The Inner Circle Guide to Cloud-Based Contact Center Solutions

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1 The Inner Circle Guide to Cloud-Based Contact Center Solutions Written by Sponsored by

2 CONTENTS Introduction: Why is Cloud computing hot?... 4 Drivers for Cloud-based Contact Center Solutions... 6 Financial... 7 Operational Functionality Strategic Considerations Inhibitors Cloud-based Contact Center Solutions: Terminology Implementation and Use Deciding on cloud Choosing a vendor Estimating ROI and TCO Implementation Timings Results of Using Cloud-based Solutions Market Landscape Pricing and Contracts Key market sectors Conclusion Interactive Intelligence About ContactBabel

3 Table of figures Figure 1: Capex and Opex changes in UK & US contact centers, Figure 2: Contact center operating expenditure in UK & US, Figure 3: What concerns do you have about cloud or hosted solutions? Figure 4: Characteristics of businesses choosing cloud and CPE Figure 5: Have cloud-based solutions made any difference? Figure 6: Pricing examples

4 INTRODUCTION: WHY IS CLOUD COMPUTING HOT? Having technology provided and managed by a third-party away from a customer's premises is not a new idea, with service bureaux and ASPs (application service providers) being around for many years. PBX functionality through Centrex has been available since the 1960s, with IVR and ACD functionality often being offered through a network provider too. In the past few years, SaaS (Software-as-a-Service) solutions such as Salesforce.com offer desktop functionality for the contact center, and many solution providers now offer convincing, rich-featured applications hosted in the cloud. That cloud-based contact center solutions are now 'hot' is down to a mixture of factors, including the recession's negative effect on capital investment, the increasing functionality of hosted applications, and the proven success and general acceptance of cloud-based solutions. Additionally, the stranglehold that incumbent CPE telephony providers had on the industry has been loosened by the advent of IP and more open systems, with the net result being a greater choice of solution providers. The maturity of Western contact center markets, coupled with the high levels of mergers and acquisitions in industries such as utilities, telecoms, insurance and finance mean that many large companies are now in a position where they provide customer contact via multiple sites, often running on disparate technologies. Cloud-based contact center solutions allow a way out of proprietary systems, lack of interoperability and the expense of maintaining many different systems without gaining from economies of scale. For example, only 28% of multisite UK operations ran as truly virtual contact centers in 2011, although the US equivalent was greater, at 49%. The main reason stated that 51% of US multisite operations stayed non-virtualised was that there were too many different systems at each location to work together: a problem that cloud-based contact center solutions address. The general lack of investment within the past few years is now showing in many contact centers, yet capital expenditure is still not forthcoming. The avoidance of large capital investments, and reduced start-up costs associated with cloud solutions is of great interest to many organizations, as is the reduced risk of trialing new functionality, and inherent future-proofing that cloud offers through frequent technology upgrades. 4

5 There are a lot of good reasons to consider the cloud. Increased flexibility. Faster deployment time. Minimal upfront capital expenses. Reduced IT requirements. But selection of the best contact center cloud vendor is the make or break decision. The Communications as a Service offering from Interactive Intelligence is used by some of the most wellrespected companies around the world. Our cloud solution provides you the high levels of security you require, with the level of control you determine, and the ability to move to on-premise if your business needs ever change. Moreover, you have access to the broadest set of applications available, with the ability to move as rapidly as you d like. Good reasons to trust the Interactive Intelligence cloud. CONTACT CENTER UNIFIED COMMUNICATIONS BUSINESS PROCESS AUTOMATION Cloud-based or On-premise

6 DRIVERS FOR CLOUD-BASED CONTACT CENTER SOLUTIONS The many potentially-positive factors driving the uptake of cloud-based solutions can be grouped into four areas: Financial, Functional, Operational and Strategic: Financial: how does cloud affect the investment and ongoing expenditure connected with technology and the operations of the contact center? Functional: what is the effect of cloud-based solutions on the functionality available to the contact center? Operational: what are the changes in the way in which the contact center is able to operate? Strategic: how are wider concerns of the business addressed by having contact center functionality within the cloud? 6

