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An AMC Technology Whitepaper
Tips for Calculating ROI for Contact Center
CRM Integration
A Step by Step Guide to Estimating Real Return on Investment
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 2
Table of Contents
Table Of Contents 2
Executive Summary 3
Beyond The Hype 4
The Overall Effect On The Customer Experience 5
Reduction In Talk Time 6
Increased Use Of Self Service 7
More Accurate Routing 8
First Call Resolution 10
Decreased Transfers 12
Increased Personalization 13
Proactive Contact 14
Context-Sensitive Call Treatment And Scripting 16
Simplified Agent Interfaces 17
Presence For Agent And Knowledge Worker Resources 18
Adding Multi-Channel Capabilities 19
A Vendor-Certified Solution 20
Appendix A - Roi, Npv, And Irr 22
Appendix B - Contact Centers 27
Appendix C - Cti Contact Center And Crm Integration 30
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 3
Executive Summary
Every project manager understands the need for an accurate return on investment
(ROI) analysis before starting a big project, even more so when it is a critical project
like the integration of customer relationship management (CRM) applications with
computer telephony integration (CTI) and multi-channel contact centers. Without an
accurate ROI, budgets and projects can be delayed or cancelled.
Just as important as coming up with an ROI estimate is coming up with an estimate
that will stand up to close scrutiny. CFOs and other seasoned executives will quickly
spot an inflated ROI estimate. ROI calculators and case studies are often provided by
vendors to put their products and services in a positive light. Unfortunately, these
may have little bearing on future deployments, and may over-inflate ROI estimates
by magnifying how bad the current situation is and how good the situation will be
after the purchase. Inflated ROI estimates based on imaginary worst case/best case
before and after scenarios will not hold up.
This informational paper cuts through the hype and shows how busy department
managers - including Sales, Call Center, Service and Support, and IT managers -
can accurately calculate contact center and CRM integration ROI for their specific
situation.
Organized to let managers quickly calculate the overall ROI of the integration, the
paper is divided into sections to let the reader select relevant metrics for estimation.
There are also appendices with handy definitions of ROI, NPV, IRR and other terms
used.
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 4
Beyond the Hype
Some CRM and Contact Center ROI calculators in the past have been inaccurate
because they were overly aggressive. They sometimes included overarching
assumptions about how bad the current situation is “before the project”. Then, by
comparison, the great way things would operate “after the project” made the ROI of
the integration project overly inflated in its predictions. A CFO or CxO can quickly
shoot holes in a bad ROI model.
Instead, companies have to look at the overall effect of a customer interaction,
divide that into areas that map to specific improvements, and then focus on each of
the areas. It may be that First Call Resolution is not a problem at one company,
while it is a big problem at another. What contact center management needs is an
ROI calculator that asks them basic straightforward questions about the current
situation, along with an honest evaluation about how much of an improvement can
be achieved in order to come with a realistic down-to-earth estimate of ROI.
That is exactly what this informational paper provides. Each section details one area
of potential ROI. It provides industry standard metrics for each. To calculate ROI for
a particular scenario, all the reader has to do is go through the sections and ask
“Does this apply to my situation?” and “Are my metrics different from the example
provided?”
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 5
The Overall Effect on the Customer
Experience
When it comes to contact center CRM integration ROI analysis, the overall effect on
the customer interaction must be examined. The objectives of this integration are to
improve the customer experience, and to improve the operational and IT efficiency.
Objective: Improve Customer Experience
Significantly Reduce Hold Times -Through more efficient and effective servicing
by agents, reduction in talk time, more accurate routing, and decreased
number of transfers from agent to agent.
Improve Agent Responsiveness - Better and faster information, first call
resolution – new systems, consistent
customer ID / data, configured screen
pop, soft phone, context sensitive call
treatment and scripting.
Expand Self-Service Options - IVR with
more comprehensive options; opt-out to agent with call data for quick
identification and configured screen pop.
Customer Identity Verified “Once” - Call prompt for account number or ANI,
attached to call throughout.
Objective: Improve Operational Efficiency
Fully Leverage the CRM Application - Improve agent desktop; consolidate
customer information; Use native support of contact center functionality and
integration with simplified user interface.
