Cost and Revenue - How WFM affects it. Part - 1

This article is must read for any Outsource Vendor management team and outsourced WFM team. 

Client side WFM team may also find it useful to see the things that have to be concidered in an outsource WFM team as well but this is more FYI for them.

In business world, Revenue is the most important thing and a sole reason why businesses exists.

Customer Satisfaction and Quality which is very necessary is also directly proportional to Revenue.

In further blogs we are going to talk about how Revenue is calculated in a Contact Center and different Revenue/Pricing Models.

This blog is must read for vendor management team and outsourced WFM. 

Client side WFM team may also find it useful to see the things that have to be concidered in an outsource WFM team as well but this is more FYI for them.

Note: Revenue Models, Pricing Models, Billing Models and Commercials means the same with just different names.

Contact centres follow different pricing models depending upon the service requirements from different clients.

We will look at each one of them elaborately with their calculations and benefits.

However, irrespective of what pricing model is chosen, the cost structure would remains the same. 

So let's first analyse and see some major components that goes into the cost structure.

• Agent Salary

As a industry standard and as a fact around 60-70% of the overall cost goes as the agent salary. 

Here, WFM plays a major role as we are the ones who decide the size of HC required.

The interval pattern, SL Goal, Shrinkage, Operational hours etc., all together combined along with best WFM knowledge will help us optimising the Agent count.

Depending upon the country, the salary or wages vary accordingly.

For e.g. In US, hourly wages are considered and in India monthly Salary is considered.

On top of the basic wages, other components such as benefits, insurance, tax etc. are added and the fully loaded wage or CTC is calculated.

• Support Staff and Salary

Support Staff is a much required element to run the operations smoothly.

Each company and each business has its own defined Support Ratio.

Couple of examples of Support Ratio is mentioned below.

• Team Lead - 1:18 (i.e. 1 TL for every 18 Agents)
• Trainer - 1:25 (i.e. 1 Trainer for every 25 Agents)

But, to determine the support staff requirement, we would definitely need the Total HC Required which is the functionality from WFM.

Once support staff is determined, we would know the salary of each function depending upon the designation. 

As explained earlier, even for support staff the fully loaded wage or CTC is calculated.

• IT Cost(System Specific)

A major cost factor in BPOs is the IT cost. The IT cost will include mainly the systems, softwares and the network requirements.

The system requirements in WFM language is called as "Seats Required".

Systems required can be classified into two as Agent System and Support System.

Support System can be either shared or dedicated, but most of the times the support systems are dedicated.

Moreover the higher management people use laptops and that is counted in the IT cost.

Hence the Seats Utilisation for Support Staff can be told as 1:1 (i.e. 1 system for every support staff).

But, for agents the seats are shared in most of the cases and this mainly depends upon the operational hours.

Below are some examples.

• If the operational hours is a single shift Monday to Friday, then the seat utilisation will be 1:1.
• If the operational hours is 18 hours Monday to Friday, we can look at a higher seat utilisation since we can have a overlapping shift.
• If the operational hours is a single shift Monday to Sunday, then the seat utilisation will be more due to week off. However if there are any peak days without week offs, then the seat utilisation will be 1:1

The seat utilisation is majorly impacted by the call arrival pattern, the DOW and the way we schedule agents.

Thus, WFM here plays a role in deciding the seats required for Agents.

• IT Cost(License)

This may include the cost to procure licenses for software such as Outlook, ACD Tools, WFM Tools, Call Recording Tools, Other client specific or Process Related Tools etc.

The cost could be either one time fee or Annual Maintenance Charges.

• IT Cost(Network)

Here, the cost required to build the network for Calls and Internet is added. 

We all know that most of the contact centers work on a MPLS system/line, but the internet bandwidth totally depends upon the type of process we run and the type of softwares required.

We can go with 512 kbps, 1 Mbps or even higher bandwidth depending upon the type of softwares to be run. Higher the bandwidth, higher the cost.

Also, if redundancy of data is required, additional cost will be added.

If the site is new, then we may have to increase the cost to bring new equipments and if the site is already functioning, we may use the shared network to reduce the cost.

• IT Cost(Miscellaneous)

Apart from the above mentioned IT costs, we may also have miscellaneous costs such as Hard Phone, CRM requirements, Work at home equipments etc.

• Other Miscellaneous Costs

We saw costs related to agent, Support Staff and IT. Apart from these, there are many other components which are added to the cost structure. Some of them are listed below

• Travel Expenses
• Compliance Certification Cost
• Hiring Cost
• Training Cost
• Rent and Utilities Cost etc.

All these components added together along with a lot of brain storming, the cost structure is finalized and further used.

We saw some components of cost, but they are bifurcated mainly into two i.e. OPEX and CAPEX

I've listed out the major cost components which goes into OPEX and CAPEX as below. But the list may vary from business to business.

• OPEX(Operational Expenditure)

1. Agent Salary
2. Support Salary
3. Incentives
4. Monthly Benefits such as Tax and Provident Fund
5. Allowances etc.

• CAPEX(Capital Expenditure)

1. Systems
2. Networks
3. Hard Phones
4. Building Investments
5. License costs etc.

Some companies may also define license costs as OPEX depending if they are annual or one time.

Now, that we have seen the cost structure, the upcoming blogs will explain the Revenue calculations and how to use this cost into the overall pricing models.

Thanks for reading and stay tuned for future blogs!!

Vinay Vasudevan