7 FINANCIAL Cloud-based solutions are sometimes thought of as having a pay-as-you-go financial model that allows business of all sizes to move away from high front-end expenditures in favor of a more manageable operational expenditure approach without any overspending. While some solution providers offer this, to varying extents, it is by no means universal. It is perhaps better to consider the financial opportunities of cloud as being related more to shifting expenditure from capital expenditure (Capex) to operational expenditure (Opex) Small and mid-size companies in particular typically do not have the ready access to cash to make the necessary capital expenditures for expensive CPE. As a result, making the shift from Capex to Opex is especially relevant for these firms. Recently, poor economic conditions have affected companies and finances, and some organizations that would have been previously less likely to have considered Opex investments (e.g. public sector, utilities companies) are now doing so, as many large Capex projects have been shelved indefinitely. Cloud offers contact centers a way forwards without relying on capital investment: Businesses can scale down future customer premises equipment (CPE) investment, with a resulting decrease in capital expenditure There is also an opportunity to buy services using a pay-per-use or even pay-as-you-talk pricing model, which helps to keep operating expenses to a minimum Additionally, issues surrounding the total cost of ownership of CPE do not arise with hosted solutions: outright purchase of equipment isn t for everyone, perhaps for reasons of budget or the ability to maintain the systems Low-risk ability to start up or move or expand without risking existing business plans Businesses retain the freedom to downscale change targets and plans to meet demand, rather than commit themselves to long-term arrangements needed to justify the purchase approach of high value CPE. 7

8 Figure 1: Capex and Opex changes in UK & US contact centers, 2011 Capex and Opex changes in 2011 (UK & US) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3% 6% 3% 1% 7% 8% 11% 10% 11% 20% 27% 24% 17% 25% 30% 49% 47% 12% 12% 6% 18% 16% 8% 13% 2% 2% 6% 6% UK Opex US Opex UK Capex US Capex Increased by 25%+ Increased by 10-25% Increased by <10% No change Decreased by < 10% Decreased by 10-25% Decreased by 25%+ Recent ContactBabel research carried out with more than 400 US and UK contact center operations shows that investment levels and budgets are still in the doldrums. Almost 1 in 5 US operations had their investment budgets cut by more than 10% in 2011, even though many businesses believe that they have weathered the worst of the economic storm. These figures show that the cut in investment has not led to a loosening of the purse strings where Opex is concerned either, with a rough balance between those increasing and decreasing their ongoing spend. 8

9 Looking in more depth at Opex, we can see that it is typical for total salaries to account on average for around 70% of a contact center's Opex, with much smaller elements spent on IT, telecoms, training etc. Figure 2: Contact center operating expenditure in UK & US, 2011 Contact centre operating expenditure, US & UK, 2011 Recruitment 2.3% Utilities & local taxes 2.6% Training 3.2% IT maintenance 3.6% Telecoms charges 4.7% Rent 4.8% Other salaries (e.g. management & IT) 13.4% Other 8.5% Agent salaries 57.0% In current circumstances, we can see that for many businesses Capex is tight or non-existent, and Opex budgets are rising very slowly, if at all. The positive financial impact of cloud-based solutions is built on shifting from Capex to Opex, but the question is: if Opex is also closely-controlled, surely a business won't countenance a big jump in spend, even if it is shifted into a monthly operating budget? If this is true, it is worth considering how a movement from CPE to cloud-based solutions could impact on expenditure in each of these Opex categories, thus reducing or substituting existing expenditure within the Opex budget and freeing up budget with which to pay the cloud provider. Agent salaries: At 57% of Opex, any small change in salaries will make a large impact on overall spend. At first glance, shifting technology from CPE to cloud doesn't look like it will impact on agents at all. However, moving to cloud means that companies can be more flexible in their staffing arrangements, either through having agents in lower-cost locations (either onshore or offshore), and by supporting a more volume-driven staffing schedule (e.g. by having homeworkers log on for short shifts when they are needed, rather than the full eight hours). Seasonality is also 9

