This article originally appeared in the January 2011 issue of Customer Interaction Solutions Magazine

In today’s contact center solutions marketplace contact centers have a choice between hosted and premise-licensed delivery. This has naturally raised several important questions that must be answered so that the right method for the right product is selected that best meets your contact center needs. Roe Jones, Product Manager, Interactive Intelligence (News - Alert), takes a hard look at some of these issues.

Compare the benefits and the challenges of hosted and premises-installed solutions.

RJ: Benefits of hosted solutions include lower up-front capital expenditure and “pay-as-you-go” pricing models; easy to provision multiple sites and remote agents; reduced IT maintenance and management costs; faster application deployment and access to upgrades; and flexible scalability to quickly adjust capacity as business needs change. Challenges of hosted solutions include less control over applications, and security and reliability concerns.

Benefits and challenges of premises-based solutions tend to mirror the flip-side of hosted benefits and challenges. Specifically, premises-based benefits tend to be maximum control over applications with a high degree of application customization, and fewer concerns about security and reliability. It’s important to note, however, that over the last couple of years, hosted solution vendors have made great strides in these areas.

For instance, Interactive Intelligence has addressed security, reliability and application control concerns by offering a unique local control VoIP delivery model that enables customers to keep all voice traffic on their networks and record and store all recordings inside their firewalls. Interactive Intelligence also offers scalable server virtualization architecture that provides dedicated servers for increased security, reliability, and application control. Of course, Interactive Intelligence always recommends that buyers conduct a thorough audit of a vendor’s hosted facility (both the infrastructure and policies) to ensure maximum security and redundancy.

Outline the advantages and downsides of OEM-hosted versus third-party hosted solutions

RJ: The advantages of OEM-hosted over third-party solutions are greater flexibility (bug fixes,  new features, migration to premise-based solution, etc.); lower costs by eliminating a third party; and simplified vendor sourcing and management, again, by eliminating a third party. A potential downside of using an OEM-hosted solution might be lack of vendor experience in hosting applications. However, this will vary significantly, so a thorough evaluation of a vendor’s hosting track record is recommended – particularly access to hosted customer references.

What technology applications are best suited for hosting and which ones should be premises-installed? Why?

RJ:   Today, virtually all contact center applications can be delivered as hosted solutions. These include CRM, sales force automation, help desk/tech support, and the traditional contact center features such as IVR, ACD, screen-pop, monitoring/recording, reporting, etc. One consideration for hosting, however, is the degree of application customization and complexity required. For highly customized application needs, a premises-based solution might be better. In addition, should the customer want to eventually migrate from a hosted to a premises-based solution, many vendor solutions will require a complete re-write of applications. Interactive Intelligence recommends that buyers ask if a hosted-to-premises migration is even possible and, if so, what potential application re-writes will be required. If the hosted vendor also offers premises-based solutions, and if they also function as the OEM, then odds are good that this migration is possible with no impact on applications.

Q: For what contact center functions and for what size contact centers and organizations are hosted solutions are ideal? Which ones should consider having their solutions delivered on-premises?

RJ: Hosted solutions make the most sense for customers with any of the following requirements: Short deployment timeframe; minimal capital expenditure; flexible purchasing model that accommodates spikes in interaction volume; cost-effective disaster recovery and business continuity (premises-based buyers can also deploy a DR-only hosted solution); and multi-location and teleworker support.

Some criteria that may make a premises-based solution more desirable are organizations that have very strict regulatory and compliance requirements. In some cases hosted solutions will not meet the needs of organizations that require highly customized applications. Finally, though hosted vendors are rapidly adding sophisticated applications to their offerings, some may still not exist via this delivery model. For instance, business process automation will be difficult, if not impossible, to find via a hosted model due to the degree of integration, customization and complexity required.

In terms of size, many industry analysts report that larger hosted deployments are already beginning to outpace SMB deployments and they expect this trend to continue. This is understandable given that hosted vendors are addressing the reliability and security concerns that are most prevalent among very large organizations. In addition, while cost is a main hosted driver among SMBs, for larger organizations the breadth and depth of applications is a key driver. Many hosted vendors now offer very sophisticated applications for both contact center agents and business users.