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Hosted Contact Centres are Ready for Prime Time

Hosted Contact Centres are Ready for Prime Time

Hosted Contact Centres are Ready for Prime Time

By Donna Fluss
InfoQuorum / TelCall Magazine

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Hosted contact centre solutions are capturing the interest of IT and contact centre managers around the world with their unique value proposition. All organisations — carriers, outsourcers, enterprises and governments — considering either new investments or upgrades to their existing contact centre infrastructure should read this article. Hosted contact centre offerings are altering the market dynamic and redefining the rules for contact centre investments.

The entry of vendors into the hosted contact centre market is a response to growing demand from carriers and service providers around the world for hosted contact centre solutions. The next few years will bring hosted contact centre customers increased value, as technology vendors and network service providers offer increasingly feature-rich, architecturally strong and dependable multi-tenant solutions with quantifiable benefits. DMG Consulting LLC predicts that by 2007, 20 to 30 per cent of all new contact centre seats will be hosted.

Hosted contact centre solutions have been on the market for close to nine years, but adoption began in earnest in 2004. When hosted contact centre solutions were first introduced in the mid-1990s, they were met with an appropriate level of skepticism, as were most hosted applications. Market acceptance of internet protocol (IP)-based contact centre technology and the growing need for flexible, multi-site solutions are pushing companies to look for cost effective alternatives to premise-based offerings. Product enhancements, improvements in the hosting business model and proven results are now attracting the attention of end users in the public and private sectors, companies large and small around the world.

It started with CENTREX

The history of the hosted contact centre market dates back more than twenty years to the CENTREX service, which is still being offered today. This hosted private business exchange (PBX) offering includes rudimentary automatic call distribution (ACD) functionality that gives companies basic call queuing and routing capabilities. The primary attractions of CENTREX were its ease of deployment and its elimination of the need for a dedicated technical staff to support the switch. Users simply needed telephones and had to explain how they wanted their calls routed within their shop.

CENTREX was fine for user organisations that required only limited call centre capabilities. The only choice for companies that needed more advanced call routing and queuing features was to upgrade to a premise-based call centre system, if they wanted to continue to handle these functions in-house. As many small and mid-size companies or departments within larger companies did not have a technical staff to support premise-based systems, moving beyond CENTREX presented technical and staffing challenges, aside from the expense, which often exceeded their budgets.

While some companies invested in premise-based call centre systems, they often had to compromise functionality to control the cost. At a minimum price of (US) $2000 to $5000 per seat for a functionally-rich call centre solution, something had to give, and it was often advanced skill-based routing, computer telephony integration (CTI), recording or other related capabilities. Companies didn’t want to compromise, but didn’t have a lot of alternatives. Reasonably priced call centre systems were available as an option on a PBX, which offered a broader range of capabilities and flexibility than CENTREX, or with plain old telephone systems (POTS).

Premise-Based vs. Hosted

Contact Centre Solutions
Companies now have many good alternatives for both premise-based and hosted call/contact centre systems.

Premise-based contact centres
A premise-based contact centre is installed at the customer’s site. The system must be implemented by the customer or a systems integration (SI) firm and maintained on an ongoing basis. The customer is responsible for wiring each agent’s desktop, servers, software and integrating the system to its carrier or IP network. The user is also responsible for configuring and maintaining the contact centre and all related components, including an interactive voice response system (IVR), CTI, e-mail response management (ERMs), liability recording, quality management and many other applications. Technical support is required to maintain the system.

Hosted contact centre offerings
Hosted solutions provide network-based contact centre functionality as an on-demand service — a network service provider (NSP), technology provider or outsourcing bureau implements and supports the switch. The hosted offering does not require wiring or implementation of any hardware beyond a PC, browser and phone (it is possible to do the implementation with just a PC.) The user does not require technical support to maintain the application. In some situations, users are allowed to maintain the software and in others, all change requests are handled by the service provider.

Primary Differences

Prospects looking for a new contact centre system should consider many factors, including:

Business model – hosted, premise-based or outsourced;

Technology – which vendor’s solution delivers the greatest return on investment (ROI); and

Service provider – from whom to purchase their solution. Many vendors now sell the same products and services.

