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

A growing range of increasingly sophisticated applications are ascending to the cloud. Among this ever-growing list are business intelligence, call recording, CRM, CTI, customer support, hiring and training, IVR/speech recognition, recording, routing and predictive dialing, unified communications (UC) and workforce management.

So much so that the cloud, offered by solution developers, OEMs or third party resellers, appears to becoming the norm, supplanting traditional customer-premises software (CPS). The traditional regime of installing and integrating software is slowly becoming part of the contact center past like dropping in, bolting on and wiring up hardware ACDs and IVRs.

Demand for the Cloud

Contact centers are both following the movement and pulling their suppliers to the cloud, driven by need to cut costs and improve service to enhance competitiveness being driven by the downturn and the slow recovery. Here are several observations from industry executives:

*          Bill Patterson, Microsoft Dynamics CRM director of product management, reports that while the majority of customers employ it as CPS, “the fastest growing trend is our cloud services”

*          Jeff Foley, senior marketing manager at Nuance, whose customer base is primarily CPS yet it is experiencing rapid increases in hosted demand with 96 percent growth from 2009 to 2010

*          Steven Kaish, vice president of  product management and marketing at CosmoCom is seeing larger firms going to hosted; it is not just small-medium enterprises or smaller departments that have traditionally sourced from these vendors.

“People are becoming more comfortable with going to cloud/hosted solutions, “says Kaish. “The whole movement to the cloud is trendy; every paper you pick up mentions the cloud.”

*          Jason Alley, solutions marketing manager at Interactive Intelligence (News - Alert), reports that the firm’s communications-as-a-service (CaaS) revenue grew 74 percent from 2009 to 2010 which he says mirror, and even exceed, analyst forecasts.

 “As the word gets out about successful deployments and benefits realized by mainstream contact centers, an increasing number of companies will join the pack,” says Alley.

Pulling the Solutions Upwards

Causing solutions and contact centers to ascend to the cloud are pulling forces. The most powerful of these is IT cost savings, which can be 60-80 percent lower than traditional CPS deployments, reports Kaish.

Cloud applications are more flexible, enabling buy-as-you-go pricing, which aligns solution purchasing with changing business needs, adds Alley. Deployment is also much faster.

To illustrate, Alteva’s (News - Alert) cloud-based UC solution cuts deployment time by 75 percent, management time by 90 percent and total cost of ownership by 25-30 percent over a CPS solution, reports Louis Hayner (News - Alert), the firm’s chief sales officer. The Alteva UC system brings the costs of new systems to $250-$300 per user from $2,000 per user with CPS.

Another key pull is that cloud-hosted solutions enable continuous improvements driven internally and from the experience of other customers. With this there is also no worrying about sourcing the latest version and expending IT resources on upgrades. In some cases the hosted solutions provide superior outcomes to CPS. They can also be less complex to manage. 

These advantages are especially apparent on sophisticated products such as speech recognition. To keep them performing at their highest potential, these systems should be coupled with ongoing tuning and maintenance at the platform and application levels, advises Foley.

Foley says his firms leverage the massive amount of data collected through its Nuance On Demand deployments to improve speech recognition accuracy for every customer application. This network effect translates to up to 30 percent better recognition for Nuance On Demand customers compared to its CPS clientele.

Nuance On Demand includes an always up-to-date integrated solution stack that includes the inbound and outbound IVR platform, speech engine, text-to-speech, natural language understanding, call recording, analytics and tight ACD and CTI integration. According to the firm, this virtual package offers a clear advantage over CPS as it eliminates much of the infrastructure complexity and required systems integration and additional costs.

“The other great advantage with hosting is early access to technologies,” adds Foley. “Nuance’s latest speech technologies are typically made available to hosted customers months before on-premise customers are ready to deploy them. This time gap can translate into significant cost savings as customer applications benefit from higher automation rates and better customer experience.”