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Blending of Inbound and Outbound Calling - Automatic route of in/out-bound
calls to agents on availability; Integrated and configurable for optimization and
quality.
Expand Self-Service Options - IVR with more personalized options; opt-out with
„call data‟ for quick identification, and proactive contact.
Objective: Improve IT Efficiency
Vendor-certified solution
Integrate across all contact center systems
Reduction in Talk Time
Since staffing can account for 70% of the cost of a Contact Center, improving the
efficiency of the staff can easily provide a strong ROI argument.
Typically, a contact center and CRM integration
project can improve the talk time by 20 to 30
seconds per call. These improvements come from an
automatic screen pop presenting customer data right
when the call arrives to the desk of the agent, which
can provide up to 20 seconds of savings. Additional
improvements come if the solution is certified and integrated with the CRM
application. This means that that all of the telephone controls appear inside the CRM
application and carry the call attached data with every communication event, which
allows an integrated user interface for post-call wrap up - an additional 10 seconds
of savings.
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In order to see if these ROI elements are applicable to an organization, the company
should ask the questions:
What is the current average call duration?
Is it going to be possible to reduce that call duration by 20 seconds by having
CRM customer information automatically appear on agent desktops?
Is it going to be possible to reduce agent time a further 10 seconds per call
by allowing an in-CRM application window for call control, call attached data,
and wrap-up?
A close look at the answers to these questions will place the company in a good
position to calculate a realistic ROI for reduction in talk time.
Increased use of Self Service
By passing User Entered Data (UED) to the agent when calls are transferred from a
self-service IVR system to a live agent, customers
gain confidence that they will not be asked to
provide all of their information again to a live agent.
This will encourage them to enter the data to the
IVR system and not simply “zero-out” to a live
agent whenever they encounter the IVR system.
The combination of passing along UED with the function of agent screen-pops
typically increases self-service usage by 5%.
The questions the department manager must ask in order to gather an accurate
assessment of the ROI for increased use of self service are:
What percentage of calls uses self service today?
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 8
What is a reasonable increase in self-service usage due to screen-pops and
passing along UED to live agents, encouraging customers to take the time
and provide UED to the IVR?
More Accurate Routing
If the contact center and CRM integration project includes a routing element, then
this aspect should be considered as part of the ROI. Routing may be manual or
automatic, and involves an examination of the
call attached data (CAD), which is either collected
from the phone call details, or by user entered
data into an IVR application. The CAD is then
used to perform a lookup into the CRM database
to make a routing decision. This routing decision
is based largely on the purpose of the call. An
inbound sales or marketing call may be routed to the department handling the
product requested or may be routed by the priority level of the customer who is
calling. A service and support inbound call center can implement more accurate
routing by skill set or seniority of agent to handle larger more important customers.
When companies can go beyond routing with old IVR methods, they accrue the
biggest benefits of more accurate call routing. If companies can expand the routing
accuracy technology to perform a CRM lookup within the IVR, huge savings can be
achieved. For example, in the insurance industry, if the CRM record of the caller
indicates that there is a pending claim, then the IVR can report the status of that
claim, possibly avoiding a live agent call and keeping the call self-service. If the
caller requests a live agent, the IVR can route the call to the adjuster handling the
claim, greatly increasing customer satisfaction.
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©2009 AMC Technology, L.L.C. All Rights Reserved. 9
More accurate routing can save time re-routing the call - commonly 60 to 120
seconds faster than having the wrong agent talk to the customer first - and can also
increase customer satisfaction, and thereby retention. There is commonly 2% to 8%
improved customer retention for this element alone.
The questions the department manager must ask in order to gather an accurate
assessment of the ROI for more accurate routing are:
To what extent does incorrect routing affect the performance of the contact
center?
To what extent does incorrect initial routing affect the customer satisfaction
and thereby customer retention?
If the contact center and CRM integration project will include a manual or
automatic accurate routing aspect, will this have a positive impact?
How much will the call time be reduced, on average, because of more
accurate routing?
What percentage of the calls will be impacted by more accurate call routing
improvements?
How much will the customer retention be improved because of increased
customer satisfaction (may wait to answer this question as part of the overall
project)?
