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Return On Investment Information For
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Milsoft’s Interactive Voice Response Solution
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Introduction
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Today’s utilities are continually asked to do more with less. Customers demand ever higher levels of
customer service but are seldom willing to accept the higher utility costs that would facillitate the
desired improvements. As a result, utilities are constantly seeking ways to lower operating expenses
while avoiding any accompanying degradation in customer service. As you would expect, this can be
a difficult task. Fortunately, the means to accomplish this task does exist in at least one area. By
effectively applying well-designed interactive voice response (IVR) systems, a utility can actually
improve customer service to a significant degree while holding the line on costs and, in many cases,
actually reducing operating expense.
The intent of this document is to provide basic cost justifications for the installation of various IVR
technologies. It should be noted that all illustrations are given as examples and any utility
considering the installation of an IVR should feel free to plug their own information into the tables
provided. Milsoft is confident that, regardless of the figures used, interactive voice response systems
offer a cost-effective, cost-saving alternative for improving customer service while effectively
managing utility overhead.
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The Company
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Milsoft has been providing thoughtfully-designed, cost-effective interactive voice systems to
electrical utilities since the late eighties. With over two hundred and fifty current users, Milsoft IVRs
are in place for utilities of virtually every size, shape and description. Designed specifically for the
utility industry, Milsoft IVRs are in place in nearly every state in the union and a number of foreign
countries. Milsoft fully supports each system after installation and has continually received rave
reviews from our clients for the quality of our customer support.
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The Systems
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Milsoft IVRs are typically applied to two areas of utility operations: these two areas are outage call
handling and customer service applications.
Outage call handling, as the name would imply, consists of the IVR answering and processing
customer calls during times of service interruption. In most cases the IVR is either equipped with
outage management software or is linked to an outage management system.
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Customer service applications typically include, but are not limited to the following:
1. Customer account inquiry
2 2. Bill payments via credit card, debit card or e-check
3. Payment extensions and arrangements
4. Scheduling
a. new service
b. disconnects
c. re-connects
d. other scheduling applications
5. Utility information to the public
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6. Customer notifications
Sample Customer Service Representative (CSR) Data
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1. The average CSR works an average of 243 days per year.
2. The average CSR does not work nights, weekends, nor through vacations ( 2 weeks/yr)
and holidays(7 days/yr.)
3. The average length of a CSR handled call is 3.3 minutes.
4. At 90% efficiency, a CSR handles approximately 17 calls per hour.
5. Annual CSR call handling capability is, therefore, approximately 31,811 calls.
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IVR Comparison Data
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1. The average IVR is on line 365 days per year.
2. The average IVR is available nights, weekends and holidays.
3. The length of a call taken by a standard keypad activated IVR is 1.5 minutes
4. The IVR is capable of 100% efficiency.
5. Each phone line or extension attached to the IVR is capable of handling 40 calls per
hour on average.
6. Excluding night, weekend and holiday traffic, the IVR will still handle approximately
80,960 calls annually. Night, weekend and holiday calls would be in addition to this
number.
7. Adding voice recognition to the IVR platform typically reduces the customer call length
to 52 seconds.
8. Adding voice recognition increases the IVR’s ability to handle calls to approximately 69
per hour or 139,656 calls annually. Night, weekend and holiday calls would be in
addition to this number.
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3 Customer Service Representative Relative Compensation
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The IVR system should seldom, if ever, be viewed as a means for reducing staff. Rather the IVR
should be viewed as a means for greatly increasing customer service while avoiding staffing
increases. To better understand how reduced staffing needs can impact a utility financially, it is
necessary to begin by estimating the utility cost of each new employee hired. For purposes of
illustration, three different salary levels are represented in the chart below.
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Total Cost of a Customer Service Representative
Cost Category
Compensation (Wage/Salary)
Hourly Compensation (Wage/Salary)
$15.00
$20.00
$25.00
Annual Compensation (Wage/Salary)
$31,200
$41,600
$52,000
CSR Benefits Package
$10,920
$14,560
$18,200
Total Annual Cost per CSR
$42,120
$56,160
$70,200
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Additionally, the figures below were used when calculating the totals included in the tables that
follow.