The Innovation Push

Applications and customers are being pushed to the cloud by supplier innovations. These are erasing whatever functionality distinction there is between hosted and CPS deployments.

As one example, Microsoft dramatically boosted the scalability in Microsoft Dynamics CRM 2011, which is available hosted or CPS. A recent high-workload test revealed that it could support 150,000 users on a single tenant compared with 50,000 concurrent users in the 2007 version with less a than four millisecond response time; five milliseconds is a blink of the eye.

Microsoft Dynamics CRM 2011 CRM Online provides full cloud development capabilities that allow customers and partners to extend and build custom relationship applications. They can accomplish this, reports Patterson, by deploying custom code, plug-ins and call-outs directly within their CRM Online solution. 

Hosting solution clients can, in some instances, test proposed upgrades themselves before they go live. Parature now lets its customers can explore new upcoming features in a "sandbox" environment.

The contact center products have been modified to ensure that they work well in the hosted environment. For example, when CosmoCom introduced screen recording in 2009 it built its own solution, because those on the market it evaluated did not have a way to operate securely in a truly hosted environment.

“Traditional screen recording solutions cannot be hosted without violating corporate security guidelines,” Kaish points out. “What we did was to design our screen recording capability so that sessions could be initiated on the agents’ PCs out to the network, which is more secure than the traditional method of requiring sessions to be initiated from the network to the PCs.”

Interactive Intelligence’s Alley points to networks, virtual server technology and Web interface innovations that he says will effectively eliminate any remaining functional limitations to the hosted model. These developments, along with the others, are likely to accelerate hosted adoption.

“While minor limitations still exist with hosting, customers now effectively have access to the same functionality, with the same level of management control in the cloud that they are used to in a premise environment,” Alley points out. “More importantly, they have access to proven platforms and partners that have adequately addressed fears associated with security, predictability, and flexibility. Together, this is enabling companies of all sizes to take advantage of the hosted model with minimal risk.”

Is The Climb to The Cloud…Or Down to a CPS Valley?

For some firms the ascent into the cloud may be another way to get over the implementation mountain to a new CPS deployment. Patterson is seeing that in hosted CRM. Today while smaller organizations start and stay in the cloud, medium/larger outfits begin there, such as for the smaller departments, and then as they become comfortable with the applications, migrate their enterprises to CPS.

But why go to CPS after being in the cloud? Patterson thinks firms take that path when they are faced with complex applications, such as in large-scale contact centers where CRM software has to integrate with as many as 15-17 systems. At that level, speed and performance begin to become an issue. “It is not impossible for the cloud-based CRM apps to handle this but it is more difficult to do than with CPS,” he points out.

The biggest holdback to cloud ascension by firms is security concerns–that data is arguably perceived to be at greater risk of being deliberately or accidentally compromised if it is hosted. The firms that are most conservative on this point understandably tend to be in the financial services and healthcare industries, reports CosmoCom; they must also comply with strict standards and laws.

”Security is less of an issue on hosted contact center infrastructure like ACD and IVR when compared with traditional CRM systems, because they do not hold the same level of valuable personal information,”  explains Kaish. “Still, hosted contact center solutions need to also meet strong security requirements.”

By the same token, he points out that one of the world’s largest hosted solutions, one that handles customers’ ID, financial and healthcare information via networks and outside servers is a CRM application: Salesforce.com (News - Alert).

“It is a perception of who is in control,” says Kaish. “When a company is outsourcing to hosters they are relying on someone else and they may not yet be comfortable with that. But if the company looks more deeply at the security issue, they will find that most hosters have security policies that are at least as strict as their own.”

Interactive Intelligence redesigned the architecture in its CaaS offering in 2009 to answer corporate security as concerns, reports Alley. It permits separation between customers’ applications; it allows customers’ to keep the voice paths, their databases and recordings on their private networks–behind the firewalls–to increase security and for compliance.