10 addressed, through being able to add and shed agents as needed. Cloud offers various ways to reduce or otherwise manage overall salary costs, through contact center virtualisation in all of its forms. Other salaries (e.g. management & IT): Businesses can experience a decrease in development costs and attendant IT management salaries, as cloud solution providers will already have solutions up and running. Moving physical hardware off-site also means that maintenance requirements will no longer be an issue for the contact center. Furthermore, for multisite operations, moving to the cloud will offer greater opportunities for having a singlecross-site management team in place, with call routing and self-service controlled at a single point, reducing management costs as well as improving consistency and increasing the available labor pool. Infrastructure and processes which are held in the cloud can avoid issues which CPE resources can experience, such as unnecessary duplication across multiple sites and a corresponding increase in management costs for configuration, administration and performance checking. Rent, utilities & local taxes: Although businesses are usually tied into contracts for their premises, a cloud approach to technology means that a growing business can look for value elsewhere if a new operation is to open; or a contract break occurs, without the upheaval and downtime associated with moving on-site hardware to another location. Moving equipment to the cloud will reduce energy expenditure. Telecoms charges: Call queuing at the network level also saves money. In multi-site operations rather than pass a call down to a contact center which may not have an agent immediately available to take the call it makes sense to queue the call at the network level until an agent is capable and available to take it. The call is then passed once to the agent in the specific contact center. IT maintenance: Cloud-based solutions can mean that the need for large server farms is reduced or removed, lowering the cost of hardware and maintenance. Software upgrades are carried out at a network-level, reducing cost and upheaval. 10

11 Training & Recruitment: Cloud does not offer a great deal of opportunity for saving costs on training, although there may be some opportunity for recruitment savings based on having the ability to locate contact centers or homeworkers anywhere, including in lower cost areas. Other expenditure: Apart from these instances of reduced Opex, cloud offers other opportunities to cut down on unnecessary expenditure, including: Operations with fluctuating traffic (either on a seasonal or more frequent basis) do not have to buy sufficient software licenses or telephone line capacity to cover the peaks, as many cloud providers offer the possibility of adding short-term licenses on a pay-as-you-go basis The cloud allows users cost savings associated with not having to own or run their own hardware. Although servers may be a commodity purchase, the energy costs involved in running them can far outweigh the initial purchase and 85% of computing power generally sits idle in any case. End-user question: "Where do the biggest cost savings come from?" (Utilities company) Cost savings really depend on your existing environment and planned approach. We encourage companies to compare financial impacts of both cloud and premise models, in order to round out the view across a given period. The answer is always in the details. Human capital is expensive and cloud solutions require fewer resources to operate, in general. However, what s interesting is that most companies we speak to don t end up reducing headcount when moving to the cloud, but will re-focus resources to address strategic imperatives or initiatives that have been under-resourced previously. The drivers for the cloud have gone well beyond financial benefits: companies are looking to leverage the cloud to increase flexibility (e.g., dynamically and economically scale up and down to address seasonality and growth), speed up deployment times, and free-up IT staff for other work. 11

12 OPERATIONAL On a day-to-day basis, cloud-based contact center solutions can theoretically offer a better service level and a simpler environment for businesses to operate in. Reduced need for IT support and implementation: Having hardware and software based in the cloud means that ongoing system maintenance is significantly reduced, as it is the duty of the cloud provider to handle such matters. This is also the case in terms of implementing new systems, with users generally stated to be up and running in days, although of course the level of customization is often less than in a CPE environment with dedicated IT and business resource available. Larger pool of agents to choose from: Treating multiple contact centers as a virtual contact center allows great efficiencies to be made through economies of scale. This is especially true where businesses are using skills-based routing. All agent competencies are displayed to the scheduler regardless of agent location - who can be more flexible, simply because the available resource pool is so much more deep. Short-term scalability: The cloud offers great flexibility in adding or shedding agents and user licenses, of particular relevance to businesses which have substantial changes in call volumes over a year (such as the seasonality experienced by retailers and travel agents) or which have to react quickly to handle event-driven call spikes (e.g. an emergency weather-drive situation affecting utilities companies). Scalability is key: many contact centers want to be able to gear up and down to suit business demands and cope with peaks and troughs without unnecessary expenditure, and with cloud-based solutions they can do this on a daily basis if necessary, instead of spending on capacity that they may not use for months. Centralized management: In a multi-site, cloud-based environment, self-service and call routing scripts can be held centrally to increase the speed to alter these as required, and also to maintain consistency across sites. Infrastructure and processes which are held in the cloud can avoid issues which CPE resources can experience, such as unnecessary duplication across multiple sites and a corresponding increase in management costs for configuration, administration and performance checking. 12