Legend
Customer Service Representative (CSR) = 260 working days
Customer Service Representative (CSR) = 2,080 working hours (260 days x 8 hours per day)
CSR Benefits Package = 35% of Annual Compensation
CSR Calling Efficiency = 35,360 (17 calls per hour x 2,080 hours)
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4 Handling Cost Per Call
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Once the employee cost has been calculated and the number of calls taken by that employee has
been estimated, it is possible to roughly compute the cost of each answered call. It is understood
that, in some cases, employees do things other than answer calls, so the actual call handled cost
should be adjusted, by employee category, as is appropriate. As with all statistics provided within
this document, the numbers below are meant to serve as representative examples. For purposes of
illustration, the mid-range resource costs (see above) are utilized. IVR costs are calculated based
upon a full service IVR that handles both outage calls and provides all stated customer service
functions.
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Calculation Cost per Call
Resource Cost
Call Taken
By CSR
(Annually)
Standard
IVR
(Initial
Cost)
IVR with
Voice
(Initial
Cost)
$ 56,160
$ 80,000
$ 85,000
Annual Calls Taken
Cost per Call
31,811
$
Efficiency %
1.77
- Relative Cost per Resource
80,960
100%
$
139,656
0.99
44%
56%
$
0.61
65%
35%
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As the above chart illustrates, calls handled via an IVR can result in a savings of up to nearly seventy
percent (65%) over those same calls handled with live operators. The intangible in this equation is
the increased call handling ability when applied to overall customer service. As evidenced once
again by the above charts, an IVR will offer access to the utility on a much greater scale than if an
attempt is made to employ strictly live answers. It is difficult to assign a monetary value to increased
customer service, but there is no doubt that this is a factor that should be given considerable
consideration when calculating the value of an interactive voice response system.
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5 Long Term Cost Comparison
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In order to accurately compute costs, it is necessary to illustrate ongoing expense. The chart below
depicts an estimated ten year cost analysis of live operator costs when compared to ongoing IVR
expense.
Customer
Service
Rep.
Standard
IVR
IVR with
Voice
Year 1
$ 56,160
$ 80,000
$ 85,000
Year 2
$ 56,160
$ 16,000
$ 17,000
Year 3
$ 56,160
$ 16,000
$ 17,000
Year 4
$ 56,160
$ 16,000
$ 17,000
Year 5
$ 56,160
$ 16,000
$ 17,000
Year 6
$ 56,160
$ 16,000
$ 17,000
Year 7
$ 56,160
$ 16,000
$ 17,000
Year 8
$ 56,160
$ 16,000
$ 17,000
Year 9
$ 56,160
$ 16,000
$ 17,000
Year 10
$ 56,160
$ 16,000
$ 17,000
Annual Resource Cost
Cumulative Resource Cost
Relative Cost
$ 561,600
$224,000
$238,000
100%
40%
42%
The above table illustrates that, when viewed over the long term, an interactive voice response
system makes very good sense economically. When properly applied, the IVR can have a dramatic
impact on the costs associated with handling a significant number of customer telephone calls.
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6 Call Pattern Analysis
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When properly configured and utilized, the IVR can also have a significant impact on the pattern of
calls to a utility. Without an IVR in place, nearly 100% of the customer calls must be handled during
normal business hours. Night and weekend service is virtually non-existent. The only instances
where customer calls are typically handled after hours are those where outages are involved.
Applying an IVR will not only provide an expanded level of customer service but reduces the call
load the customer service representatives are required to handle during normal business hours. The
table below reflects the movement in call patterns experienced by representative utilities when a
twenty-four hour access IVR is utilized.
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Changes in Call Load Patterns
Call Patterns
Without TeleLink
With TeleLink
100%
21%
0%
23%
% of Business Hours Calls
% of After Business Hours Calls
% Handled by CSRs
% Handled by TeleLink
100%
56%
0%
44%
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The effect of installing an IVR that is available twenty-four seven is that 25% to 35% of the
customer calls to the utility will be made after hours. This has the effect of reducing the load on
customer service representatives, reducing the number of repetitive tasks typically handled by a CSR,
allowing CSRs to concentrate on more difficult customer requests or needs, holding the line on the
number of telephone lines, and making CSR service/access availability well beyond a utility’s normal
business hours.
