Why Hosting Is Part of Your Future

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The success of Salesforce.com is not an accident. There is a very good reason that an estimated 87,200 organizations have signed up for this hosted application. The provider of sales force automation software has a huge partner ecosystem and its application architecture facilitates integration.

Hosting, or software as a service (SaaS), is basically an alternative sales and delivery vehicle for applications. Many successful hosting companies, such as Salesforce.com, appreciate the importance of playing well with others. Indeed hosted interactive voice response (IVR) providers have learned this lesson, and it’s one that hosted contact center infrastructure vendors are starting to understand.

Although end users increasingly expect their hosted contact center infrastructure vendor to provide them with all of the related functionality they require—such as recording, quality assurance, and workforce management—they also would like their vendor to function as an open communications platform that eases all integration. In fact, many end users will eschew a hosted infrastructure vendor that makes it difficult and expensive to integrate with critical applications.

As a result, many hosted contact center infrastructure vendors are addressing this shortcoming and facing this technical and philosophical challenge. The vendors that figure out how to deal with these apparent contradictions while consistently delivering an outstanding, reliable, and cost-effective experience will become leaders in the increasingly competitive IT sector.

The figure on the facing page shows the three primary value propositions for hosted contact center infrastructure solutions: decreasing cost, ongoing innovation, and increasing value. Also shown are the different approaches taken by vendors for multitenancy, which is a key element of hosted solutions.

Pros and Cons of Hosted Contact Center Infrastructure Solutions

Financial, operational, technical, and practical arguments all could be made for and against hosting IVRs and contact center infrastructure solutions. The lists of reasons to host or not host (beginning at right) cover most of the discussion points that would help you decide whether hosting is the right approach.

In previous years, enterprises frequently cited security concerns for not making an investment in a hosted contact center infrastructure or IVR solution. While security is a major issue for companies of all sizes, the hosted vendors have worked diligently and made significant investments in this area. The vendors take security to heart because one well-publicized breach could seriously hurt business. Most offer a variety of options to meet the most stringent security standards. And when a hole is found, they are quick to close it.

DMG Consulting recommends that end users create a matrix that includes the points shown in the two lists below when trying to decide whether a hosting/SaaS model is a good fit for their organizations. Weigh and prioritize each of the issues and see which approach is best. (It’s easiest to work with a 100-point scale.) If one side, pro or con, receives the vast majority of points, it would be clear which way to go. However, if an organization is open to both approaches, then we suggest issuing a request for proposal (RFP) to both premises-based and hosted vendors, because both groups have a great deal to offer.

Reasons to Host Contact Center Infrastructure

• cash conservation;
• low start-up costs, with a small initial cash outlay;
• generally lower total cost of ownership;
• relatively small monthly payments that come out of the operating budget instead of the capital budget;
• vendor responsibility for system installation, implementation, and maintenance;
• rapid implementation, with users generally up and running in one day to two weeks with a full-featured implementation;
• cost-effective and feature-rich alternatives;
• solutions can be rightsized for small, midsize, and large contact centers;
• browser-based offerings require little on-site technology;
• vendor releases of new functionality occur more frequently than those of premises-based providers, which could help to achieve a strategic service advantage;
• investment protection because the vendor is responsible for upgrades;
• continuing technology refresh without forklifts or major disruption to the operating environment;
• reduction of IT support costs, eliminating the need for on-premises IT staff and related management overhead (indirect cost allocations);
• elimination of hidden support costs that are generally not counted, e.g., data center real estate (for servers), power, cooling costs, systems administration, database administration, help desk, or change management; 
• ease of scaling up or down;
• handling of virtual and geographically dispersed locations;
• reduction in time and complexity involved in opening additional contact center sites;
• no (or little) incremental network costs or application expertise required to support multiple sites and at-home agents;
• standardized functionality and best practices easily implemented across departments or the entire enterprise;
• option to combine premises-based applications with the hosted contact center solution;
• ease of transition to a premises-based implementation, with minimal exit cost or system impact;
• simplification of disaster recovery/contingency planning, testing, and implementation;
• ability to negotiate a flexible contract because users are not locked into a long-term capital investment; and
• ability to walk away from an implementation without a major financial write-off.

Reasons Not to Host Contact Center Infrastructure

• hosting for an extended period, about three to four years, is likely to cost more than purchasing the technology outright (however, including the cost of system upgrades and operations complicates the financial trade-off);
• terminating a long-term contract before it expires could be costly;
• the client depends completely on the vendor to provide a high level of service reliability;
• not all of the applications are as functionally rich as the leading premises-based offerings;
• prospects must find a service provider that can meet the organization’s requirements and has contact center expertise;
• cost, quality of service, and speed of enhancements are subject to changes in the hosting vendor’s financial position or business strategy;
• the service provider might not be as responsive as an in-house team, and it may take days to make simple changes;
• the hosting vendor might not have the depth of technology expertise to “push the technology envelope” into the new value-added areas required to maintain a competitive service advantage;
• the client depends on the vendor to implement new features as needed;
• the hosting vendor might not be willing to support unique requirements;
• integrating the hosted solution into an existing operating environment could be difficult; and
• data security and backup are no longer under the client enterprise’s direct control.

Final Thoughts

If you have avoided using hosted/SaaS for contact center technology and applications, take a fresh look because this model is the source of much innovation. Consider the hosted/SaaS-based vendors as additional competitors introducing capabilities and alternatives to the market. As is the case with premises-based providers, each vendor, and offering, has its own strengths and weaknesses and should be assessed based on technical and functional value as well as the vendor’s track record.

Donna Fluss is founder and president of DMG Consulting, a provider of contact center and analytics research, market analysis, and consulting services. She can be reached at donna.fluss@dmgconsult.com.

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