13 End-user question: "Does cloud make it any easier to implement virtual contact centers or multichannel/ social media? If so, how?" (Retailer) It certainly can as the cloud makes it easy to turn-up these types of services. Technology is no longer the gating factor it s a question of how ready your business is from an organizational and process perspective. Certain cloud providers have industry leading consultants available to help you answer those questions and put best practices in place to ensure a successful deployment. 13

14 FUNCTIONALITY Cloud-based applications may allow businesses greater opportunities to implement new technology, a point of particular importance to the traditionally-overlooked mid-sized contact center sector. Trial new applications quickly using a low-risk pilot: Contact centers can expand, move, increase size or try out new functionality without the high initial set-up costs. Using a pay-per-use model allows businesses to start a contact center or move at low risk or increase for a temporary campaign or try out new functionality without having to spend excessive amounts of time and money first. This is especially true for new and usually expensive applications such as speech recognition which can be a very expensive solution to implement at a CPE level. The hybrid cloud model (a mixture of CPE and cloud) is often used to migrate existing applications to the cloud once the decision to upgrade or replace existing CPE functionality is made. Amongst the biggest gainers from cloud technology are mid-sized contact centers, a market which many vendors have been failing to address for a great number of years. Solution providers which have deep and rich functionality aimed at the high-end of the market have been reluctant or unable to offer similar features to smaller operations at a price point that is acceptable to both parties. Cloud-based solutions mean that this market becomes potentially profitable to vendors: for example, the customization of cloud-based offerings can be far less, which means that overall cost for the smaller operations is less than in a CPE environment, as vendors gain from the economies of scale associated with multi-tenancy. Future-proof: A competitive, open cloud environment should mean that vendors will be motivated to innovate and provide better service. Cloud solution providers have continually to enhance and develop their services which bestows a competitive advantage to business users who can deploy the latest technology and the often inherent advantages of improved functionality, service and reduced costs, through their contact centers. In effect, a hosted solution removes the technology stranglehold experienced by many contact centers with CPE and allows them to concentrate on their core business as this release of frequent new functionality can be used to achieve a strategic service advantage. In a CPE environment, upgrades to applications are carried out under ongoing maintenance contracts. Upgrading one element may cause a knock-on effect requiring other applications to be upgraded as well, a task which can be long and expensive. Cloud-based providers update applications on an ongoing basis. 14

15 End-user question: "How does cloud-based functionality compare to on-premise?" (Large retailer) It s almost one-for-one. Functionality is rarely an inhibitor, especially if the cloud service is based on a market-leading contact center platform that has 1000s of customers running their operation on it. 15

