Customer Support: Who Pays?

by Andrew Hiles

Customer support, end-user support, the Help Desk, Service Desk, or Contact Center: For simplicity, let’s call it all the Help Desk. Whatever we call it, it needs funding. The question is, who pays? The options are limited:

It is treated as an overhead and not charged
It is treated as an overhead and charged out bundled with the rest of IT
It is charged to the customer

Generally, what comes free is not appreciated and may be abused. There are benefits in charging for the Help Desk, both to the Help Desk itself and to the customer.

The benefits for the Help Desk are:

Staff can be paid out of income
Tools can be bought out of income
Increased income may bring increased staffing levels or pay for advanced tools

From the customer’s perspective:

A service that is charged for is more likely to be defined — customers want to know what they are getting for their money
When cost is exposed, customer expectations become more realistic
If coupled with SLAs, the service then becomes better aligned to business needs and customer requirements
The result is increased customer satisfaction

Having said this, the majority of internal Help Desks still make no charge for their services.

Before establishing costing and charging methods, it makes sense to understand the motives behind charging. Market-led charging asks what the market will bear, considering and putting the price in the context of any competition. Basically, the charge can be as much as possible while achieving and maintaining market share. If there is no (perceived) competition, the charge need bear little relation to cost (as long as it exceeds it!) Supplier-led charging starts with the basis of understanding existing costs, trying to recover them, and (usually) hitting revenue and profit targets by demonstrating added value.

In either case, we need to understand the cost of the support service, so we need to establish a method for identifying this cost. The simplest way is to look at General Ledger (GL) detail from the Finance Department. The Chart of Accounts will identify various areas of spend by department. This should include the Information and Communications Technology department; hopefully, the support area expenses can be identified from this. But that is often the first challenge: the financial detail does not always go down to the level of detail necessary. Figure 1 identifies typical information available from the GL.

Employment Costs	Materials and Services	Equipment	Professional Services
Payroll Costs management Payroll costs Support staff Employee benefits costs Employee Expenses travel Professional development Training costs Conferences Recreational expenses Overheads of employment (to cover cost of senior management, HR, security, subsidized catering, etc.)	Rent (or accommodation cost) Maintenance and repairs Utilities (electricity, water) Materials and services Internal telephone and network costs External telephone and network costs Internet costs Utilization of IT services Software computer supplies Office supplies Copying services Manuals, books, and publications Subscriptions Mail, postage, and shipping costs Memberships and dues Marketing, advertising and promotions Travel tickets, etc. Meetings food and beverages	Telephone, computer and office equipment (depreciation charges) Office furniture (depreciation charges) Proportion of plant if not covered in overheads (depreciation charges; e.g., aircon)	Consultant/ contractor costs

Figure 1: Support costs.

Staff costs for charge-out can be determined as outlined at Figure 2 below:

Begin with ...	This leaves ...
260 working days per employee (52 weeks x five days) 25 days vacation / public holidays, minus 10 days sick or other special leave, minus 5 days training	220 days billable 420 minutes per day (excluding lunch and other breaks) 315 minutes per day (at 75 percent utilization) = 70,875 billable minutes per year.

Figure 2: Staff costs.

The recovery rate can then be calculated by applying total billable time to total costs.

A “sanity check” may be done by analyzing Support workload in various categories and using industry figures on cost of support to check whether charge-out at those rates would recover the cost (refer to figures 3 through 6). Figures vary depending on the survey and from year to year, but the examples should give a broad idea.

Figure 3: Average cost per service institute (Source — Help Desk Institute).

Figure 4: Mean cost of service request (source: Help Desk Institute).

There are a number of call automation software vendors who claim significant savings (for instance, Gartner Group research indicates that 30 percent of support calls are for password resets while a Forrester survey shows that the average technical support call costs $25). Automation of routine requests can result in lower call costs. Cost can also be reduced by use of email rather than telephone, use of VoIP, automating acknowledgements and feedback to customers, use of bulletin boards, allowing users to resolve their own problems through access to the case knowledge base, use of chat rooms, and online help.

