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  • Writer's pictureVinay Vasudevan

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

This article is a must-read for any Outsourced BPO management team and outsourced BPO WFM team. A Client-side WFM team may also find it helpful to see the things that have to be considered in an outsource WFM team, but this is more FYI for them. In the business world, Revenue is the most important thing and the sole reason why businesses exist.

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

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

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

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

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

However, irrespective of the pricing model chosen, the cost structure would remain the same.

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

Agent Salary

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

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

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

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

E.g., In the 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.

A 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, the fully-loaded wage or CTC is calculated even for support staff.

IT Cost(System Specific)

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

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

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

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

Moreover, the higher management people use laptops, which is counted in the IT cost.

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

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

Below are some examples.

  • If the operational hours are a single shift Monday to Friday, the seat utilization will be 1:1.

  • If the operational hours are 18 hours Monday to Friday, we can have a higher seat utilization since we can have an overlapping shift.

  • If the operational hours are a single shift Monday to Sunday, then the seat utilization will be more due to the week off. However, if there are any peak days without week offs, then the seat utilization will be 1:1

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

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

IT Cost(License)

This may include the cost of procuring licenses for Outlook, ACD Tools, WFM Tools, Call Recording Tools, other clients specific or Related Process Tools, etc.

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

IT Cost(Network)

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

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

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

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

If the site is new, we may have to increase the cost to bring new equipment, 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 equipment, etc.

Other Miscellaneous Costs

We saw costs related to agent, Support Staff, and IT. Apart from these, many other components 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 are added together, and after a lot of brainstorming, the cost structure is finalized and further used.

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

I've listed the major cost components that go 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 on 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 in the overall pricing models.

Thanks for reading, and stay tuned for future blogs!!

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