16 STRATEGIC CONSIDERATIONS Apart from the day-to-day improvements in the functionality and operations that cloud-based solutions can provide, wider impacts have to be considered as well. Disaster recovery: Ensuring business continuity during outages, facility emergencies and inclement weather is a critical requirement. Cloud-based contact center models ensure business continuity by enabling agents to be connected to the technology platform and necessary applications from anywhere with Internet access. Even in an outage, companies maintain the ability to service and sell to the client base, undermining what could otherwise be a disastrous situation resulting in lost revenue, dropped calls and negative customer experiences. Cloud solutions eliminate the costly and time-intensive process of building and maintaining a back-up site from which to take calls and deal with emergency situations, and superior solutions are fully-redundant, with complete disaster recovery and business continuance delivered from multi-site locations. Cloud solutions can also provide back-up disaster recovery protection to centers which prefer on-site CPE or a hybrid model, as reserve protection. Cultural considerations: Making the move to cloud is a far bigger proposition than deciding whether to implement or replace a particular contact center application such as call recording or workforce management. The decision can be as much cultural and political within an organisation as it is technological or operational. As the report will show, the perceived security and data privacy issues around cloud are always present in any such discussion, and a lack of confidence or understanding of the reality around these issues, especially in the higher echelons of decision-makers, can veto the move to cloud, regardless of the financial or functional arguments put in its favor. The move to cloud has similarities to the decision-making process around IP that many contact centers have been through in the past few years: it may not be related just to the contact center, but other business areas too the technical elements of the decision may not be easily understood by business-focused executives concerns about security and reliability are frequently aired the general movement of control away from the enterprise to a third-party can cause uneasiness final decisions may not be made from within the contact center environment. In the case of IP, 40% of contact centers in the US and UK state that the move to IP was a corporate decision, not a contact center decision. Although the case for cost reduction via a single IP network was stated to be the most important factor in the final decision, corporate sponsorship (or lack of it) was placed at no.2. 16

17 INHIBITORS Despite the generally positive experiences that most users of cloud & hosted solutions report, there are still considerable barriers to implementation that are holding back some potential users, mostly around security, availability and functionality. The strongest of these is the concern that data security will be compromised by allowing a third-party to control customer details. 30% of non-cloud-based respondents state that data security in the cloud is of great concern to them, although this figure is dropping year on year, which shows that greater education and understanding about risks and successful cloud projects (e.g. CRM) is making an effect. Some cloud-based solutions allow clients to keep call recordings and sensitive customer information on their own site, whereas most others provide externally-audited and accredited dedicated security that can surpass on-premise offerings. The difficulty in integrating with existing systems, and to a lesser extent, loss of control is also of concern, although most respondents rightly do not consider a lack of reporting to be a deal-breaker. 47% had some concerns that existing investments would be difficult to integrate if they were to move to cloud, although many solution providers offer a solution that can work alongside existing CPE elements, such as a PBX. Solution providers should continue to focus their efforts on demonstrating the strength of their security measures, and reassuring potential users of cloud- and hosted solutions that the security measures in place are actually stronger than would be feasible within a fully premise-based operation. Concerns about loss of control should also be addressed. Figure 3: What concerns do you have about cloud or hosted solutions 1? 1 Data from "The US Contact Center Decision-Makers Guide 2012" (ContactBabel) 17

18 Security The greatest concern around cloud-based solutions particularly in multi-tenancy, public cloud environments is around security, both from attacks from outside or within the service providers' organizations, or through poorlydesigned security allowing data leaks without a sinister motive being present. Allowing a third-party to be in control of a businesses' data security is a major cultural and technological change to the way most businesses and IT departments operate. Organizations should expect that data should be at least as secure in a third-party environment that is dedicated solely to providing a high-quality cloud-based service, as this is one of the factors by which the solution provider will succeed or fail. Potential cloud clients should look for: multiple levels of firewall protection continuous intruder detection systems a two-person rule for changes to code or hardware frequent scheduled password changes external testing and audit trails data encryption used both in storage and in transit, under the control of the user additional layers of user authentication and privilege vetting of employees with access to sensitive information or hardware internal traffic and server monitoring. Businesses should make sure to ask their cloud provider what data encryption levels are operated, and whether the customer is given control of the data encryption key. Data should be encrypted at all stages, when travelling over the network between business and the database, and also when it is in the database and any back-up databases too. US organizations may wish to check that providers are FIPS certified, and compliant with PCI-DSS, Sarbanes-Oxley, IFRS, HIPAA and other regulatory requirements. Some elements to consider asking about include: Security: the cloud provider must have a strong security management system based on an internationallyaccepted security framework Usage: make sure customer data is used only as instructed or to fulfill the cloud service provider s legal requirements and that governance and role-based access management policies, and ongoing process testing procedures are in place Data ownership: make sure the cloud provider claims no ownership rights to customer data Payment functionality: some providers (PCI DSS Level 1 compliant) can process payments themselves in the cloud via IVR, whereas others work with call recording companies to pause recording when relevant Disclosure: the cloud provider must only disclose customer data where required by law Geographical data location: the cloud provider must specify the locations and countries in which data will be stored. Physical protection of the data center(s) should also be considered Auditing: the cloud provider must use third-party auditors to ensure compliance, both physical and technological. Readers may also like to be aware of the policies and aims of the Cloud Security Alliance (https://cloudsecurityalliance.org/). 18

