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 Additional Insight Into ContactBabel's US Contact Center Operational Review

In "The US Contact Center Operational Review", a free study of over 200 contact center operations carried out by ContactBabel in association with the American Teleservices Association (ATA), they report some interesting reasons why outsourcers are, or are not, adopting hosted vs. premise-based solutions.

Drivers for adopting hosted solution
According to the report, the main drivers for adopting a hosted solution are:

...decreased capital expenditure that such a model brings, as well as the possibility of increasing functionality quickly and cost-effectively, allowing them to try new applications without having to commit massive resources of time and money. More than half of respondents report that they strongly feel that hosted solutions can provide these two advantages.

The report also indicates that other drivers for hosted solutions include managing call fluctuations, reducing ongoing costs and saving on technical support costs.

Concerns about adopting a hosted solution
Reason for concern, according to survey participants, in adopting a hosted solution included 1). a lack of justification for replacing an existing system and 2). the loss of control as it related to getting problems fixed quickly.

I tend to agree with Contact Babel on all of these points, but a glaring omission in their report, as far as reasons NOT to adopt a hosted solution, have to do with inflexibility for integration.

Increasingly contact centers have to connect with multiple and numerous disparate systems, both internal and external to their enterprise. Once you've hosted your contact center capabilities, you no longer have direct, immediate access to the architecture that must be exposed in order to facilitate integrations with mission-critical systems like CRM packages, ERP systems, and a whole host of other business applications and systems that play an integral part in every interaction.

I completely understand a contact center's need to manage and reduce costs and to expand functionality quickly and selectively based on customer demand and seasonality. And I am a fan of the SaaS model when appropriate. But it's important to keep in mind that, because the contact center is becoming more and more a major part of the enterprise and thus requires comprehensive integration into the rest of the business, the ability to achieve integrations should be as lofty a consideration as price.

Make sure your contact center solution provider can give you the best of all worlds. Many vendors offer leasing options for premise-based systems to create the "feel" of a hosted solution. Large up-front capital investments can be repurposed as monthly payment that prevent cash flow crunches while enabling the scalability for connectivity that your center will undoubtedly need.

The report, created in association with ATA (The American Teleservices Association) is entirely free and can be downloaded from www.contactbabel.com.

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.