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Feb 10 2016 Gain-Sharing: The New Model For Application Development – Moving From Transactional Vendor Relationship To A Financially Aligned Partner

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Most technology projects deserve the bad rep they frequently get: late, over budget, and fail to deliver the expected business value  but the vendor still gets paid. The problem stems from the vendor having no other incentive but to ensure they are sufficiently compliant with the work statement. For years, gainsharing or value-based arrangements have been discussed, but very few are ever adopted. Today’s contact center solutions lend themselves well to revisiting this option.

Restating the obvious – live agents are expensive, and unnecessary or low-value calls should be deflected by a self-service IVR whenever possible, without compromising the customer experience. Current IVR development practices utilizing dynamic and intuitive navigation, real-time back-end data integration and proactive customer engagement can dramatically improve the call containment and deflection results. It is not unusual to expect to see containment rates over 80% of certain transactions from well designed IVR’s where many companies today may be seeing results below 30%, and with low customer experience ratings as well.

Incentive Based Project Model

The value is there, as are the metrics to prove it. The challenge is to build the right incentive model for the vendor to share the risk and the rewards of delivering these types of results. As an example, a leading telecommunications company had baseline metrics of a $3.00 average fully loaded cost-per-call, and based on their current call volume, calculated that each 1% improvement in the containment rate would yield approximately 5,000 deflected calls, or $15,000 per month cost avoidance. More than enough upside to get management’s attention.

The typical project definition needs to change as well. The simple build-and-done model won’t work to meet a true gain-sharing objective. The “project” should include a continuum of service, from initial design and deployment, to on-going tuning and enhancement, an approach often referred to as managed application services. This will allow a skilled vendor to iteratively assess grammars, navigation patterns, points of exit, etc. for experience-based improvements beyond the initial design. With the appropriate results-based incentives in place, these ongoing enhancements will not be burdened by frustrating project change requests, rather they will be fueled by one of the greatest motivators, money. Money that comes from the measurable positive results realized by the company, and shared with the vendor, now partner, who delivered it.

While all this sounds so simple and obvious, there is hard barrier stopping most companies from even being able to enter into these types of discussions. One department is burdened with the cost of the solution, while another enjoys the resulting savings. Resolving this, and opening the door for truly dramatic results, requires executive sponsorship from senior management. And this requires courage and conviction on the part of the project champion, and a credible technology partner who passionately shares their commitment for results.