19 End-user question: "How do we know customer data can t be shown to other clients or hacked into? Is browser-based technology really secure? What sort of guarantees / certification should we look for?" (Medium-sized financial services organisation) Begin dialogue between your IT/security team and the service being evaluated. Discuss things such as data separation methods, where data resides, access control/physical security, network security, security monitoring, code of conduct, privacy policies and, ultimately, what level of protection is guaranteed under contract. Certain cloud contact center providers run single-customer, multi-instance virtualized environments in their data centers. As well, some offer the option to keep voice traffic and sensitive customer data (including recordings) locally, within your own private network. These two architectural approaches virtualization and the hybrid, local control model are freeing mission critical centers to move to the cloud by providing an added level of security and isolation. Integration Being able to continue using relevant existing CPE systems, and access databases and back-office systems is a minimum requirement for all businesses considering cloud-based solutions, and one which is of great concern to many. As all businesses are unique, there is no generic solution to this, but many cloud providers have pre-built integration with leading CRM applications such as Salesforce.com, Microsoft Dynamics, SAP and Oracle CRM, and web service APIs enable customers and technology partners to create tightly-integrated contact center applications. Potential cloud-users with multiple, complex systems should not underestimate the effort and potential cost associated with integrating these CPE systems with those in the cloud, and this should be factored into any TCO/ROI calculations. End-user question: "We have concerns that integrating with our CRM, back-office systems and bespoke applications may be very difficult." (Medium-sized insurance company) Assuming you are dealing with a market leading contact center provider, that should not be an issue. Integration with CRM and backend systems is considered standard for cloud contact center deployments. However, do your due diligence during the evaluation process to ensure there won t be any surprises. 19

20 Control, visibility and reporting Loss of control is of as much concern to businesses as fears over integration. A service provider may not be as responsive as an in-house team, and it may take hours or even days to make changes to the system. It is also the case that the solution provider upgrades or implements new functionality as and when they wish, in the case of the multi-tenancy model, and backing up the system is also something that the solution provider becomes responsible for. It is vital that such issues form part of any agreement between the client and the cloud solution provider, with expectations of the provider's speed to react stated and agreed in writing before any contract is signed. Some cloud vendors provide complete visibility of their service availability and performance through webbased dashboards. Reliability and performance Cloud clients depend upon the solution provider to maintain a high level of service reliability, availability and uptime. This means there must be data center redundancy and geographical separation, and enforceable service level agreements. Service providers will test their systems on an ongoing basis, and a few will even guarantee their availability to % (the '5 9s target of carrier-grade availability), backed by penalties if they do not achieve this. This level of reliability is the standard for very large contact centers which have paid significantly for this in a CPE environment, but is likely to be an improvement on what SMEs are used to, with their much smaller budgets. The nature of cloud-based systems that they can be accessed from anywhere by anyone with a browser means that problems at the client's premises can be circumvented by physically moving staff elsewhere. Potential users of cloud-based solutions should be aware of what they are comparing when they place vendors side-by-side for reliability assessment. Some vendors include the necessary downtime associated with maintenance and upgrades of an instance, others only count unscheduled downtime. Potential clients should make sure that the provider's infrastructure is load-balanced and over-provisioned relative to the number of users to ensure resilience and consistent levels of performance. There is a risk that some providers add new clients without adding new hardware or other supporting systems (which would obviously be more profitable), and this would negatively affect the response times of the applications. End-user question: "Do you require any software to be downloaded onto the agent desktop? If not, how do you guarantee the speed of a browser-based solution, especially in a scripted conversation which requires immediate processing?" (Outbound telemarketing company) The Interaction Scripter Client requires a download. 20

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