Wow, this year really flew by. I guess we say that every year around this time when we’re faced with changing leaves and pumpkin spice lattes as a reminder that we’re already entering the holiday season. That also means we’re entering budget season.
As enterprises and businesses of all sizes begin planning for their 2022 budget, they are facing a dynamically changing technology landscape that is being driven by new realities, changing priorities, and new needs like increased cloud adoption to support remote work, business continuity, automation, and new technologies that can help drive growth.
Some businesses are flush with capital and want to use that to their advantage, but more often than not they are faced with the need to do more with what they are spending now, or even less. If you find yourself trying to justify additional spending next year on your tech stack, or to find money to make an upgrade, Premier can help you. We will evaluate your needs and desired state, current state, and budget to help you make the case.
But, if you’re going to go into your next budget meeting alone, here are two strategies that can help you achieve your goals.
1. Justifying the spend
When you’re pitching added line items or inflated costs for your budget, the TCO model is your best friend. TCO, Total Cost of Ownership, is a model that accounts for the total cost paid and the return realized, often in the form of soft-dollar savings, increased productivity, or even some intangible assets like brand equity and brand value.
For example, I recently wrote about how Contact Center as a Service (CCaaS) technology can help build brand equity and create the opportunity for more efficient handling of customer service inquiries. For example, let’s say that a software as a service company adopts a new CCaaS solution to help improve customer service and provide omnichannel support. Some assumptions:
An average customer’s annual value (ARPU – average revenue per user) is $1000.
The cost of the new CCaaS solution is $5,000 per month or $60,000 annually.
The customer has 10,000 customers or $10mm in billing per year.
The churn rate is 8% annually, meaning they lose $80,000 in revenue per year.
The average time to resolution through standard phone support is 20 minutes and costs the company $100 in time and overhead.
They field 10 calls a day on average.
Let’s also say that the new CCaaS solution improves the customer experience and gives them more efficient ways to handle calls. Some new assumptions:
Churn is reduced by 5% to 3% total.
Average time to resolution and associate cost is reduced by 20% on average.
Old churn rate: $80,000
New Churn rate: $30,000
= $50,000 savings
Annual cost of handling calls before: $365,000
New annual cost of handling calls: $292,000
= $73,000 total savings
Total annual savings from reduced churn and improved efficiency: $123,000
Total annual cost of CCaaS solution: $50,000
= ($73,000) total cost of ownership, for a 32% return on investment
There are even some more intangible benefits, like:
- Decreased amount of time per case may allow for more volume before having to hire additional resources and the associated facilities and equipment requirement.
- Better and faster handling of cases improves customer experience and increases brand loyalty and customer satisfaction, which improves not only retention but positive word of mouth/brand awareness/social media contagion.
- Mitigate the risk of bad experiences being spread by word of mouth/social media.
2. Find money in the current budget
This is a quite simple approach. There are almost always ways to find savings within your current spend. Here are some of the top places to find them:
a.) Validate your invoiced rates are the rates you’re contracted for. There can be a significant variance, in my estimation it can be as much as 20%. By knowing what you should be charged and what you are being charged, and managing that, you can reduce costs and even get a refund. Although, most providers cap you to going back only 3-6 months of billing so this should be an ongoing process done regularly.
b.) Renegotiate your terms, if you’re out of term. Even if you’re not, if you’ve had the solution in place more than a year or two, chances are the “going rate” has changed. Sometimes so significantly you can even justify breaking a contract and paying a termination fee. By telling your current provider you’re aware the market has changed and you are considering a move, you can likely reduce the rates you pay without the hassle of making a change.
c.) Change your provider. As stated above, the market changes quickly and there are deflationary pressures on prices. They can move so significantly that it makes sense to break a contract early and the cost and hassle of changing providers is worth it. In some cases, your new provider may even pay the termination fee.
d.) Implement new technology. You can often see significant savings, as well as other benefits, by changing your legacy tech to new, next-gen tech. For example, move your MPLS network to SD-WAN. Or migrate your old PBX with the expensive maintenance contract and repair costs to a UCaaS solution.
The best approach is a holistic look at your current state and desired state, and leveraging a combination of both of the strategies above. In either case, it can take some know-how, relationships, and perseverance to get the right outcome. That’s where we can help you. This is what we do day in, day out, and by engaging us you can have your cake and eat it too next year.
Let’s have a conversation about your 2022 budget today! Contact us for a free consultation.