Employing an IVR for customer service also has an impact on call distribution loads on a daily basis.
Typically, a utility has the heaviest call loads on Monday and Friday. Customers are getting ready for
the weekend or reacting to something that should have been done the previous week. Making
standard customer service functions available, via the IVR, on the weekend will typically reduce the
Monday/Friday call loads to more acceptable levels.
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7 Credit Card, Debit Card and E-Check Payments
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Most utilities accept payments via credit card, debit card or e-check. As any customer service
representative will verify, these calls can be among the most time consuming. The average time on
the line for a bill payment call, when made to a live operaor, is approximately three and one half
minutes. For purposes of illustration, it is assumed that the average representative handles one
thousand five hundred (1,500) such calls per month or eighteen thousand (18,000) such calls
annually. This translates to roughly 1,050 hours of the representative’s time. Given that the average
employee works approximately two thousand hours (2,000) per year, a customer service
representative can spend up to half of their time taking payments over the phone. With an annual
compensation rate of $47,840 per year, this means that the cost of handling these payments can be
in excess of $25,000.00.
Moving as little as fifty percent (50%) of these calls to an automated system can result in a savings
of fifty percent of the employees salary . Obviously, the employee is still going to get paid.
However, the subject employee can now devote up to half their time working on more difficult or
time consuming tasks. The shift to automated payments will also assist the utility in “hiring
avoidance”. That is to say, less people can do more work resulting in a reduced need to increase
staffing.
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Outage Call Handling
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The handling of outage calls with an interactive voice response system differs considerably from
handling routine business calls with an IVR. The value of an outage call handling IVR should
therefore be determined by somewhat different standards. Among the things, both tangible and
intangible, that should be considered when creating a return on investment model for outage call
handling IVRs are:
1. Many, if not most, outages occur outside of normal business hours.
2. When an outage occurs after hours, the utility is typically short staffed.
3. When after hours personnel are called to work, the salary level is generally 1.5 times the
normal rate.
4. Customer service suffers when telephone calls go unanswered.
5. In many cases when outages occur during normal business hours, staff members must be
taken off their normal tasks to assist with handling the outage.
6. Properly applied, an IVR can shorten crew response times and hasten restoration.
7. An IVR can considerably lighten the Dispatcher’s load during outages.
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Assumptions
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In the examples presented in the following section, the followng figures are used. Note: These
figures are presented for purposes of illustration, and it is assumed that anyone reviewing this
document will substitute figures that accurately reflect their organizational situation:
Average CSR Cost = $56,160
Estimated Hourly Cost = $27.00 ($56,160 divided by 2080 hours)
Average Dispatcher cost = $70,760.00
Estimated hourly cost = $34.02 ($70,760 divided by 2080 hours)
Number of Dispatchers typically on duty outside of normal business hours = 1
Number of CSRs typically diverted from regular tasks to assist with outages = 4
Number of additional dispatchers called in to handle after hours outages = 2
Average outage duration = 2 hours
Time on Line for Live Operator = 3 minutes per call
Time on Line for an IVR call = 1 minute per call
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9 Sample Outage Savings
The following charts illustrate the financial difference that can occur when an IVR is employed
during a daytime and after hours outage. Once again, those individuals tasked with computing an
applicable ROI are encouraged to adjust the figures to represent real world conditions for their
subject utility.
The following chart assumes a daytime outage, lasting two hours, that occurs during normal busniess
hours. In keeping with the above, it is further assumed that a total of five employees (1 Dispatcher
and 4 customer service representatives) will be put to use answering customer calls. For comparative
purposes the use of an eight line IVR outage call handling system is assumed.
Dispatcher
Wages
CSR Wages
Outage Labor
Cost
Calls
Handled
Savings
Without IVR
$68.04
$216.00
$284.04
200 (est.)
0
With IVR
$68.04
$0.00
$68.04
960 (est.)
$216.00
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When outages occur outside of normal business hours, the financial impact is even more significant.
The chart below illustrates what cost savings can result when an IVR is implemented for an after
hours two hour outage and four CSRs receive time and one half compensation.