The primary differences between premise-based offerings and hosted solutions are cost, total cost of ownership (TCO), architecture and scale. System users no longer have to sacrifice contact centre functionality for convenience. Prospects should start by making sure all systems under consideration meet their functional requirements for today and for the foreseeable future.


Premise-based offerings are generally priced on a per seat or concurrent agent basis. Most premise-based vendors also charge licensing fees for each channel (i.e. phone, chat, e-mail) and each system (IVR, CTI, recording). Additional costs include installation, professional services to customise the system, training, maintenance and major software upgrades.

Pricing models for hosted solutions vary. The majority of hosted solutions use a perpetual per seat/per agent scheme, per usage, or a combination of the two. Moreover, pricing can vary based on volume and functionality. Hosted solution vendors generally charge a set-up fee and may also charge a training fee. Many of the NSPs also charge their customers for every requested change.

The ‘pay per usage’ licensing model is unique and enables subscribers to pay only for licenses that are being utilised. Premise-based vendors generally offer licenses for each communication channel, while some of the hosting vendors charge one fee per seat, regardless of the number of channels used.

There are also vendors that charge concurrent licensing fees, which allows companies or NSPs with multiple shifts to reuse the same license. The best pricing model allows for both concurrent agent pricing and one fee for all channels. In that scenario, a customer doesn’t need to know exactly how many phone, e-mail or chat licenses to purchase and can dynamically reallocate their use, as needed.

While every company needs to do its own lease versus buy analysis, there will be a point where the accumulated monthly subscription costs of a hosted offering are greater than the one-time cash outlay for a premise-based system. In contact centres with more than 250 agents, this is likely to happen between years three and four; in smaller contact centres with less than 75 agents, it may take longer.

Total Cost of Ownership

The TCO of hosted offerings is substantially less than for premise-based systems. Companies with premise-based contact centres require people to maintain their system, must pay annual maintenance and have to invest in upgrades periodically. Additionally, while hosting companies do charge for implementations, the cost and time involved is likely to be substantially less. There are hosted offerings that can be provisioned in less than one day.


Premise-based contact centre solutions require manual installation of software and the physical presence of hardware (i.e. servers) at the customer’s site. While IP makes it easier to build multi-site contact centres, it’s all done on a single tenant. A company that needs to partition anything besides the database will have to install separate systems for multiple users. Premise-based vendors do not support true multi-tenancy.

Hosted systems are increasingly utilising multi-tenant architecture that enables multiple users with unique business processes, to reside in a common infrastructure. Multi-tenant architecture obviates the need to have separate servers for each customer. Subscribers/tenants are able to share common licenses and hardware while continuing to operate in a segregated environment. There are a variety of definitions and forms of multi-tenancy, but optimal performance is achieved when multiple subscribers (companies or departments) can run on the same server, but each tenant can see and change only their own administrative environment, routing and queuing rules and reports. A true multi-tenant environment also allows for system-wide software upgrades without service disruption and changes to one tenant without any impact on the performance of the others. (See Figure One: Advantages of Multi-Tenancy.)

Hosted contact centre solutions do not require the physical presence of any hardware or software beyond a PC, browser and phone.


Functionally-rich, multi-channel premise-based solutions have traditionally been oriented to large enterprises and not for small or medium size environments. Moreover, premise-based solutions require additional hardware to scale upwards.

The advent of multi-tenant or shared architecture enables providers to add both subscribers and capabilities by spreading applications across the shared network. Network-based shared architecture enables providers to support unlimited capacity while vendors of premise-based solutions must add additional servers, nodes or other hardware and software to increase capacity.

In a hosted model, subscribers are able to scale up and down, at will, very quickly, without adding hardware. They are also able to ‘rent’ feature-rich contact centre solutions that support multiple-channels and multiple sites regardless of whether the environment is two sites with two agents or 50 sites with thousands of agents. Hosted offerings equalise the sales and service capabilities of companies regardless of their size.

Market Opportunities

The availability of hosted offerings picked up substantially in 2004. NSPs, outsourcers, premise-based vendors, government agencies, universities and enterprises have begun to invest in these solutions.

Network Service Providers

Hosted contact centre offerings have captured the interest of NSPs, which continue to expand their product portfolios and provide a growing number of communications services to existing customers.

