive return in three to six months. Investments that companies properly justify will likely be approved.

Chief Financial Officers (CFOs) are looking for quantifiable numbers, not projections based on market expectations or vendor hype. Most call centers are measured based on productivity metrics; while such metrics aren't the best measure of call center effectiveness, they offer the hard numbers needed to get an investment approved. Investments that result in real dollar savings and/or cost avoidance are the only ones CFOs will accept. Acceptable investment justification metrics include:

1. Staff reduction (productivity improvements),
2. Call and e-mail deflection and/or reduction,
3. Reduction in training and hiring costs,
4. Real estate expense savings,
5. Telecom expense reduction,
6. Savings in depreciation expense,
7. Reduction in system development/ integration/maintenance expenses, and
8. Increase in customer revenue.

All of these metrics result in productivity enhancements, quantifiable savings or incremental revenue. Unacceptable ROI justification measures include:

1. Increase in customer loyalty,
2. Enhanced customer satisfaction,
3. Decrease in account attrition, and
4. Sales referrals.

The above measures can be included in an ROI analysis. But call centers cannot use them solely for justification because they are "soft" numbers that are difficult, if not impossible, to quantify.

This table summarizes the justification criteria acceptable for different types of call centers.

When justifying investments, separate the savings categories. Do not lump the savings, avoidance and revenue numbers into one benefits line. Most CFOs accept cost avoidance in an ROI analysis. But many, constrained by budgets, will reject requests for funding or ask for additional information - a common delay tactic.