Developing Business Cases for Upgrading Contact Center Infrastructure

Over 233 years ago Adam Smith wrote about transformation and high performing businesses. He noticed by studying Pin Factories that the successful businesses were those focused on transforming their operations. Smith wrote,

First, the improvement of the dexterity of the workmen, necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man’s business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman.

Secondly, the advantage which is gained by saving the time commonly lost in passing from one sort of work to another, is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools.

Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by which labour is so much facilitated and abridged, seems to have been originally owing to the division of labour.

There it is, a 233 year-old recipe for a business case. You don’t have to fix what isn’t broken. Smith describes the major levers in our business case:

1. Business Process Output (e.g. calls served, cases served, AHT, FCR, etc.)
2. Labor Output and Cost (e.g. calls and cases per agent per day/hour/shift, management pyramid, cost per hour, cost per minute, utilization, etc.)
3. Technology Output and Cost (e.g. capacity of various components expressed in calls, agents, etc.; as well as cost per relevant component for both as-is and to-be architecture)
4. Sales, Revenue and Net Income (e.g. as-is and to-be plan based on new capabilities)

The objective of the business case is to create a modeler that simulates the impact of the transformation program on two areas:

1. The reduction in Total Cost of Ownership (TCO) by new technology and improved customer loyalty
2. The increase in Sales, Revenue, and Net Income driven by new technology and improved customer loyalty.

Many strategists are compelled to stop the business case after step 1 above, but it is step 2 (the impact on Sales, Revenue, and Net Income) which is the key for modeling a major technology overhaul such as shifting call center infrastructure to Cisco UCC. Business leaders fall in love with Cisco UCC not because it is cheaper to operate or buy, but because of the promise it brings to transforming operations and improving customer loyalty. Characterizing and building expectations around this outcome is key to a simple and elegant business case, and will drive decision-making very quickly.

The business case itself needs to be developed using a spreadsheet in such a way that the main levers are represented as variable input fields with the spreadsheet. The challenge with these spreadsheets is that the various sub levels of each input are very interdependent. This means that one area such as depreciation schedules becomes an output, but if it could be made longer (e.g. 5-years instead of 3-years) it actually drives decision-making and becomes an input. The problem here is that you can’t have it both ways without receiving the all-to-familiar “Circular Reference” error in Microsoft Excel where the spreadsheet stops working.

Therefore before you start coding spreadsheets and find yourself lost in the possible permutations, the first step is a preliminary strategy document. The purpose here is to gain some amount of consensus as to:

1. The breadth of the analysis?
   • Usually the key here is how many front-office and back-office seats are going to be included?
     • The larger the number of seats and the sooner they will convert to the new technology the better the ROI especially with IP-based solutions like Cisco UCC which has a larger foundational base of cost than tradition premise based TDM call center solutions
   • Is growth and the impact on revenues going to be included?
     • If you have read some of my other posts you will find that this is a key point with me. Moving from an old depreciated TDM solution to a shiny new IP-based solution is going to require capital, as well as new expenses. Including growth and the impact on revenue as well as the associated net income after the investment makes the entire plan go down easier.
2. How much capital is available?
   • What is the process for approval?
     • Who really needs to be involved for approval, and what are there key objectives? This is where many plans fall apart, failing to satisfy the top executive in the decision-making chain, instead serving the needs of a lesser executive. It is better to have a sit down with the C-level that will make the final decision before even starting to write anything.
   • What is amount of capital potentially available?
     • This comes from meeting with the C-Level executives, but the key point here is don’t walk away with the executive saying, “I’ll get you whatever money you need if you can make it accretive.” That is another way to quickly fall into an abyss where you make assumptions that are incorrect at the beginning and waste precious time.  Get a clear view of how much cash is available maximum by quarter, and what the potential for change will be (e.g. probability factoring).
   • How will the new assets be depreciated? This is a challenging area for most treasurers and auditors, because the easy answer, “faster depreciation is better,” is not what you want to hear when you ask the question. IP-based call center infrastructure is very different structurally than older premise-based TDM PBX equipment. IP-based call center infrastructure like Cisco UCC is heavily centralized and very modular. Aside from the Gateways and CVPs the majority of the rest of the solution is platformed on simple Intel-based servers running Microsoft OS or Linux. The majority of the solution is software that is automatically updated and maintained under contract. Therefore, the opportunity is to get your auditor to divide up the solution into hardware and software, and depreciate the software much slower than the hardware. Essentially the software will be functional until Cisco finally retires the UCC software platform which won’t be in the next 5-years.
3. What other factors will drive the decision and the ROI?
   • Potential competitive market changes
   • Potential changes within the target customer market
   • Planned product or service marketing plan introductions
   • Current product lifecycles and demand

Using this information you can create a very high level estimate of potential impact to TCO and Revenue. From here you can gain consensus, and lock-down some of your variables possibly helping competing leaders in the business to understand the value of consolidating their efforts on the new platform.

The key is strategy, and the next leg of the effort is a detailed technical architecture and strategy. This will likely require rounds of analysis of potential architectures, and then deep analysis with the most promising solution. Then you can build a detailed business case that provides the ability to model various outcomes based on your C-Level analysis.

Adam Smith wrote about strategy saying,

Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things.

It is critical that you get senior leadership attention and that the key decision-maker doesn’t become a customer of the strategy, but the owner. You should have a steering committee that includes all the key competing factions of the company, and you need the key decision-makers commitment to clear the road of obstacles along the journey to the final decision.

Ed Fullman, Partner
Adam Smith Consulting
www.adamsmithconsulting.com
ed.fullman@adamsmithconsulting.com