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

If contact center managers are the centers’ professional drivers, then their vehicles are the IVR/speech recognition, dialing and outbound solutions, for these are the technologies that move the centers forward. And just as organizations have shifted from owning to leasing vehicles, as they have with the buildings that house contact centers, more are doing likewise with these key solutions through leasing them, specifically cloud hosting.

Ashwin Iyer, program director for Frost & Sullivan's (News - Alert) Contact Center practice, reports that the North American combined contact center hosted market is $1.3 billion annually. Of this, hosted IVR takes up about $600 million, and routing, chat and outbound contact plus quality monitoring, workforce management and analytics account for the rest. And hosted demand is growing twice as fast as that for their premise counterparts.

Mariann McDonough, chief marketing officer for inContact is seeing this growth. Her firm is beating out premise players in more than 50 percent of opportunities.

“In fact, we’re seeing that more of the decisionmakers are demanding that a hosted solution be among the options in the early phases of the process,” says McDonough.

The Hosted Benefits and Drivers

According to Iyer, the principal benefits of hosted IVR, dialing and routing are cost savings in licenses, installation, integration, maintenance and support and in upgrades. Other key advantages include increased flexibility, scalability and business agility. For example, the go-live time with hosted speech rec is one to three months as compared with six to 12 months for on-premises deployments.

Many hosted offerings have also become quite sophisticated. To better serve VIP customers, Contactual’s multichannel ACD routing provides service level optimization that aligns contact priority to specific service level agreements and with appropriately-experienced agents. LiveOps’s call flow authoring studio application enables administrators or business users to streamline the inbound call process and with this, shorten overall implementation time and cost.

Moreover, many companies’ on-premises IVR, dialing and routing products that were acquired prior to the economic downturn are now reaching the end of their lifecycles and are becoming obsolete. They often do not handle newer channels like chat or support applications like alerts and analytics for the increasingly popular automated outbound notifications.

Now that money is slowly being freed up, firms that did not have the resources to replace these tools are considering the hosted option, reports Iyer. Hosting permits gradual and affordable phasing in of newer functionalities on legacy systems without rip-and-replace.

“Companies had tested hosted at the beginning of the slowdown and found that it works well and have realized the benefits,” explains Iyer. “They would now rather use the capital for other IT investments. Managing customer relationships should be their focus, not managing the technology.”

Bruce Pollock, vice president of strategic growth and planning at West Interactive (News - Alert) reported that many companies are now faced with “forklift upgrade” scenarios; they need to undertake contact center transformations that encompass new inbound and outbound technologies. Yet they lack the justifiable capital to purchase and the internal IT/technology resources to install/integrate and support them.

“Thus, some ‘business teams’ at enterprises are turning to third party providers to help in designing, hosting, deploying and managing their applications – in other words, to help them ‘move to the cloud’, so to speak,” explained Pollock.

One of many such companies realizing the hosted benefit is Vivint, one of the U.S.’s largest home automation companies. After deploying the Five9 (News - Alert) Virtual Call Center that replaced premise-based technology for outbound telesales and telemarketing, it significantly increased its agent workforce and their productivity and sales while reducing costs. The Five9 solution enables Vivint to manage its leads more effectively by permitting agents to determine when the system dials or redials phone numbers based on call results.

“The deployment at Vivint is an example of the capability of cloud-based call centers to enable companies to reduce costs, increase sales productivity and focus on their core business,” says Jim Dvorkin, CTO of Five9. “Our clients consistently increase productivity by up to 300 percent; business results like that can really be a game-changer for a company.”

Is Hosted Only For SMBs/Small Contact Centers?

Hosting has proven popular for smaller centers and operations, enabling them to stretch their resources. Yet it is with the larger contact centers where hosted delivery generates the greatest ROI, Iyer points out. His firm’s data shows that while over a three year period, a 100-seat contact center could save 42 percent with hosting, a 500-seat contact center would gain 58 percent.The underlying reason is economies of scale. Hosting spreads costs over many more customers.

“The more the work involved and the bigger the installations the higher the benefits,” says Iyer. “Hosted solutions are mature and they can scale to multiple sites onshore and offshore.”