As traditional carrier-based revenue streams continue to dissipate, NSPs are seeking new communication offerings that will enable them to leverage their existing networks. NSPs’ sizeable customer bases and extensive distribution networks make them a very attractive target market for hosted contact centre vendors. Hosted contact centre vendors will increasingly turn to NSPs in their attempt to gain critical mass.

Large Enterprises

For larger enterprises, the principal attractions of hosted offerings are their lower TCO, rapid deployment and minimal impact on the capital budget. Companies that want to have their contact centres managed centrally will find the new hosted contact centre offerings compelling, with little or no sacrifice of convenience and functionality. During the last couple of years, the capabilities of hosted offerings have improved substantially, although these functions differ greatly from each other and there is still room for improvement. Any company considering an investment in IP-based contact centre infrastructure should add hosted offerings to its list of products to consider.

Small and Medium Enterprises (SMEs)

Like large organisations, small and medium sized enterprises (including smaller departments within larger companies) can benefit from contact centre technology. However, the vast majority of SMEs do not use contact centre technology. Budgetary constraints coupled with the lack of resources and expertise needed to support a switch have been the principal impediments to implementing premise-based solutions in SMEs. Hosted contact centre offerings are now enabling SMEs to rent feature-rich contact centre solutions that are flexibly priced, allowing users to pay per usage rather than on the per seat basis that is the norm for premise-based offerings.

Distributed Operations

The large number of multi-site and multi-national service and sales environments, companies with numerous branches and remote agents, are forcing companies to find ways to cost effectively incorporate these geographically dispersed groups into a centralised contact centre system. Hosted solutions enable customer interactions to be routed to any agent, group or contact centre, at any time and/or location. These solutions are based on thin-client platforms and allow agents, supervisors and administrators to conduct any contact centre activity from any location using a web browser.

Selecting a Hosted Solution

There are a growing number of hosted contact centre infrastructure technology providers and more are expected to enter the market in the next few years. The providers include some of the incumbent premise-based contact centre platform providers as well as relatively new entrants — vendors that have built solutions from the ground up during the past 10 years. As this is an immature market, the products and offerings vary greatly and there are significant differences in technology, functionality, pricing, installation and support.

Where to Start

Prospects considering hosted contact centre offerings can turn to several types of vendors for solutions:

  1. Product Companies
    These are technology companies that develop their own systems and sell them to network service providers, enterprises, government agencies or educational institutions.
  2. Service Delivery Providers
    These companies purchase hosted contact centre systems from product companies, install them in their networks or facilities and then sell the contact centre capabilities to their own clients. Many companies are entering this market on a monthly basis, as hosted contact centres are viewed as a growth market and a way for carriers to replace lost revenue streams.
  3. Service Delivery/Technology Companies
    These companies develop their own technology and sell it either to user organisations or to other service providers, using a variety of business models. Service delivery/technology providers include telecommunication firms and service bureaus.

What to Look For

Hosted contact centre solutions must support multi-tenancy, multi-media and multiple sites. They must address time domain multiplexor (TDM) and IP transactions, as both are going to be around for many years to come. They must be functionally rich and easy to install and maintain, requiring little to no technical expertise of end users. And, they must not require more hardware than a PC, web-browser and phone at the customer site.

Hosted contact centre offerings must be able to intelligently route, queue, report and provide workflow for inbound and outbound customer inquiries, across all communication media, including phone, web, fax, e-mail, chat and collaboration. Companies should also consider future needs beyond core contact centre functionality, such as customer relationship management (CRM) applications, customer service suites, call tracking, field service and sales force automation (SFA).

  1. A Two-Step Selection Process
    Prospects for hosted contact centre solutions must evaluate both the underlying technology and the service capabilities of the provider/delivery company with whom they will be dealing directly. As this is a developing and expanding market, there are many variations among the offerings available from service providers. Some of the service delivery companies openly disclose whose technology they use for their hosted contact centre offering and others do not. In either case, it’s essential for end users to evaluate the capabilities of the underlying switch, in addition to assessing the service that they expect to receive from the service provider.

    Hosted offerings are new to service providers and they are just beginning to learn how to sell, provision, manage and support these advanced contact centre services — skills very different from selling carrier services. Early adopters have been working through these challenges with their service providers. NSPs are realising that they need to employ a staff that is knowledgeable about contact centre operations in order to assist end user organisations in setting up optimal contact centre operations. NSPs are also realising that they must invest in educating their staff about the features and capabilities of their new services.

