Gosh, I should have seen this report sooner, but what with the Michael Jackson trial, and then Britney announcing her pregnancy, well, things have been hectic here.

According to a recent Frost & Sullivan report, the hosted IP contact center market in Europe, Middle East and Africa is gaining ground among large and small enterprises. Legacy and next-generation carriers are already launching these services in Europe, which is expected to exhibit strong growth by 2007.

Frost & Sullivan finds that this market generated revenues of EUR139.6 million in 2004 and is expected to grow at a compound annual growth rate of 26 per cent to around EUR444.9 million in 2009.

The euros worth $1.28, do the math yourself.

Although the market is still in a formative stage and the technology is novel, the potential therein is huge: as much as 7.9 per cent of the installed base is likely to use hosted IP contact center services in EMEA by 2009, notes Frost & Sullivan Research Analyst Mr. Shomik Banerjee. Ultimately, hosted IP contact center services are expected to emerge as a complementary service to premise-based contact centers.

There have been some large installations in the EMEA region by incumbents and this is expected to initiate a trend among other existing carriers. Incumbents possess significant advantages in terms of their strong brand image and efficient distribution channel, which they can use to market the services effectively and spur growth.

Hosted IP contact centers are particularly attractive to enterprises primarily because outsourcing contact center infrastructure helps shift the burden of technology risk onto the service providers. As well, enterprises can reduce their maintenance and support staff and gain access to newer services at lower costs.

Small and medium enterprises and some very large organizations are expressing keen interest in adopting hosted contact center service offerings. SMEs and informal contact centers are showing a preference for multi-tenant services because of the cost advantage they offer in terms of a partitionable service.

In fact, Frost & Sullivan forecasts multi-tenant hosting to emerge as the most popular service, ahead of all the other offerings in the hosted IP contact center market such as single-tenant services and integrated access, remarks Mr. Banerjee. This is largely due to cost advantages and demand based scalability.

However, the medium and large enterprise segment seems inclined towards single-tenant or dedicated hosted products. Additionally, large enterprises appear to prefer outsourcing their telecom and data communication requirements to a single service provider.

Industry participants face a significant challenge in communicating the value proposition of outsourcing contact center infrastructure to service providers. Participants need to find an effective way of raising awareness about the numerous and innovative offerings available.

Education along with initial success stories are cornerstones towards instilling confidence in the solution, says Mr. Banerjee. Service providers need to develop robust business models with attractive pricing bundles as well as build strong distribution channels, strengthened by adequate expertise, to promote and support the various offerings.

Among major technological trends, the use of open standards and off-the-shelf operating systems has been instrumental in promoting rapid growth of hosted IP contact center services in EMEA while the use of session initiation protocol has promoted interoperability.

The market is also seeing numerous partnerships between small participants in an effort to provide lucrative value propositions. Platform vendors and service providers are attempting to penetrate the large enterprise segment by adding a wide range of features and applications to make their offerings more appealing.

France, the United Kingdom are among the earliest adopters of hosted contact center services in Europe. Several distributed contact centers are evaluating hosted tools in France , UK, and Germany, while all three countries are witnessing a strong demand for multimedia. The United Kingdom also boasts of a huge informal contact center base and many participants have launched virtual contact center services.

David Sims is contributing editor and CRM Alert columnist for TMCnet.