InContact’s McDonough concurs. The size of the contact centers purchasing her firm’s hosted software has grown substantially quarter over quarter.

“This is no longer a solution just for small contact centers,” says McDonough. “It’s a viable solution for large enterprise contact centers and contact centers that have forecasted substantial growth.”

Ben Navon, founder, president and CEO of Optimized Business, reports the shift initially started with small firms with limited budgets who jumped to hosted solutions and dialing in the cloud.

“Now medium and large sized companies are learning to trust the hosted solutions, which assists them in minimizing their IT efforts and they benefit from the features available on the cloud,” says Navon.

Chris Bohlin, senior product manager of Voice Communications at SoundBite Communications (News - Alert), says his company offers a hosted multichannel dialing solution that it is now building out and will allow organizations to replace their on-premise investments entirely. 

“Surprisingly, we see many large-sized organizations still relying on agents manually dialing a phone number,” reports Bohlin. “They're simply not taking advantage of the technology available to them. This is creating some of our biggest greenfield opportunities.”

Pricing, Stability and Security

Hosted IVR, dialing and routing are becoming more affordable. The price points have been declining rapidly for the past couple of years, reports Iyer. A full-suite suite ACD, IVR, outbound and chat with call recording platform that would cover 100-250 seats would cost $200 per seat/month in 2008-2009. Today that is running to $150 seat/month, 30-40 percent less.

Hosted solutions have become much more reliable and secure to where these issues are beginning to fade away although they will not disappear completely. Firms are providing network operations centers (NOCs), backup and redundant servers and power and connectivity. Standards like PCI (News - Alert) and SAS70, solutions like locked-down desktops and compliance with regulations, plus options like having the data housed on premises while the applications are hosted are addressing them.

While there have been well-publicized cloud outages, like Amazon’s, such events are unlikely to be replicated in the contact center environment. Tim McCurry, USAN’s marketing director explains that Amazon utilizes virtual machines within multiple availability zones in multiple regions. Resources are allocated as needed and shared in a given zone. Therefore, a problem in one zone can lead to a catastrophic systemwide failure. 

“In most contact center hosting environments, multi-node configurations in geographically dispersed data centers are totally independent and isolated from potential failures at other locations,” explains McCurry. “There is load balancing among sites but no resource contention. In other words, a failure in one location will not affect other locations and traffic will be re-routed automatically to other sites until the failure has been corrected and the site is back online.”

Navon points out that the probability of hosted solutions going down versus on-premises systems and connections going down are much lower. He recommends having fallback configurations just in case.

“These concerns are and will probably always be there,” says Navon. “When you use a hosted solution, you are in the hands of your provider.”

These reliability and security attributes do not extend to all hosting providers. McCurry reports that some of the newer entrants do cater to more price-sensitive customers with less robust and secure platforms than those of the more experienced providers.  

“When selecting hosted solutions firms need to look under the hood,” advises Iyer. “There are hosting providers that provide enterprise-class security. You get what you pay for.”

BPO firms that offer hosted services like TeleTech are customers of its own technology hosting services says Tina Valdez, vice president of on demand operations. Her firm got in to the hosting business as a result of its contact center practice and the advanced technologies it needed to stay ahead of the competition.

“If the services are unavailable or cannot pass security audits, then not only are our hosted clients in a world of hurt, but our own agents in nearly 70 centers and TeleTech@Home home-based agents across the globe are unproductive or at risk of penalty,” explains Valdez.  

Why Stay With On-Premises?

With all the advantages of cloud/hosted IVR, dialing and routing are there any advantages on saying on-premises? There are three related answers: (1) existing operations’ stability (2) satisfaction with the existing solutions and (3) company culture. This last one is critical. If one’s company does not have the infrastructure, such as procurement practices, metrics-driven performance and mindset to make partnering with a cloud provider a success, it will not work.

“The cloud can bring the flexibility to handle seasonal volumes, to try new technologies and to change your cost structure,” says Valdez. “As a potential client, you need to be prepared to know what to ask for, how to ask for it and how to hold your partner accountable for your contact center’s results.”