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 10
First Call Resolution
First call resolution (FCR) is a common goal of contact center CRM integration
projects. The aim is not only to make great
strides in improving this metric, but also to
allow more accurate measurement of the
problem. Having a customer call in two, or
even three times to resolve the same issue is
a waste of contact center resources, and a
strong dissatisfaction issue amongst
customers. By integrating CRM into the contact center, agents can instantly see the
entire interaction history of the customer and can pass along that data seamlessly as
the call is transferred. If the CRM integration solution is certified against several CRM
applications, then the call attached data (CAD) can accompany the call as it is
transferred from an agent to a knowledge worker outside of the contact center, even
if they are not using the same CRM application. All of these factors greatly improve
the overall FCR after the contact center CRM integration project is completed.
Several analysts have researched the subject of FCR, some of them defining FCR as
being “first live agent spoken to.” For the purposes of a general ROI calculation for a
contact center CRM integration project, one must assume that if the customer
inquiry is resolved in the first contact - regardless of how many live agents were
involved in the interaction.
The greatest benefits to first call resolution come from the measurable positive
impact to FCR from technology improvements that allow agents to locate specialists
more easily. There are two basic ways that a contact center CRM integration project
can achieve this. The first way is to use the automatic call distributor (ACD) to
manage queues by expertise. The contact center agent, when they recognize that a
special expertise is needed to resolve an issue, can transfer the call to the next
available agent in that expertise queue. This has the benefit of using the extensive
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efficiency and optimization technology available within the contact center software to
optimize performance. The second way this can be achieved is by having the
integration software perform a series of CRM “dips,” examining the database for the
information needed to route the call. For example, if a specific technical skill is
needed to resolve an issue, the agent can use the integrated software to look up the
HR records for skills, perform an availability query from the contact center, and
combine these two pieces of information to route the call to an available agent with
the salient skill set.
FCR alone can improve customer retention by as much as 15% to 30%. Another
factor to consider in the ROI calculations is the contact center agent time savings
enjoyed by better FCR. To calculate the overall time savings, one has to calculate the
time savings on those calls that have in the past required multiple calls, and then
multiply that by the percentage of calls having this problem in the past. Some
common numbers might be 30% of calls have not historically achieved first call
resolution, or 70% FCR, and when a customer must place a second or even third call,
the average extra time spent is 9 minutes. If this is improved to 75% FCR, then the
average time savings over all calls coming into the contact center is 540 seconds x
5% of calls impacted = 27 second average reduction in call times.
Once again, every corporate situation is different. The benefits of improved first call
resolution may not be as good, or in some situations, they may be much better.
There are several questions a department manager must ask before being able to
accurately assess the ROI of improved FCR. These are:
Is FCR an issue in the contact center?
What percentage of calls fails the FCR test in the current environment?
What percentage is a reasonable improvement in FCR will result from the
contact center CRM integration project?
How much time is wasted in the contact center when FCR is not achieved?
How much is customer retention impacted by FCR?
*may need to answer this question as part of the overall project
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 12
Decreased Transfers
Similar to the analysis of first call resolution (FCR), reducing the number of times a
call must be transferred can provide powerful ROI
support for integrating the CRM into the contact
center. In addition to allowing immediate viewing
of the entire history of contacts with that
customer, sophisticated CRM integration solutions
can place callers on hold and make a consultative
outbound call to a knowledge worker from inside
the CRM application. Although not as powerful an improvement as FCR, decreasing
the number of times a caller is transferred does have a measurable improvement
and can reduce call times 60 to 120 seconds overall. However, rather than use
common industry values, the department manager must examine the situation at
their particular contact center.
Questions that can help determine the accurate ROI of decreased transfers are:
Does the contact center have an issue with a high number of call transfers?
What percentage of calls currently gets transferred?
What percentage is a reasonable improvement in decreased call transfers that
can be expected after the CRM integration?
How much time is lost when customers have to get transferred?
How much is customer retention impacted by too many call transfers?
*may need to answer this question as part of the overall project
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Increased Personalization
Calculating the ROI of increased personalization must really be divided into two parts
when it comes to contact center and CRM integration. The first part is the increased
personalization for the live agent that comes
from having all of the customer information at
their finger tips even before answering the call.
