What is Contact Center TCO, and How Can I Calculate It?

Unpack a definition and formula for contact center TCO

What is Contact Center TCO, and How Can I Calculate It?
Contact CentreInsights

Published: April 6, 2022

CX Today Team

As companies strive to become more customer-centric, most no longer view the contact center as a cost center or a “necessary evil”.

Instead, contact centers are becoming a trusted source of information, delivering critical business insights across the enterprise to improve customer experiences and overall revenues.

But just how much bang does the contact center deliver for its buck? Total cost of ownership enables the contact center to measure this by assessing how many “bucks” they spend on a particular asset.

Understanding this is critical to maximizing contact center investment choices.

What is Total Cost of Ownership (TCO) in Contact Centers? Definition and Formula

TCO culminates the costs of acquiring, implementing, and maintaining a particular asset. Before investing in a solution, calculating this metric enables the contact center to estimate ROI.

The formula for calculating contact center TCO is as follows:

Total Cost of Ownership = Upfront Costs + Fixed Operational Costs + Variable Costs

Let’s dig deeper and assess the three central components of this formula:

  1. Upfront Costs – What are the initial costs of acquiring a new asset? Such charges may include a down payment, implementation expenses, and perhaps an insurance fee.
  2. Fixed Operational Costs – These are recurring expenses needed every month, quarter, or year but are fixed in their value, increasing only incrementally at regular intervals. Software licenses and maintenance costs may fall into this bracket.
  3. Variable Operational Costs – Variable costs make contact center TOC unpredictable, impacting net returns. Emergency support, repair costs, and training costs are common examples.

Finding a Balance Between TCO and Customer Service

It is sometimes tempting to keep TCO down to a minimum, operating the contact center on a threadbare budget to avoid damaging the bottom line. However, this often harms customer service.

Ideally, operations will realize a positive correlation between TCO and critical customer metrics, where every cent spent leads to a corresponding improvement in contact center performance.

As the contact center matures, TCO will become more predictable. Management may then focus on investing in areas where the contact center can enhance CX. These may include:

  • Increasing customer journey insights
  • Adopting a digital-first mindset
  • Balancing human and AI support

By doing so, measuring the TCO of new investments, and using this figure to calculate ROI, contact centers can showcase their value to the broader business and often increase their budgets.

Discover how contact centers can balance human and AI support by reading our article: Re-Humanising the Contact Centre with Help from AI


Artificial IntelligenceKnowledge Management

Share This Post