Cost	% of Survey Participants
$0	$10 22.2%
$10	$15 20.1%
$15	$20 21.5%
$20	$25 14.6%
> $25	21.25%

Figure 5: Average cost of call (source: SupportSoft and support-industry.com).

Cost	Contact Method
$32	Phone transaction
$9	email
$4	Message board
$7	Chat over Internet
$1	Online

Figure 6: Costs by different contact methods (source: RightNow).

META Group research indicates that Support calls average 1.75 times the number of users per month. If you have your own statistics, it would be better to use them but, in their absence, at least the META Group statistic will give a ballpark figure.

A couple of other research statistics may also help to put your Help Desk into a more general context (or perhaps to add confusion).

Help Desk 2000 reported that the cost per call for 75 percent of organizations should be around $18.
A Hackett Benchmarking & Research survey found that top quartile Call Centers handle 2.5 percent calls to every one by an average call center. The cost per contact for first quartile Call Centers was $4.73 compared to $14.73 for average Call Centers.

In our experience, call costs come down to a few key factors:

The complexity of the infrastructure and hence often the complexity of the problems and the longer the time they take to resolve.
The value of the service and of the customer to the organization — the higher the value, the greater the impact of failure and the more it is worth investing in support.
The frequency of change and the number of users and hence the volume of calls.
The rate of staff turnover both of the Help Desk and in end-user areas.
The level and quality of automation supporting the Help Desk.

Charging Options

Options for charging include:

A set-up fee
An annual or monthly fixed fee per user
A fixed fee service contract (maybe different tariffs, e.g., Bronze, Silver, Gold)
A departmental charge based on headcount, the number of user IDs, or the number of PCs or terminals within the department
A charge per Help Desk call
A charge per Help Desk call based on length of call
A “forum” fee, depending on the topics or services to which the customer wishes to subscribe
Charging at an hourly rate for the call and resolution time
A charge bundled with maintenance or warranty
Line charges using a “customer pays” telephone service

These are not necessarily mutually exclusive. Although we have seen all these in use, commercial Help Desks tend to favor forum fees, fixed fees, or line charges. Internal Help Desks favor fixed fees per user.

Some services remain free, and the Internet is a fruitful source of information, advice and vendor solutions to Frequently Asked Questions about their products.

Our advice, if moving from “free” to “fee” is:

Give plenty of notice.
Start by advising what costs would be if charging were to be implemented.
Then bite the bullet! If the Help Desk has a value to them, customers will pay for it.

One example of charging is the United States Environmental Agency. Some years ago, they were budget constricted and the department decided to introduce a charge of $300 per user per year. Within four years, their customer base grew from less than 1,000 to about 3,000. They were able to maintain — and even improve — on the ratio of support staff to users, with the numbers of support staff growing from nine to 60, with 30 satellite staff.

The U.S. Environmental Agency identified the following keys to success:

Gain management support
Keep people informed
Create an annual SLA “contract”
Define service levels and deliver against them
Keep it simple
Encourage customer feedback
Re-evaluate services annually.

While this worked for them, unless their support resulted in overall savings for the agency, the cost of their staff was ultimately born as an extra charge on the customer. For a public sector Help Desk, increasing staff ultimately either bites into the operational budgets of the mission-achieving functions or results in higher costs to the taxpayer. In cases in which the Help Desk is an internal service, increasing staff ultimately eats away at the profitability of the organization or has to be passed on to its customers. For every $100,000 spent on the Help Desk, the enterprise typically has to increase turnover by up to $1,000,000 to cover the overhead.

Incidentally, the U.S. Environmental Agency has probably the best slogan for a Help Desk: it is “Under-Promise and Over-Achieve.”

Andrew Hiles is a director of the Kingswell International, consultants in service management and customer-supplier relationships.

He is the author of the CD Help Desk Framework and co-author of the book Creating a Customer-Focused Help Desk: How to Win and Keep Your Customers, published by Rothstein Associates, Inc. You can read more about Andrew and his work a www.kingswell.net.

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