  2. Technology Criteria
    The breadth and depth of the hosted contact centre offerings vary greatly and are still maturing. Hosted contact centre solutions should include core functionality for multi-media routing and queuing, IVR, and CTI, as well as other non-core applications such as call recording, quality management, workforce management and customer service suites. End users must prioritise their own technical, functional, pricing, installation and support requirements and then find vendors that address their needs. End users replacing a premise-based switch may not yet find everything they had in the past, but Greenfield sites are likely to be very pleased with the advanced capabilities that are standard in most hosted contact centre offerings. If a feature or depth of functionality is not yet available from a particular hosted contact centre provider, ask to see the product roadmap to find out if and when the missing capability is going to be added.
  3. Globalisation and Localisation
    Hosted contact centre offerings should include multi-language capabilities to account for localised language differences. Hosted solutions should also enable users to operate in disparate locations with varying time zones, incorporating a mechanism to allow agents and supervisors to run reports and conduct all other contact centre activities in the relevant zone.
  4. Architecture
    Hosted contact centre offerings should be based on multi-tenant architecture. Prospects should be mindful of any limitations on the number of independent tenants that can be supported on a single switch, as well as vendor capacity per tenant (number of simultaneous users). The latter issue is of particular concern for companies that are considering adding capacity to their existing contact centre operations.

    Additionally, hosted offerings should utilise open standards to ensure systems interoperability with a broad range of operating environments, including Windows, Linux and Unix. Prospects should identify what resources, if any, are required to complete systems or software integrations and calculate the associated costs.

  5. Security
    Hosted vendors must protect their customers from internal and external security breaches and attacks. Additionally, supporting multiple customers on shared systems requires that each tenant’s data and business processes be kept secure. A multi-tenant system must provide for separation among clients, such that each customer can operate in a segregated environment while still leveraging shared licenses and hardware.
  6. System Implementation and Maintenance
    Ease of implementation and ongoing maintenance are essential for hosted solutions. Prospects should carefully evaluate the provisioning capabilities of their service provider. Offerings that can be implemented using menu-driven interfaces without the need for system integrators or professional services have shorter implementations and lower expenses.

    It is essential that end users evaluate the ongoing support they expect to receive after the system is implemented. Issues include whether software upgrades are included in the maintenance agreement, how custom change requests are addressed and how often features are added to the system. Prospective hosted contact centre customers should inquire about downtime for all upgrades and systems changes.

    Prospective system users must also find out if subscribers are allowed to self-administer changes to the system or if their NSP is going to be responsible for these changes. Many hosted contact centre systems include this capability, but NSPs do not enable it because making system changes is a valuable revenue stream for them. Regardless of whether users want to make changes themselves or have the NSP do so for them, they must select a hosted contact centre offering that is flexible and allows for timely modifications.

  7. System Backup
    As contact centres are considered mission critical in most organisations, system backup is a serious issue. Hosted offerings must be fully redundant and subscribers should seek service level agreements that guarantee uptime. Providers must ensure that there is no single point of failure and must offer ‘hot-backup’ technology or mirrored processes that run in parallel. This guarantees non-stop service even in the event of server failure. Moreover, the system back-up should be situated in a geographically separate location.
  8. Reporting
    Reporting is critical for contact centres, which must measure every aspect of their systems and agent performance. Prospects for hosted contact centre solutions should seek solutions that offer maximum reporting flexibility. Users should be able to pull standard reports and customise them with a web browser. Subscribers should identify how often reports are provided and the manner in which reports from multiple tenants are maintained.
  9. Pricing
    Price is a very important decision criterion for many companies, however, it should be considered relative to the other factors, such as total cost of ownership. There are many cost factors to consider including: cost per seat; whether licenses need to be purchased for each medium or if they are channel-independent; implementation costs; upgrade and termination fees; and the cost of adding new seats and sites.
  10. Experience and References
    The growth of the hosted contact centre market has ushered in numerous vendors and providers from different backgrounds with varying levels of experience. A hosted contact centre vendor or provider should be able to demonstrate successful project engagements with full product suites in a multi-site, multi-tenant environment. Additionally, vendor partnerships should be verified.

For a copy of the full white paper, Hosted contact centers are ready for prime time, including a vendor analysis comparing the offerings of the hosted contact centre technology players visit

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