Call center centralization vs. decentralization analytic framework
Call center centralization can be cost-effective for centers of a certain size. In her latest column, Donna Fluss outlines a framework for call center managers who are considering call center consolidation.
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As companies look for ways to decrease costs without undercutting the customer experience, the debate over whether to centralize or decentralize call centers is a perennial one. Enterprises need a framework to quantify and evaluate the tradeoffs and benefits.
Call center centralization: The cost analysis
Any analysis of whether to centralize – consolidate call centers into one location -- or to decentralize a call center – retain multiple call center sites in different locations -- is difficult and may require rough estimates. But this information is necessary to properly staff a consolidated site. For a consolidated center, it's also important to establish all potential call categories that center representatives could encounter to identify the skill sets that you need. This analysis is conceptually simple but practically challenging. To do a fair assessment, it's critical to capture all direct and indirect costs.
The next step is to determine the optimal staffing levels and organizational structure for the centralized site. It is important to address staff requirements (phone-based and non-phone-based personnel), and all supporting cost categories, including telecom, real estate, technology and so on. If you're hiring a staff from scratch, it's necessary to account for hiring and training costs and the extra time required per transaction as new hires come up to speed. While startup costs can be significant, they usually don't have a major impact on the analysis.
Call center centralization: The benefits
Comparing the cost analysis for a centralized call center with the status quo will indicate whether consolidating is cost-effective. Without doing the analysis, there is no accurate way to determine the break-even numbers – the number of agents required to make a centralization effort cost-effective – particularly because other costs, including salaries, real estate, telecom costs and technology, can vary greatly from one location to the next. If the call center has a limited number of agents, consolidation probably won't be cost-effective. The benefits of call center consolidation come from economies of scale; if there is no scale to be realized, the benefits are minimal.
Here are some of the areas where call center centralization can yield savings:
- Economies of scale in handling transactions (calls, email, chat sessions, etc.).
- Lower salary and benefit costs per employee at the central site, compared with the average for all existing sites.
- Centralized training and quality assurance (QA), with one centralized QA and training staff, instead of separate groups at every site.
- Centralized management and supervision. In small sites, there may be as few as five or six people reporting to a supervisor. In larger sites, this number can go as high as 20 agents to one supervisor.
- Reduced real estate costs, which come from having only one location instead of many. (But be sure that the analysis includes any write-offs or lost rent for "abandoned" sites. These can be hefty.)
- Telecom savings; some carriers will offer reduced rates for large volume. (Yes, there may be some incremental costs associated with moving calls across different regions, but volume discounts may also be available.)
- Reductions in hardware, software and maintenance. There may need to be a larger investment in technology at a consolidated site, but one set of everything will ultimately be less expensive than having multiple systems for dispersed sites.
- Reduced support costs; technical resources will be required at only one site.
Consider a backup facility
One cost that cannot be ignored is the need for a backup center. Even when consolidating a call center, it's a good idea to have at least two centers to ensure adequate backup. Establishing a backup arrangement with a third-party company can be one solution to this challenge. But there are many benefits for a company to have its own backup facility, even if it creates additional costs.
IP and hosting may influence the centralization decision
Voice over Internet Protocol (VoIP) technology and hosted solutions give enterprises a great deal of flexibility and options. By using IP and possibly hosted infrastructure, enterprises can realize many economies of scale without physically consolidating.
The cost analysis is relatively easy, albeit time-consuming if the numbers are difficult to locate. Another challenging but essential aspect of the analysis is estimating how the move will affect regional customers. If a call center can respond in four rings instead of five because there are more representatives in the call center, some customers will consider this better service. The ability to answer calls on one or two rings may not appear to make a substantial difference, but reducing the time to answer calls or respond to email by minutes (or days in the case of email), will have a quantifiable impact on service quality and customer perception.
Some businesses have customers who have made it clear that they want support to be provided by local people. There are some geographic regions that insist on support being provided by people with their own accents, not just people who speak their language. After years of closing local bank branches and centralizing support, for example, U.S. banks have figured out that customers, particularly small businesses, like banking with people they know. This is a complex issue that cannot be addressed by cost analysis, but it can have significant impact on the company's bottom line nonetheless. After all, what is the real value of savings millions on servicing costs but losing a large percentage of one's customer base?
Bottom-line impact of call center centralization
Each call center environment is different and has to be carefully evaluated before making the decision whether to centralize. As a result, it's essential to establish a baseline by which to measure everything – cost, volume, key performance indicators (including customer satisfaction levels), customer base numbers and so on – to accurately measure the impact of the consolidation effort on a company's bottom line.
About the author
Donna Fluss is the founder and President of DMG Consulting LLC, a firm specializing in customer-focused business strategy, operations and technology services. Ms. Fluss is a recognized thought leader and innovator in contact center and real-time analytics. She is the author of The Real-Time Contact Center and many leading industry Reports including the 2007 Contact Center Performance Management Market Report, the 2007 Speech Analytics Market Report, the 2007 Surveying and Analytics Report and the annual Quality Management/Liability Recording Product and Market Report. Contact Ms. Fluss at [email protected]