Dispatcher
Wages
CSR Wages
Without IVR
$102.06
With IVR
$102.06
Outage Labor
Cost
Calls
Handled
Savings
$324.00 ($27.00 $426.06
per hour CSR
compensation
rate * 1.5 after
hours rate * 4
CSRs * 2 hour
outage duration)
200 (est.)
0
$0.00
960 (est.)
$324.00
$102.06
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10 As a final comparison, the chart below illustrates the financial impact an IVR can have during a
more serious or extended outage such as might occur during an ice storm, hurricane, severe
thunderstorm or tornado. This chart assumes the wages quoted in the above two charts. The
outage duration is elevated to twelve hours and the number of dispatchers increased to three. The
number of customer service representatives called in to answer phones is increased to eight. Once
again it is assumed that the outage occurs outside of normal business hours.
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Dispatcher
Wages
CSR Wages
Outage Labor
Cost
Calls Handled Savings
Without IVR
$3,674.16
($102.06 per
hour
dispatcher
compensation
rate * 3
dispatchers *
12 hours)
(three
dispatchers)
$3,888 (Eight
customer reps.)
(or $27.00 per
hour CSR
compensation
rate * 1.5 after
hours rate * 8
CSRs * 12
hours)
$7,562.16
1,600 (est.)
0
With IVR
$1,224.72
($102.06 * 12
hours) (one
dispatcher)
$0.00 (IVR
$1,224.72
handles all calls)
3,840 (est.)
$63,374.44
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As the above chart illustrates, the IVR can handle significantly more customer calls then a group of
customer service representatives. So, in addition to the obvious cost savings, there is a marked
increase in customer service.
It is important to note that while no monetary amounts have been assigned to the intagables
associated with IVR usage, these intangables can have a significant impact on overall utility
performance during outages. It will be left to each individual organization to assign whatever values
to these items they deem appropriate.
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11 Interactive Voice Response – Financial Analysis:
Provided below is a sample calculation of an IVR Return on Investment. Those reviewing the chart are encouraged
to substitute the supplied figures with those figures felt to be appropriate for their organization.
Interactive Voice Response - Financial Analysis
Year 0
IVR - Initial Capital
Expenses
$85,000
IVR - Installation, Training,
& Support Expenses
$20,500
$
$
$
$
-
-
$(49,340)
$17,000
-
$17,000
$17,000
$17,000
$17,000
$56,160
-
$105,500
$17,000
$56,160
$85,000
$17,000
$17,000
$56,160
-
Totals
$190,500
$56,160
$336,960
$39,160
$39,160
$39,160
$39,160
$39,160
$146,460
$17,000
$17,000
$17,000
$17,000
$17,000
$85,000
$56,160
$56,160
$56,160
$56,160
$56,160
$231,460
$(49,340)
-
$
Cumulative Cost Savings =
Net Profit + Depreciation
$
$56,160
$(49,340)
Gross Profit = Net Profit
+ Depreciation
Year 5
Depreciation (≈ 20% of
IVR System)
Year 4
$17,000
$56,160
Net Profit = Increased
Staff Efficiency - Total
IVR Expenses
Year 3
Increased Staff
Efficiency / Cash Savings
Year 2
$17,000
$105,500
Total IVR Expenses
Year 1
$6,820
$62,980
$119,140 $175,300 $231,460
$231,460
Return on Investment
(Payback)
11 Months
Monthly ROI = $4,680.00
(or $56,160/12)
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Disclaimer No-ce: This ROI reflects the quan=fied impact of the unique factors noted in the descrip=on of this study, and is provided for illustra=on purposes
only.
Actual results experienced will vary based on the profile, applica=on
and
circumstances presented by each customer's business situa=on.
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Produc-vity Analysis: For calcula=ng yearly capacity of a CSR, we took 2080 hours and reduced this by an average 2 week vaca=on and an average 7 addi=onal days of paid holidays that are typically recognized. We did not take out sick =me and personnel =me. We did not apply an efficiency ra=o to account for lost =me do to processes or lack of processes. For this reason, we feel our numbers are conserva=ve but realis=c in calcula=ng throughput of the average employee. Actual results experienced will vary based on the profile, applica=on
and
circumstances presented by each customer's business situa=on.
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