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Contact center software purchases: It’s strictly business

Contact center managers are shifting the discussion of new software away from the on-premises vs. on-demand debate and evaluating software based on traditional business concerns.

When it comes to overhauling the contact center, the long-standing technology debate of on-premises versus on-demand software just isn't relevant anymore. In its place is the challenge for managers to select contact center software that best matches their business needs and delivers the best return on investment (ROI).

"Always start with the business case," said Kate Leggett, a senior analyst at Forrester Research Inc. in Cambridge, Mass. "What is it you need to be successful? Then map it to the vendors that can support the business."

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This process could well take contact center managers to the cloud. But for some companies, it may make sense to continue supporting an on-premises platform if, for example, the environment is highly customized and was bought at a premium. Still others will determine an environment with both on-premises and on-demand applications better fits their business strategy. One scenario could be when a company needs to support a small contact center in a remote location or from a recent acquisition. It could get that site up and running with an on-demand offering in a matter of days, consultants said.

"What happens is you are rarely in a position to make a categorical, binary decision of hosted versus on-premise," said Keith Dawson, principal analyst with Frost & Sullivan in New York.

Instead, call centers are evaluating the typical factors such as cost and ROI, functionality and support that go into a new system purchase.

Contact center technology offers low-cost options

Cost is clearly the big lure to on-demand contact center software. When it comes to upgrading an older on-premises installation, a company may need to scrap it and start over. In these cases, with as few as 100 agents, that price tag could be in the $1 million range for a new on-premises system, said Sheila McGee-Smith, president and principal analyst of McGee-Smith Analytics LLC in Amherst, N.H.

In contrast, contact centers can install on-demand workflow automation software or other applications for monthly fees that can be as little as $10 per seat.

"It really took the recession and frozen capital budgets to get people to really look at this new grouping of [on-demand] vendors," added Donna Fluss, president of DMG Consulting LLC in West Orange, N.J.

Fluss said one of her clients, a retailer, is currently evaluating the choice between on-premises and on-demand software. "They can't afford to pay $100,000 per application, but they can afford to rent it for less than $10 a head on a monthly basis."

However, in other cases, a company may have made recent investments in an on-premises platform and is still waiting to realize the full payback, noted Penny Reynolds, a senior partner at The Call Center School LLC, a training and consulting company is Nashville, Tenn. "You wouldn't be in the best position to go on-demand," she said.

Consultants also note that for larger contact centers, the per-seat monthly fee could become too costly once it hits the several-hundred-agent range. But Drew Kraus, a research vice president at Gartner Inc. in Stamford, Conn., warns that managers need to carefully weigh associated costs when evaluating the on-demand model.

"The ROI calculations are the trickster's tool," Kraus said. "What we are finding is that many organizations are looking at the software costs, but forget the administration costs. If they have personnel in charge of the care and feeding of this environment, and if that goes away by having someone else run the infrastructure, then that can really tip the scales."

Another business driver is time to market. In some cases, companies do not have the time to invest in bringing a new system in-house, a process that can take months, when they can be online with an on-demand application within a few weeks.

Then there is the matter of support. Consultants report that some companies have found the support they receive from on-demand providers can be a notch above their in-house IT group because so many IT groups are so overloaded. Meanwhile, the on-demand vendor is willing to put the time in to win and keep the business.

When a call center needs technical support, "it is about now," McGee-Smith said. "In today's world, your request can go into a queue for IT and it gets prioritized."

Finally, a contact center may need to consider the company's overall business strategy, and if other business segments are moving to the cloud, then it may make sense to follow suit.

Red Herrings or Real Concerns?

When a story surfaces about on-demand technical problems such as the recent news that experienced glitches in delivering its cloud computing services, decision makers get nervous, and rightly so. Here are two key issues to consider:

  • Security. Call center managers may worry that an on-demand provider can't deliver the level of security and reliability that an in-house operation would provide. "One of the inhibitors [for going on-demand] is the perceived security issue," said Drew Kraus of industry research firm Gartner Inc. "When you talk to the providers of SaaS [Software as a Service] solutions, because they know security is an important issue, they overinvest in it. They tend to be better than many enterprises."
  • Customization.  The perception is that on-demand contact center software is "cookie cutter," and cannot be tailored to an individual customer's needs. Consultants suggest on-demand vendors are open to working with customers. "Sure, what you get is what you get," said Donna Fluss, president of DMG Consulting LLC in West Orange, N.J. "I was never happy with what I got, so I always asked for changes," she said, referring to the contact center software she worked with years ago. "The hosted vendors are hungry and they will do what it takes. I will say for a fact there is more R&D [research and development] going on in the hosted market right now."

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