A Bias Towards Hosted Call Centers

Honestly, I have no particular horse in the race when it comes to hosted vs. premise-based solutions. My recommendation of one over the other would come from evaluating the business need and making a decision based on that. But there seems to be a bias for this model as evidenced by pro-hosting articles and research like this one that only refer to the hosted option, and repeat, ad nauseam, the same old benefits: lowered up-front cost and minimized system maintenance.

Now, those benefits are nothing to sneeze at, but to say the hosted option always costs less to start-up is not necessarily true. Hosting can be a more expensive option!

I think it was in the movie Fight Club that actor Edward Norton said, "On a long enough time line, the survival rate for everyone drops to zero." Similarly, given enough time (a year, maybe two) hosted options exceed the cost of premise-based solutions. Well, not always - but it does happen!

So let me reiterate. I'm not against hosting. I'm for it, when the business need determines it. But to not even mention premise solutions in such an article, I think demonstrates a bias towards one method over the other.

Call Centers: Hosted or On-Premise

In an article about hosted or on-premise call centers, Cindy Waxer at InsideCRM posed a handful of considerations for comparing the two methods.

While Cindy does a decent job of laying out the pros for each type of call center solution, there are some additional advantages to a premise-based solution that are not mentioned in her article, and call center managers should seriously consider these when weighing options.

1. Premise-based solutions do, in fact, typically carry a higher up-front investment, and therefore companies who go this route can avoid the capital expenditure. However, the purchase of a premise-based system allows your company to take advantage of depreciation of such an asset, which hosted models do not provide.


2. For small companies, Section 179 of the US tax code allows those small business owners - who acquire equipment for their business - to deduct the cost of such hardware in a single business year rather than over time. Companies that spend less than $450,000 a year on qualified equipment can write off a certain amount in the year in which the equipment purchase is made.

3. Premise-based solution providers can often offer leasing options, allowing the company to stretch payment over time and negating the up-front cost concern.

4. Ongoing maintenance and upgrade costs for hosted solutions can add-up over time, and can ultimately result in costing more - sometimes significantly more - than a premise-based solution.

So, while hosted options are certainly less expensive up-front, time can negate this benefit.

Call Center Vendor Checklist

Here are but a few useful tips to consider when purchasing contact center software:

• Carefully consider the differences between hosted and on-premise solutions. Each has their own merits depending on the business need, but dig deeper than the prevailing hype. Conventional wisdom seems to be that hosted solutions are attractive due to the supposed low-cost, up-front investment. However, when calculating the total cost of ownership, on-premise solutions can be more cost-effective investments than hosted offerings—sometimes even as quickly as within the first or second years of ownership.
• Consider purchasing a call center software solution that allows you the ability to establish integrations between your dialer and other, existing third-party applications or custom, internal applications—without the purchase of additional software and equipment.
• Purchase a software solution that provides you, in a single license, all of the functionality you need to sufficiently operate your contact center. Pay-per application (agent applications, supervisor applications, etc.) can become cost prohibitive.
• Make sure your call center software vendor offers free subsequent software upgrades or otherwise does not force you to upgrade to (and pay for) future releases.
• Seriously consider the fact that many call center software vendors offer “bolted-on” systems with disparate products that were acquired through mergers. Holistic software offerings may represent the better bet since they were designed, from the ground-up, to work together harmoniously and don’t require complex workarounds, proprietary APIs, and additional professional services expertise to implement.

On-Premise vs. Hosted Technologies for the Contact Center

Software as a Service (SaaS) is all the rage these days mostly because of the purported cost-savings and scalability aspects of contact center technologies. In my opinion, there are several SaaS contact center solutions that make perfect sense for any size call center: speech analytics (Nexidia is first on my list) , CRM (think salesforce.com, Siebel et al) are a few that come to mind.

But the core components of the contact center—the predictive dialer (outbound) and the ACD (inbound)—are critical tools that should remain on-premise because they are better suited for systems integrations and are less expensive than hosting options—with a few exceptions.

Existing centers that already have invested in facilities and infrastructure may be able to benefit from the hosted model when they need to add more seats in busy, seasonal peaks and dial-down after the rush. Brand new contact centers, on the other hand—those who are in start-up mode and don't yet have facilities and infrastructure—should be diligent in their consideration when comparing SaaS vs. on-premise call center technologies. Hosted solutions are positioned as cost-effective alternatives to premise solutions, but that's simply not always true.

Just ask CRM expert Steve Hayes, President and Co-Founder of eVergance, who stated a similar belief in his SearchCRM.com post comparing SaaS vs. on-premise applications (Note: you have to be logged in to SearchCRM.com to read this article - but registration is free)

In case you decide against subscribing to SearchCRM.com, here's what Steve said:

"If you already have an established call center systems infrastructure, I don't believe there is anything unique about SaaS offerings that would make delivering self service any easier. In fact, you may be better off with more specialized on-premise applications... These enterprise-grade packages would better support your integration requirements and would provide more flexibility in working with disparate content sources."

Granted, Steve is talking about self-service applications with a focus on CRM, as he is a CRM expert and consultant, but the message is the same: some applications are better suited for SaaS delivery than others.

The real skinny is this: if your contact center needs to integrate with back-office systems or third party applications (think green screens, AS400s, or anything outside your four walls), then an on-premise contact center is the only way to go. And furthermore, it is a complete untruth that hosted options cost less than on-premise systems.

Don't believe me? I'll post more about this soon, and offer some pricing examples, that will debunk the myth about supposedly lower cost hosting options (other than those I mention above) as opposed the more expensive (not!) on-premise option.

Some Pros and Cons About Virtual or Hosted Contact Centers

Virtual contact centers, also known as hosted contact centers, are being considered by more and more companies these days - either as replacement systems, seasonal/overflow solutions, or as a temporary solution while migrating to an on-premise platform.

Decision-makers are attracted to the hosted model for very good reasons, a few of which are described here.

First and foremost, Hosted solutions don't have the same up-front investment required by on-premise systems. Monthly payments ease the strain on cash flow, and you're only paying for what you need. The virtual option appeals to small businesses because of the ability to avoid protracted periods of time installing, testing and training.

A second key reason for considering a virtual solution is independence from IT. Because it is not uncommon for an adversarial relationship to exist between business and IT personnel, the idea of jobbing out IT's involvement could mean quicker turnaround and less operational headaches and contractual SLAs to hold over the head of the hosting service.

The virtual contact center is on the rise for these and many more reasons. And, in my opinion, the hosted model is a smart way to go - if it suits the business need. There are plenty of reasons why an on-premise solution works best.

I'll address each of these in my next post.

Until then, peace.