The second is self-service personalization, which
comes from letting a CRM data dip: customize
messages on hold; provide a specialized IVR;
announce expected wait time; give prompts
about issues; or deliver personalized information such as “flight delayed.”
For example, in the airline industry, it was discovered that if a caller was in the
middle of a trip, then there was an 80% likelihood that the purpose of the call was to
change the time or date of the return flight. It is easy to see that in this situation a
huge savings can be achieved through contact center CRM integration by simply
having the IVR provide alternative flight choices without having the need to go to a
live agent.
Live personalization is really a customer satisfaction and customer retention matter,
with common improvements of 2% to 8% in customer retention for this element
alone.
Self-service personalization may improve customer retention also but is focused
largely on reducing the contact center agent call time by providing more information
in a self-serve environment based on CRM integration in the contact center.
Commonly, self-serve personalized solutions look to reduce the number of contact
center live calls by 5% to 20%, calls that normally would have taken an average of 9
minutes to complete. Thus if the number of calls to live agents is reduced by 5%,
WHITEPAPER: Tips for Calculating ROI
©2009 AMC Technology, L.L.C. All Rights Reserved. 14
then the average call time savings of self-serve personalization from contact center
CRM integration can projected to be around 27 seconds.
In order to accurately estimate the ROI achievable from increased personalization,
the department manager must look at the facts in their particular situation. Some
questions useful in determining an accurate estimate are:
Is increasing live and self-serve personalization a possibility in the current
contact center configuration?
What percentage of calls currently get handled live that could have been
handled via self-service prior to the CRM integration project?
What percentage of live calls now being handled by self-service is a
reasonable improvement that can be expected after the contact center CRM
integration project?
How much time would be saved for every call that was handled live previously
and is now handled via self-service after the CRM integration project?
How much would customer retention be impacted by improving live agent
personalization?
*may need to answer this question as part of the overall project
Proactive Contact
The inclusion of proactive contact as function for an outbound contact center applies
only to certain companies. Whether it‟s the placing of outbound calls, e-mail, IM,
etc., companies maintain customer satisfaction and reduce inbound live call agent
usage by sending out reminders and information to customers proactively, before the
customer calls in.
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For example, in the situation of gift and prepaid cards, inbound contact centers often
are inundated with callers wanting to know their remaining balances. A simple SMS
text message to their mobile phone indicating balance
changes is a quick way to reduce the inbound
inquiries significantly. This is an ROI element that
must be analyzed on a company by company basis.
Since the situation can vary widely, the reduction of
inbound live agent traffic can be impacted across a
wide range from a reduction in calls by 25%, all the way down to no reduction at all.
For illustration purposes, if average call hold times at the inbound contact center are
9 minutes, and these calls can be reduced in volume by 25%, then an average call
savings of 540 seconds x 25% = 135 seconds can be achieved.
In order to accurately approximate the ROI achievable from proactive contact, the
department manager must examine their particular situation. Some questions useful
in determining an accurate estimate are:
By what percentage can inbound calls reasonably expect to be reduced
through the use of proactive outbound contact?
What is the average call time of those calls that are eliminated or reduced
thanks to proactive contact?
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Context-Sensitive Call Treatment and
Scripting
Context-sensitive call treatment and agent scripting are important reasons for
enterprise contact centers to take on a CRM integration project. By allowing agents
to read from a customized script or otherwise respond to customer inquiries based
on the call attached data (CAD) combined with information stored in the CRM
database, new upsell and cross-sell opportunities can be created. This rise may be
the result of a large number of products or package options that would be impossible
for a contact center agent to memorize but can be presented to the agent in the
context of the customer information. The ROI measure for this aspect can vary quite
widely from one company to another so it is important to take a down-to-earth view
of this metric for the particular situation at hand.
Some questions to ask are:
What is the current upsell and cross-sell revenue generated inside the contact
center? Outside the contact center?
How much does the company plan to increase upsell and cross-sell
opportunities as a part of the objectives for the contact center?
What percentage of calls currently handled could have benefitted from
context-sensitive call treatment and scripting?
What is a reasonable improvement in upsell and cross-sell opportunities to be
expected after the contact center CRM integration project provides context-
sensitive call treatment and scripting?
