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

Condensed Industry Report, sponsored by Interactive Intelligence

Hosted contact center infrastructure solutions, also referred to as Software-as-a-Service (SaaS (News - Alert)) or Communications-as-a-Service (CaaS), are steadily gaining ground in enterprises of all sizes and in a variety of public and corporate verticals. Hosted solutions are reaching unprecedented levels of customer satisfaction because of the minimal cash outlay required, quick deployments, rapid and quantifiable return on investment, scalability and agility, ongoing investment protection, a reduced maintenance burden, and the opportunity to “try before you buy.” Vendors also continue to expand functionality through product enhancements and improved deployment and integration models.

Internet Protocol (IP) and Session Initiation Protocol (News - Alert) (SIP)-based technologies have additionally eliminated physical communications constraints, empowering enterprises to be more responsive to their customers using the virtual, multi-channel and flexible servicing infrastructures of hosted solutions. Enterprises are looking for ways to leverage these new technologies, and contact center hosting is an ideal, cost-effective fit.

Moreover, the new generation of hosted/CaaS-based contact center infrastructure has overcome the technical and functional limitations of older solutions. Now the leading vendors need to correct the misperceptions that are hindering more widespread adoption of these solutions. DMG’s findings identify the five top misconceptions as:

Concern #1: Hosting is only for small contact centers.

The Reality: Eight years ago when the first hosted contact center infrastructure vendors were looking for funding and sought to explain their value to the market, one of their standard arguments was that this new business model would “democratize the world of the contact center.” In other words, for small and mid-sized organizations that couldn’t afford a premise-based contact center platform, hosting meant they could realize the same benefits as companies that had the financial and IT resources to acquire such a solution and support it on an ongoing basis.

Since then, hosting vendors have continued delivering new servicing capabilities that don’t require small and mid-sized enterprises to compromise on functionality. DMG research shows, in fact, that the typical buyers of these solutions are mid-sized customers, and that the majority of hosted solutions are actually deployed to replace an existing premise-based contact center solution that no longer meets the organization’s needs.

Concern #2: Hosted contact center solutions are functionally inadequate.

The Reality: Just as no two premise-based solutions are alike, neither are the many hosted contact center infrastructure solutions now available — each of which offers its own unique design, architecture and functionality. (Note that some vendors have even built their hosted offerings on premise-based contact center platforms.)

As the market continues evolving, hosted providers are moving toward a common set of capabilities that include call routing and queuing, IVR, dialing, computer telephony integration and recording. At a higher level, a select few vendors have further taken an “all-in-one” approach to add modules for the applications most commonly used by contact centers, such as workforce management, quality assurance, satisfaction surveys, performance management, coaching, and knowledge management. All told, and with various packaging and pricing strategies to choose from, hosted contact center infrastructure providers now offer some of the most competitive and functionally rich solutions in the market.

Concern #3: Hosted contact centers solutions are inflexible and not customizable.

The Reality: Actually, based on DMG’s findings from hosted customer interviews, the opposite is true. In general, hosted end users consider their vendors and solutions to be both flexible and scalable, although there are significant differences among hosted contact center providers (as there are likewise among premise-based competitors). In weighing a hosted solution and vendor, pay particular attention to ease of setting up and modifying the application, and to the vendor’s flexibility in making upgrades. For example, does a vendor enable your IT staff to add users and deploy new IVR services from your end, or do you have to rely on their people to perform such services for you?

Either way, a major advantage that most hosting vendors have over premise-based providers is the ease with which they can offer new functionality — they simply load software and make the new features immediately available. Hosted solutions are also highly scalable, and allow organizations to add and reduce users and functionality as needed to meet cyclical or seasonal volumes and pay only for as much contact center capacity as they use (all of which is often negotiable with hosted vendors, by the way).

Concern #4: Hosted contact center implementations and integrations are more difficult than premise-based initiatives.

The Reality: Few integrations are easy, whether solutions are premise-based or hosted. Fortunately on the hosted side, however, some vendors have built their platforms using technology that’s far more standards-based and open than many older premise-based contact center offerings, which makes integration easier.

Moreover, hosted solution vendors are highly motivated to get their offerings up and running as quickly as possible, since they don’t earn revenue until the system is in production, and especially since the majority of hosted end users have made it clear they chose a hosted offering to avoid an expensive and lengthy implementation. To that end, many hosted vendors offer fixed implementation and integration fees that compare very favorably to the cost of premised-based efforts.

Concern #5: Hosting has a higher total cost of ownership than premise-based solutions.

Also consider that total cost of ownership looks at the cost of an asset or investment over its lifetime, taking into account the purchase price, hardware costs, maintenance and upgrade fees, and the cost of internal and external resources to support the solution overall. While TCO numbers vary for every acquisition, in general, DMG Consulting has found that, in a three-year host vs. buy analysis for a contact center solution, assuming no functional (hardware or software) upgrades, no maintenance fee increase and a minimal IT and business resource requirement, 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 TCO in the end.

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