NelsonHall’s latest CMS market analysis focuses on the increasing importance of transformational CMS, whereby a vendor not only takes over the running of a client’s call center processes, but seeks to optimize these processes to achieve the desired business goals of the organization.

In the current market, the need to reduce cost while maintaining or enhancing customer satisfaction is still the primary driver of transformational CMS contracts, but in future we expect to see pure cost take-out give way to revenue generation (currently present in 14% of transformational contracts) as the primary driver.

For now, however, leveraging CMS as a revenue generator may still be some way off, and vendors are looking at a variety of process improvement methods to deliver transformation, including use of lean methodologies, call deflection, hiring based on behavioral characteristics, and improved agent training.

One such example is Serco’s latest win, a large multi-channel transformational CMS award by fashion retailer JD Williams. Under the terms of the contract Serco will acquire control of JD Williams’s Manchester contact center which houses 550 agents (~80% of the company’s CMS resources) in January 2015 for a ten-year period. Services in scope include inbound sales support, billing and multi-channel customer care. Serco will use the client’s legacy systems, implementing its EpiCentre unified channel agent dashboard.

At present, the contact center is at 70% capacity. Serco aims to use the remaining space to house additional clients as well as handle expected further business from JD Williams over the next two years. The potential agent expansion could be ~300 FTEs.

The transformation delivered will focus on process improvements that can be made by leveraging Serco’s experience in managing an online retail catalog for Shop Direct. JD Williams’s online business currently accounts for between 55% and 60% of its revenues, but with process improvement the expectation is that this will reach a ceiling of ~70% over the next two years (with the company’s catalog division still actively supporting older demographics).

In common with most transformation plays in the current market, JD Williams is aiming primarily at removing cost through increased operational and process efficiencies, and a company the size of Serco looks well placed to deliver on high margin transformational CMS contracts such as this.

We expect vendors’ transformational CMS efforts will shift towards benchmark-led frameworks and roadmaps, supported by greater automation. However, the CMS market is still some way behind F&A and HRO, where established transformational frameworks are already in place. Broad-scope BPO vendors are beginning to transition models from these areas, but for now, traditional process improvement remains the gateway to transformation in CMS.

NelsonHall’s latest CMS market analysis report, ‘Targeting Transformational CMS’, is now available, along with a NEAT tool, which enables sourcing managers to assess and compare the performance of vendors offering transformational CMS services.