How much would customer retention be impacted by improving context-
sensitive call treatment and scripting
*may need to answer this question as part of the overall project
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Simplified Agent Interfaces
Improving the efficiency of the staff can provide a strong ROI argument. Simplifying
the agent interface can be a big part of this
process improvement, especially if it involves
reducing the number of applications open
simultaneously on the desktop. Typically, a
contact center agent has a CRM application; a
window with soft-phone controls; frequently
dialed numbers phonebook; agent status
reporting buttons; separate applications for context related info; and more.
Streamlining the agent desktop can improve the call times by 5 to 10 seconds per
call, including the wrap-up activities. These improvements come from the telephone
controls appearing inside the CRM application, carrying the call attached data with
every communication event, and providing an integrated user interface for post-call
wrap-up.
The other important thing to remember about this ROI concept is the improvement
in accuracy it enables. By allowing the agent to handle all of their activities from
within a single application window, errors are minimized and the overall efficiency is
improved. How much agent satisfaction and agent retention can be improved as a
result is an important facet to consider for ROI. Acquisition of new contact center
agents may cost the company tens of thousands of dollars annually, so even if agent
retention is only improved by 10% thanks to the improved working environment on
the desktop, this can provide a significant ROI element.
In order to see if these ROI elements are applicable to an organization, the company
should ask these questions:
What is current average call duration?
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Is it going to be possible to reduce that call duration by 10 seconds by
simplifying the agent interfaces?
What is the current annual cost for agent turnover?
By what percentage can agent tunover reasonably be reduced thanks to the
increased job satisfaction arising from simplifying the user interface and
making it easier for agents to do their work?
Presence for Agent and Knowledge
Worker Resources
The type of call transfer used makes a big difference to customers. Being transferred
to a voice mailbox, or even worse, another long wait in hold queue, is not a pleasant
experience. Having information about the presence
of agent or knowledge worker resources can make
a big difference in customer satisfaction and
customer retention. Depending on the severity of
the current problems with cold transfers, which are
made without giving any notice or explanation to
the recipient or the caller, presence information alone can improve customer
retention by as much as 5% to 10%.
These questions can help determine if presence information can play a role in the
ROI estimation for a particular enterprise:
To what extent does warm vs. cold transfer of calls currently affect the
customer satisfaction and thereby customer retention?
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How much customer retention improvement can we expect because of
improved transfers thanks to presence information? *may need to answer this
question as part of the overall project
Adding Multi-Channel Capabilities
Calculating the ROI of adding multi-channel functionality to the contact center is
often only a small part of a larger company project. This is usually the result of the
realization that customers are choosing their preferred communication channel from
an ever growing list of possibilities (voice, web, chat, e-mail, fax), and that the
contact center must adapt. How much the multi-channel adaptation benefits from the
contact center CRM integration is the same analysis as for the single telephony
channel, only divided twice. It is split once because communications via other
channels are still only a fraction of the total communication budget; and reduced a
second time because only a percentage of the benefits enjoyed by the telephony
channel aspects of the project will also be enjoyed by other channels.
In order to accurately assess the predicted ROI achievable from adding multi-channel
capabilities to the contact center CRM integration project, the decision maker must
ask the following questions:
What percentage of total customer communications comes from non-
telephony communications (e-mail, fax, web-chat, etc.)?
What percentage of these multi-channel communications could be covered by
a contact center CRM integration project?
What percentage of the benefits achieved by the telephony aspect of the
project would be attainable in the multi-channel aspects?
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A Vendor-Certified Solution
Calculating the ROI over the lifespan of a project also means calculating the benefit
over the life of the integration itself. If there are hidden costs that pop up after the
initial integration project is completed, these can greatly diminish the overall benefit
to the company. Many companies look for solutions that are vendor-certified
because of two big issues that tend to arise after the project deployment: software
upgrades and customizations.
Whether it involves a patch to fix a bug, or a major upgrade to add functionality and
extend support contracts, a non-certified solution will add unacceptable risks that
can only be mitigated by the addition of manpower costs to research, modify, and
re-test the integration. These added costs can be up to 20% of the original
manpower cost over the life of the deployment and are separate from and in addition
to any annual support fees for hardware or software.
