Call Center Management Feature Article
August 28, 2010
Hosted vs. On-Premises Call Center Software: Which Delivers Better TCO?
By Patrick Barnard, Group Managing Editor, TMCnet
While it’s true that cloud-based applications for the call center have become increasingly popular – it’s probably safe to say that more than half of all call centers now use some form of managed service software – there remains those companies which are resistant to giving up “local control” over their call center applications. Many of them equate migration to cloud-based applications to giving up control over the management and performance the call center IT environment.
As we learned in the previous articles in this five-part series, there’s actually some major misconceptions still floating around out there in the business world with regard to what cloud-based applications can and cannot do, when compared to on-premises systems. A recent white paper from DMG Consulting, sponsored by Interactive Intelligence (News - Alert), dispels some of the more common ones. Although the white paper is focused on all-in-one call center solutions that bundle all the core call center applications on a single platform, the same "misconceptions" can also apply to standalone "best-of-breed" solutions, including workforce management software.
As we covered in part one of this series, one of the more common misconceptions is that cloud-based call center solutions are “just for the little guys.” As we learned in that article, enterprises are making increasing use of cloud-based call center solutions as well, and have just as much, if not even more, to gain from making the migration.
In part two of this series we dispelled yet another common misconception: That cloud-based call center software lacks features and capabilities when compared to on-premises systems. We learned that most cloud-based systems deliver the same features and capabilities as their on-premises contemporaries – and if you think about it, why wouldn’t they?
In part three we defrayed yet another misconception – that cloud-based call center software lacks flexibility. In fact, it can be argued that today’s hosted offering are many times more flexible that premises-based systems.
And in part four we tackled yet another common misconception -- that cloud-based call center applications are more difficult to integrate with premises-based or legacy solutions. As the white paper points out, hosted solutions providers are “doing a very good job of keeping their implementation and integration costs down,” with many now offering fixed implementation and integration fees “that compare very favorably to the cost of premises-based efforts.”This week we’ll defray the last and final misconception -- and this is a big one -- that “hosting has a higher total cost of ownership than premises-based solutions.”
One of the biggest reasons business decision makers shy away from cloud-based or managed services is that they fear they will end up costing more in the long run, compared to investing in a premises- or “hardware-based” system. The comparison is not too unlike leasing a car versus buying one: If you lease a car you will always have a monthly payment, forever. But if you buy a car, and but the right one the first time, one that will last for the next ten years (five years past when you’re done paying off the loan), and it will serve your needs perfectly during those entire ten years, then you can extend the lifetime of your investment.
The downside though actually lies in the previous statement: Will that car you bought in a single huge cash payment REALLY meet your needs for the next ten years? Will you be embarrassed to be seen driving it in ten years? Will you competitors, employees, or worse, customers, laugh at you for driving it? Will it be as fuel efficient as the newer cars on the road? Will it “integrate” easily with newer automotive technologies? And most importantly, what will the cost of maintenance be on it over that ten year period?
This is the same reason why – as the white paper points out – that so many “chief financial officers prefer to invest in hosted (call center) solutions rather than purchasing licenses for systems and applications.”
“Hosted solutions require no capital investment, no or low implementation and integration fees, payments that scale in line with business activity, no support costs, limited risk and obligations, and ongoing investment protection (no need to pay for upgrades),” the white paper states. “Total cost of ownership (TCO) looks at the cost of an asset or investment over its lifetime. It takes into account the purchase price, cost of internal and external resources to support the solution, hardware costs, maintenance, and upgrade fees.”
While TCO varies from implementation to implementation, the white paper finds “that if an enterprise were to conduct a three-year host vs. buy analysis for a contact center solution, assuming no functional (hardware or software) upgrades, the maintenance fee would not increase; where minimal IT and business resources are required to manage the solution, purchasing looks to be less expensive than hosting.”
“However, if the calculation includes the cost of upgrades and a significant amount of internal resources needed to support a premise-based solution, the hosted alternative will often have a lower total cost of ownership,” it adds.
Patrick Barnard is Group Managing Editor, TMCnet, focusing mainly on call and contact center technologies. He also compiles and regularly contributes to TMCnet e-Newsletters in the areas of robotics, IT and customer interaction solutions. To read more of Patrick's articles, please visit his columnist page.
Edited by Patrick Barnard