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Hosted Contact Centers Shake Up the Market

Hosted Contact Centers Shake Up the Market

Hosted service providers offer call centers of all sizes more options than ever. Here’s how to determine if they’re the right choice for you.

By Donna Fluss

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Hosted contact center solutions are beginning to change the dynamics of customer service and sales organizations. By lowering upfront costs, reducing onsite support needs, minimizing implementation burdens and providing high quality offerings, the contact center on demand (CCOD) vendors are leveling the playing field.

Companies and departments of all sizes — small, medium and large — can now acquire feature-rich contact center services that are competitive with the premise-based systems that only larger organizations could afford in the past.

What is CCOD?

In a hosted contact center model, a service provider (often referred to as a network service provider or NSP) offers its customers multi-media and multi-site capabilities, such as automatic call distribution (ACD, call routing and queuing), skill-based routing, interactive voice response (IVR), computer telephony integration (CTI), e-mail response management (ERMs), outbound dialing, recording and many other features through its carrier network and the Web.

The only equipment investments required by end users are Internet Protocol (IP) or circuit-based telephones, a PC with a Web browser and possibly a headset. Some of the hosted solutions also require gateway software at the end user’s site, to support the applications.

CCOD Does Not Equal Outsourcing

CCOD solutions are not the same as outsourcing, although outsourcers are increasingly offering hosted contact center services. In a CCOD model, end users handle their own transactions at their own sites using third-party technology.

While there are many outsourcing business models, outsourcers generally provide the staff and often the hardware and software to respond to customer inquiries/ transactions. Hosting eliminates the need for on-site technology support while giving end users full control and responsibility for managing customers and relationships.

So, what is the value proposition? The promise of current CCOD offerings is a suite of multi-channel, multi-site contact center capabilities with minimal upfront capital outlay and a lower total cost of ownership (TCO). It’s been close to 20 years since Centrex (the first hosted contact center offering) was introduced, but today’s solutions are almost as complete as the leading premise-based systems and are getting better all the time.

The benefits of CCOD are real, but must be balanced against long-term expenses. It’s important for companies considering CCOD to conduct a return on investment analysis to assess the investment’s projected payback, net present value (NPV) and internal rate of return (IRR). Prospects should also undertake a lease vs. buy study to compare the financial impact of renting and purchasing. While the numbers will vary based on many factors, such as length of agreement and number of licenses and seats, in general, if you are going to rent/lease a contact center solution for more than three years, you will have spent more than if you had purchased the solution outright.

However, in the case of contact centers, the burden, complexity and cost of ongoing support demand serious consideration and may skew the decision in favor of the hosted solution. Prospects must address financial and operational challenges and then make the appropriate tradeoffs.

Technology Advantages

CCOD solutions package many contact center applications, such as ACD, IVR, CTI, ERMs and dialing, in one platform. Users can select any number of options to customize their contact center, without the cost and difficulty of integrating multiple disparate systems. However, integration is still required for users that want to tie internal operating systems, such as a customer relationship management (CRM) suite, to a hosted contact center.

A technological differentiator of CCOD that has many advantages is its multi-tenancy capability. While this feature varies by vendor, the most advanced multi-tenant applications allow many companies or departments to run on the same server simultaneously, securely and totally independent of each other. This means that end users can finally centralize management of multiple, geographically dispersed contact centers.

It’s already proven beneficial to government agencies, educational institutions and private enterprise. Multi-tenancy allows NSPs to offer services at a price end users can afford because a single server can be used for many customers.

The CCOD Marketplace

There are two primary vendor categories in the CCOD market. The first consists of the technology providers that build the systems. In the second category are NSPs and outsourcing companies that sell hosted contact center capabilities to end users. There is also a hybrid group that builds its own technology and sells directly to end users. The market is expanding rapidly, with the most significant growth among the NSPs around the world.

CCOD is now a viable alternative to premise-based contact centers for companies of all sizes in all industries. These offerings are compelling, even though they are still evolving and will continue to do so for many years. CCOD alters the market landscape for the traditional contact center infrastructure vendors and end users. Contact center options formerly available only to large organizations are now easily accessible to everyone.