Part of SearchCRM.com's Call Center Trend Watch guide
Hosted applications have opened a new frontier for contact center managers, beyond expensive premise-based systems. Functionally rich on-demand solutions eliminate the need for large up-front investments and are available on a monthly basis with relatively little risk. The new generation of hosted offerings provides most of the systems and applications needed to operate and manage a world-class contact center. Hosted options extend into contact center infrastructure, dialing, recording, quality management, speech analytics, surveying, coaching, e-learning, workforce management, e-service suites, email response management, knowledge management, customer service and support and more. These offerings will have a major impact on market dynamics and the decision-making process for contact center investments. DMG Consulting LLC predicts that by the end of 2007, 20% to 30% of all new contact center seats will be hosted.
Pros and cons of hosted contact center applications
Contact center managers considering purchasing a new system should certainly explore the hosted option, but they must be aware of the trade-offs. There are both pros and cons to on-demand contact centers.
The pros include:
1. Low start-up cost, small initial cash outlay.
2. Generally lower total cost of ownership.
3. Relatively small monthly payments that come out of the operating budget instead of the capital budget.
4. Vendors are responsible for system installation, implementation and ongoing maintenance.
5. Rapid start-up; users are generally up and running quickly with full-featured implementation.
6. Cost-effective and feature-rich support for small to midsized businesses (SMBs).
7. Many browser-based offerings that require little on-site technology.
8. Provides investment protection -- vendors are responsible for keeping their solutions up-to-date. (The vendor assumes the risk.)
9. Ongoing technology updates are done without forklift replacements or a major disruption to the operating environment.
10. Few in-house technical resources are required to support the applications.
11. Ease of scaling up and down.
12. No network costs or application expertise required to support multiple sites, branch offices or at-home agents.
13. Standardized functionality and best practices are easily implemented across departments or the entire enterprise.
14. The option to combine premise-based and hosted offerings.
15. Ease of transition to a premise-based implementation, with minimal financial or system impact.
16. Simplification of contingency planning requirements.
17. Ability to walk away from implementation without a big financial write-off.
Some cons to consider are:
1. Hosting for an extended period of time, approximately three to four years, is likely to cost more than purchasing the technology outright. (However, if the cost of a system upgrade is added, it alters the financial trade-off.)
2. It may be costly to terminate a long-term contract before it expires.
3. The client depends completely upon the vendor to provide a high level of service reliability.
4. Not all of the applications are as functionally rich as the leading premise-based offerings.
5. Prospects must find a service provider who is capable of meeting the organization's requirements.
6. Quality of service, per-seat cost and speed of enhancements are subject to changes in the hosting vendor's financial position or business strategy.
7. The service provider may not be as responsive as an in-house team, and it may take days to make simple changes.
8. The hosting vendor may not have the depth of technology expertise needed to "push the technology envelope" into new value-added areas in order to maintain a competitive service advantage.
9. The client depends on the vendor to implement new features as needed.
10. The hosting vendor may not be willing to support unique requirements.
11. It may be challenging to integrate the hosted solution into the existing operating environment.
12. Data security and backup are no longer under the client enterprise's direct control.
Hosting, also known as on-demand or Software as a Service (SaaS), represents a cost-effective alternative to premise-based offerings. Hosting has been available to contact centers for more than 20 years, since the days of CENTREX. But today, end users who choose hosted solutions or are forced to host by financial constraints do not have to sacrifice service quality or functionality. Over the next five years, expect to see many new entrants into the hosted market. Some will be stand-alone vendors, but many premise-based solution providers will also realize that they need a hosted offering to protect their customer and revenue base. The great news is that hosting has expanded the competitive field, giving end users a wide selection of compelling options at affordable prices.
About the author
Donna Fluss is the founder and principal of DMG Consulting LLC, a firm specializing in customer-focused business strategy, operations and technology services for Global 2000 and emerging companies. Ms. Fluss is a recognized thought leader and innovator in CRM, contact center and real-time analytics. For over 23 years, she has helped end users build world-class differentiated contact centers and vendors develop high-value solutions for the market. She is the author of the book, "The Real-Time Contact Center" and many leading industry reports, including the 2006 Speech Analytics Market Report and the annual Quality Management/Liability Recording Product and Market Report.