Customizations are constantly underway in a contact center and within a CRM
application. Business conditions dictate the necessity for agility, whether for minor
tweaks to improve efficiency, or a major overhaul to accommodate a new go-to-
market strategy. Certified solutions come with a notice from the vendor that the CRM
and contact center solutions each have passed rigorous interface tests and therefore
will not be affected by customizations to that vendor‟s product. Any updates will
keep the same level of interoperability delivered with the initial implementation.
In order to accurately assess the predicted extra costs - and thereby the hits to the
projected ROI - from using a non-certified contact center CRM integration, the
project manager must ask some of the following questions:
Is there likely to be a major or minor upgrade of either the CRM application or
the contact center equipment over the life of the deployment?
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Will the non-certified integration solution need to be examined, modified, and
tested as a result of this future upgrade? As a percentage of the original
integration project manpower estimate, how large will this re-integration
effort be for every upgrade?
Are there likely to be any customizations of either the CRM application or the
contact center over the life of the deployment?
Will the non-certified integration solution need to be examined, modified, and
re-tested as a result of this future customization?
How much money does the company intend to spend on customizations over
the life of the deployment? As a percentage of the future customization costs,
how large will this incremental re-integration effort be for every
customization?
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Appendix A - ROI, NPV, and IRR
This section provides a mathematical definition of Return on Investment (ROI), Net
Present Value (NPV), and Internal Rate of Return (IRR). Explanation of how these
are used for capital and for subscription based solutions is also discussed.
ROI
Commonly called rate of return (ROR) or return on investment (ROI), or sometimes
just return, ROI is the percentage of money gained or lost on an investment. Some
terms used to describe ROI are interest, profit/loss, or net income/loss. The original
investment may also be referred to as the capital, project cost, annual cost, or the
cost basis of the investment.
ROI can look at a past, current, or the estimated ROI on a future activity and is
usually expressed as a percentage (%).
So ROI is therefore simply the total return divided by the initial investment.
ROI = (FINAL VALUE – INITIAL VALUE) / INITIAL VALUE
Even though ROI does not include time in the formula, many people associate ROI
with time. ROI is often implied to represent an annualized % in financial descriptions.
For example, a question such as “what‟s the ROI of that stock purchase” might imply
that the answer be annualized. So first calculate the ROI of the stock transaction,
and then annualize it by seeing how much time the stock transaction lasted and
seeing how many times that time would fit in a year.
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ROI = (FINAL VALUE – INITIAL VALUE) / INITIAL VALUE
ROI:ANNUALIZED = ROI * (DAYS THE STOCK WAS HELD)/(DAYS IN A YEAR)
Another way ROI is commonly used is to express the time required to go from a
negative to a positive value.
So, for example, if a project costs $1M to implement, takes 2 months to implement,
and once implemented generates an extra $250K per month for the company, we
can calculate the annualized ROI, or also predict how many months before the
project break‟s even.
For the annualized ROI, we assume 2 months of project ($1M) and 10 months of
extra revenue (10 x $250K = $2.5M)
ROI:ANNUALIZED = ($2.5M - $1M) / ($1M) = 150%
For the break-even ROI we see how many months before the project goes from
negative ROI to positive ROI
ROI:MONTH1 = ($0 - $1M) / ($1M) = [-100%]
ROI:MONTH2 = ($0 - $1M) / ($1M) = [-100%]
ROI:MONTH3 = ($250K - $1M) / ($1M) = [-75%]
ROI:MONTH4 = ($500K - $1M) / ($1M) = [-50%]
ROI:MONTH5 = ($750K - $1M) / ($1M) = [-25%]
ROI:MONTH6 = ($1M - $1M) / ($1M) = 0%
ROI:MONTH7 = ($1.25M - $1M) / ($1M) = 25%
So it takes 7 months to achieve a positive ROI. This is also written as “The Project
has a seven month ROI.”
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NPV
Net present value (NPV) takes the concept of ROI one step farther. It not only
calculates how much extra money the company is making based on an investment,
but it also incorporates the value of that money at the end of the investment period.
In other words, if in order to complete the project the company had to borrow the
money (pay interest) or pull it out of the bank (give up earning interest) then the
longer the project takes to complete, the more “expensive” that initial investment
becomes.