Microsoft Dynamics’ Patterson sees no logical reason why contact center and CRM applications could not be hosted. “The issue is not technical, we've moved beyond that hurdle in the architecture,” explains Patterson. “It boils down instead to corporate legal policies, loss of control and allowing some degree of dependency on external IT resource that some organizations do not have the comfort factor for.”

Alley points to several reasons why some companies may prefer CPS over hosted. These include IT staff requiring full administrative access and control, the application environment demanding a high degree of custom development and general preferences to purchase solutions outright. They also encompass regulations or corporate policy that forbids hosting certain applications and that the business requires capabilities not currently offered by hosted providers. An example might be certain business process automation applications.

“It really comes down to preference and what model best supports a firm’s corporate strategy, business goals and IT policies,” says Alley.

When To Climb…And Avoiding Falls

So when should contact centers consider going to the cloud? There are two turning points, reports Nuance’s Foley. These are when CPS solutions approach end-of-life and when contact centers are looking to leverage recent infrastructure investments or operational expertise as hosted extensions of their existing CPS tools.

One prevalent method for businesses to begin benefitting from hosting is to consider a hybrid model that integrates components of their existing on-premises equipment with some services deployed in a hosted model, suggests Foley. One example is deploying hosted speech IVR integrated to an on-premise CTI or ACD. 

To avoid stepping into the service abyss when going to the cloud Duke Chung, founder and chief strategy officer at Parature, recommends that contact centers make sure they ask the right questions. These include are there upfront hardware and software costs, do they receive automatic updates and does pricing scale as you go.

“The answers are the tests of a real cloud, multi-tenant provider versus one trying to hitch their wagon to the cloud craze,” Chung points out.

When selecting a hosted provider also consider their reliability both technically and financially.

“[We’re finding] that our customers want bullet-proof systems, uncompromised voice quality and the ability to handle large spikes in traffic,” explains Interactive Intelligence’s Alley. “Customers also want a supplier that is predictable: a company that will be there for them for the long haul. This includes responsiveness, the willingness to share risk, and proven financial stability.”

OEM Versus Third Party Cloud

When going to the cloud there are two key options: OEM-hosted and third-party hosted. In OEM-hosted, the software developers sell the solutions that they developed themselves over the network as a service. Third-party-hosted firms buy the licenses from other vendors, install the software then resell it, typically with other applications in integrated platforms.

There are no overall advantages to either method, reports Steve Kaish (News - Alert), vice president of product management and marketing at CosmoCom. There are facets to consider in both options. OEMs should be experts on their own products, but they need to put quality staff for customer support. Third parties are a step removed from the vendors, but can develop very deep expertise in their suppliers’ products–which becomes easier when there are only one or two vendors.

“Third-party firms can also pull a whole range of services under one big umbrella, “ says Kaish. “Carrier third parties can offer corporate-wide voice/data and video carriage integrated with their hosted call center service bundles.”

Third Party Hosting Advancements

Third parties have been enhancing their hosted platforms. Here are just two examples:

*          InContact’s solution has been expanded to include a new predictive dialer, quality monitoring and screen recording solutions. The screen recording feature can be configured by either the contact center or by inContact’s Professional Services team and changed at anytime to meet regulatory and business requirements

*          LiveOps has added a call flow authoring “studio”, configurable recording, configurable dashboards and call visualization reporting. It offers APIs that enable seamless integrations with third party CRM and WFM applications. There is API support for telephony operations includes agent-to-agent transfer, dial plan and supporting enterprise web callback applications. There is also cross-tenant administration that allows user ID management across discrete contact centers; clients may create users that have access to multiple centers

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The following companies participated in the preparation of this article:

Alteva
www.altevatel.com

CosmoCom
www.cosmocom.com

InContact
www.incontact.com

Interactive Intelligence
www.interactive-intelligence.com

LiveOps
www.liveops.com

Microsoft Dynamics
www.crm.dynamics.com

Nuance
www.nuance.com

Parature
www.parature.com