How much the money “costs” every month is called the “discount rate.” The discount
rate is determined by the company based on many factors but usually it comes down
to the average cost of capital after taxes. Instead of a “discount rate” the company
may use a “required rate of return”, such as 10% per year. If investments make less
than 10% per year over the investment period, then they are not considered to be
meeting the required rate of return.
For NPV, time is usually divided into chunks (one month chunks, or one year chunks)
over which the discount rate applies. To calculate NPV over a time period, one has to
add up all of the Present Values (PV) for each of the time chunks, as follows:
PV:N = (ROI FOR TIME CHUNK N) / (1+ THE DISCOUNT RATE)N
where Xn means X raised to the nth power. So:
NPV = PV:1 + PV:2 + … + PV:N
Wikipedia has an excellent example illustrating NPV:
Example
X Corporation must decide whether to introduce a new product line. The new product
will have startup costs, operational costs, and incoming cash flows over six years.
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This project will have an immediate (t=0) cash outflow of $100,000 (which might
include machinery, and employee training costs). Other cash outflows for years 1-6
are expected to be $5,000 per year. Cash inflows are expected to be $30,000 per
year for years 1-6. All cash flows are after-tax, and there are no cash flows expected
after year 6. The required rate of return is 10%. The present value (PV) can be
calculated for each year:
T=0 -$100,000/ 1.100 = -$100,000 PV:0
T=1 ($30,000 - $5,000) / 1.101 = $22,727 PV:1
T=2 ($30,000 - $5,000) / 1.102 = $20,661 PV:2
T=3 ($30,000 - $5,000) / 1.103 = $18,783 PV:3
T=4 ($30,000 - $5,000) / 1.104 = $17,075 PV:4
T=5 ($30,000 - $5,000) / 1.105 = $15,523 PV:5
T=6 ($30,000 - $5,000) / 1.106 = $14,112 PV:6
The sum of all these present values is the net present value, which equals $8,881.
Since the NPV is greater than zero, the corporation should invest in the project.
IRR
Internal rate of return (IRR) is how a company compares NPV to other ways money
could be invested. Instead of implementing a project, the company could put the
money in the bank, or invest in a different project. Comparing the NPV of a proposed
project to the NPV of alternative investments can be accomplished by comparing the
IRR. A project is a good idea if its IRR is better than the alternatives.
To calculate IRR, we calculate the NPV using a variety of discount rates (or
equivalently, rates of return). The rate of return that makes the NPV equal to $0, is
therefore the IRR.
In other words, over the life of the project, we calculate the NPV using the formulas
described above and by using the company‟s agreed “required rate of return”. If it
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turns out we can break even with an even higher rate of return, then that‟s a good
thing.
The formula for IRR is really the same as the formula for NPV, except instead of
setting the discount rate to a fixed value and solving for the NPV, we set the NPV to
$0 and solve for the discount rate:
PV:N = (ROI FOR TIME CHUNK N) / (1+ THE DISCOUNT RATE)N
NPV = PV:1 + PV:2 + … + PV:N = $0
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Appendix B - Contact Centers
A Contact Center is a broad term for a solution that allows a group of agents to take
inbound and outbound telephone calls, and extends this into additional channels such
as e-mails, web-chat, Fax, and other communications (multi-channel). Contact
Center solutions are available from vendors such as Aspect, Avaya, Cisco, Nortel,
and others.
Most major businesses, enterprise size companies, and more and more, small and
medium size companies, use contact centers to interact with their customers.
Contact centers provide a variety of important functions including:
Service
Support
Inbound Sales
Outbound Sales
Internal Employee Services
Help Desks
Over the years, the science of contact centers has become more advanced, with
mathematical formulas covering queuing theory, multi-channel communications
handling, integration with database and CRM systems, intelligent outing, service
level management, work force planning, forecasting of traffic, planning of staff shifts,
and naturally operations research.
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The science isn‟t the only thing that has advanced in contact centers. Customer
service has also improved. Contact centers are constantly measuring not only
numerical metrics, but also qualitative metrics of quality, customer satisfaction, and
general demeanor of contact center staff (agents).
Contact center agents are usually grouped, either by physical location, or virtually in
modern communication networks. The types of information collected for groups of
agents can include the number of agents that are:
Logged in
Ready to take calls
Available to take calls
In wrap up mode
In addition, overall metrics are collected including:
Average call duration including wrap up time
Longest duration agent available
Longest duration call in the queue
Number of calls in the queue
Number of calls offered
Number of calls abandoned
Average speed to answer
Average speed to abandoned
Amount of time an agent spends processing requests while not speaking to a
customer (wrap up, not ready time, or after call work)
Percentage of calls that completely resolve the customers issue (also called
First Call Resolution or FCR)
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The service level, which is the percentage of calls answered within an
“acceptable” time period
Staffing still accounts for 70% of the cost of a contact center, and so the
management of the staff is tantamount for cost control. Modern methods to keep
down costs in contact centers include multi-tiered support, and use of call attached
data.
Modern contact centers are often organized into multi-tiered support systems for
more efficient handling of calls. For example, an Interactive Voice Response (IVR)
system could ask the caller basic questions about their call and even handle
database lookup responses. After that, a live operator can direct inquiries to the
appropriate department. If more assistance is required, the call goes on to the next
tier where most issues can be resolved. If another tier is required, highly skilled or
technical staffers (often called “knowledge workers” or “low repeat agents”) are
used.
Call attached data can be derived from Calling Line Identification (CLI) Automatic
Number Identification (ANI), IVR collected data (such as account number, case
number, or product being ordered), or data collected by an agent during a call. Call
attached data can be used to prioritize callers, route callers to the appropriate agent,
or otherwise more efficiently manage the call.
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Appendix C - CTI Contact Center and CRM
Integration
What is meant by contact center and (CRM) application integration?
Contact Centers and CRM Integration simply means that the contact center
functionality and the CRM functionality appear to the agent (the user) as a single
integrated solution. This
makes agents faster, more
efficient, and more effective
and courteous in the eyes of
the customer.
A number of functions should
be available thanks to this integration. These functions are listed in the “Scope
management” portion of the whitepaper. Without these functions there is not really
integration but rather co-existence. It is for this reason that the term integration is
used.
Sales managers, managers of contact centers and customer service departments,
and information technology managers all recognize the benefits of contact center and
CRM integration. The specific benefits, however, will vary from company to company:
It could be to automatically collect important call data to better understand
and improve advertising success rates.
It might be to implement a screen pop solution to empower agents to quickly
engage callers more meaningful conversations from the start.
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It might mean increasing capacity without hiring more staff by having faster
contact handling by giving agents a single application for both data entry and
call control.
It might mean improving performance measurement of staff members
through the automatic logging of contact events.
It means increasing retention of customers through more courteous customer
interaction.
It could be focused on cost reduction through more frequent first call
resolution of issues.
It may mean improving the hand off of cases to knowledge workers by
intelligent call routing and pass-through of call attached data.
It could be focused on the efficiencies of having idle agents work on e-mails
and faxes in a multi-channel contact center
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About AMC Technology
AMC Technology is a leading provider of multi-channel integration solutions that allow
contact centers to manage all types of customer interactions more effectively and
deliver superior levels of customer service. AMC Multi-Channel Integration SuiteTM
features an open architecture that seamlessly integrates customer relationship
management (CRM) applications and contact center solutions.
Used every day by thousands of agents around the globe, AMC‟s integration solutions
are deployed with leading CRM application providers including SAP, Oracle Siebel and
PeopleSoft CRM, Microsoft, and salesforce.com and leading contact center solution
providers including Aspect, Avaya, Cisco, Nortel and others.
Reflecting more than 14 years of experience with many of the world‟s leading
companies, our customers include over 200 innovative organizations that rely on AMC
solutions to better serve their customers. AMC is a privately held software
development company founded in 1995 and headquartered in Richmond, Virginia.
AMC Technology, L.L.C. 15521 Midlothian Turnpike, Ste 301, Richmond, Virginia 23113 Tel: +1 (800) 390-4866 • Main: +1 (800) 419-8600 • Fax: +1 (804) 419-8601 sales@amctechnology.com • www.amctechnology.com All other product and company names mentioned are the property of their respective owners and are mentioned for identification purposes only.