Building an ROI Model for a Cloud-Based Contact Center

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1 Building an ROI Model for a Cloud-Based Contact Center Comparing the cases for on-premises and cloud-based systems Research Perspective Sponsored by Aligning Business and IT To Improve Performance Ventana Research 2603 Camino Ramon, Suite 200 San Ramon, CA (925) Copyright Ventana Research 2011 Do Not Redistribute Without Permission

2 Investigating Options for Contact Center Systems Ventana Research s benchmark research shows that most contact centers have relatively small budgets to invest in new systems and applications. However, circumstances press center managers to upgrade to keep up with both operational and user requirements. To meet these demands, many companies are looking toward systems and applications located in the cloud as an alternative or a supplement to traditional on-premises deployment. In our benchmark research on agent performance management, 64 percent of companies preferred on-premises systems for their contact centers, 21 percent preferred cloud-based, and 22 percent had no preference. Contact center decision-makers need to consider a number of issues germane to their individual situations as they try to avoid being swayed by vendors sales pitches for whatever option they happen to offer. Indeed, your unique requirements aren t likely to be satisfied by a generic, one size fits all offering. As part of the evaluation process, we advise you to challenge vendors to prove that what they offer can meet your requirements and to consider the costs and every factor that is likely to impact the return on investment (ROI) for both cloudbased and on-premises options. Cost Comparisons Capital Expenses In our research 64 percent of companies preferred on-premises systems for their contact centers, 21 percent preferred cloud-based, and 22 percent had no preference. Hardware can be a major cost when purchasing new systems. On-premises and cloud-based models are different enough that it will take work to do a reasonable cost comparison. For on-premises contact center systems, find out whether you will need to buy new servers and storage systems or your existing systems can handle the new software, taking into account performance and scalability requirements. For cloud deployments, the supplier provides both servers and storage so you need to determine whether the vendor has adequate capacity to provide the performance your users will require, and whether your users desktops or laptops can work effectively with the cloud-based system. Also take into account that you may be able to decommission older hardware or reuse it for other on-premises applications, and generate cost savings in that way. For software, on-premises vendors require upfront licensing fees, which can be considerable. Cloud vendors on the other hand have a rental model based on usage, so you pay on a monthly basis based on the number of users or usage levels. For both models you need to consider networking requirements. In the case of on-premises, check whether your existing network is of the required quality and can carry the additional traffic or needs to be upgraded. In the case of the cloud as well as in-house networks, ensure you have reliable, Ventana Research 2011 Page 2

3 high-speed Internet connections with 24-by-7 availability for all users no matter where they are located, possibly including the ability to connect through mobile devices while on the move. Finally there is the expense of disaster recovery. For on-premises you need to include the cost of an off-site installation that duplicates your hardware, applications and data, plus the costs of services to regularly update the secondary site. For cloud-based vendors you need to determine whether they have duplicate sites that can handle your backup and recovery and if so, what costs that adds; if they do not, ask how they support disaster recovery. Operational Expenses On-premises capital purchases incur more borrowing costs, while the cost structure of cloud deployment is nearly all operating expense. Most cloud vendors have a usage-based model for determining fees, a pay as you go approach usually billed monthly. This approach requires budgeting and cashflow adjustments as it is quite different from the upfront license and annual maintenance fee for on-premises systems. Maintenance for both hardware and software is a standard ongoing expense for on-premises systems. In contrast, both maintenance and to a large extent software upgrades normally are included in the monthly fee for cloudbased systems. In addition, Both approaches involve costs for professional services to carry out initial installation, systems integration, application customization and configuration, plus user and operations training. cloud-based suppliers tend to release incremental revisions of their software rather than waiting for a single major upgrade, which may mean enhancements become available more frequently and less intrusively. Ongoing application and technical support are required in both cases; however cloud-based systems tend to require less involvement of in-house IT. Onpremises systems typically require skilled IT staff trained in technical, functional and operational aspects of the hardware, the network and the application, while the cloud places more emphasis on networking skills, desktop and laptop setup and some application skills; the cloud vendor provides most of the technical skills and all the operations support. Other Considerations Both approaches involve costs for professional services to carry out initial installation, systems integration, application customization and configuration, plus user and operations training. On-premises is likely to require a lengthier installation period since it includes new hardware, software and networking. This can be disruptive and force users to wait longer for the functionality they need. Cloud systems, on the other hand, usually are accessed through a thin client or a Web browser, and implementation is reduced to configuration of Ventana Research 2011 Page 3

4 the application to meet user requirements. Both deployments are likely to require integration with existing systems, which in the case of the cloud might present more issues relating to systems access and security. In the longer term, there may be other costs associated with cloud-based deployments. Take into account the potential impact of escalating monthly usage costs, potential costs to revert to on-premises should the need arise, and any implications if you need to downsize to smaller numbers of users. As with any technology, you ll have to establish security whatever the deployment model. Consider your requirements and costs for both models, and make sure you are confident that the security of the cloud vendor can protect your business data. Scalability also is an important issue. For an on-premises model, estimate the potential hardware and software costs to support additional users and data growth. In the cloud model determine the current capabilities of the vendor and its plans for supporting not just your growth but also that of its other customers. Cloud systems usually are accessed through a thin client or a Web browser, and implementation is reduced to configuration of the application to meet user requirements. Also, it s important to think about the increasing use of mobile devices by employees wanting to access applications on the move; determine what it will take to support mobile users in either kind of implementation. Making the Choice Increasingly companies have the option to choose between on-premises and cloud deployment for their contact centers, or a mixture of both. The cloud is generating much of the buzz these days, but the business case is not always as clear-cut as some vendors would have you believe. Cloud vendors often focus on the reduction of capital costs and IT resources and play down some of the other issues and costs associated with moving to the cloud. Cloud deployment may not be the best solution in some cases, especially those that involve the organization s most sensitive, mission-critical data and systems. But the simplicity and speed of deployment and the potential cost savings make it an option worth considering, particularly when users are widely dispersed across locations and time zones. It is also worth taking into account that the cloud model changes the relationship with the vendor. On-premises is typically a shorter-term, more hands-off relationship, whereas with cloud vendors you need a closer working relationship that lasts the duration of the contract. In all models on-premises, cloud-based or mixed, the first consideration should be your organization s unique technical and functional requirements; Ventana Research 2011 Page 4

5 if a vendor cannot match these then the system will not gain adoption or deliver the business outcomes you require. Once you have identified vendors with systems that match your requirements, regardless of the supply model, build a business case for each vendor that includes an ROI model and takes into account all the potential costs: short and long term, capital, operating and other considerations. Taking this approach offers the best opportunity to ensure that whatever you choose meets your expectations and delivers the benefits and ROI you are looking for. About Ventana Research Ventana Research is the most authoritative and respected benchmark business technology research and advisory services firm. We provide insight and expert guidance on mainstream and disruptive technologies through a unique set of research-based offerings including benchmark research and technology evaluation assessments, education workshops and our research and advisory services, Ventana OnDemand. Our unparalleled understanding of the role of technology in optimizing business processes and performance and our best practices guidance are rooted in our rigorous research-based benchmarking of people, processes, information and technology across business and IT functions in every industry. This benchmark research plus our market coverage and in-depth knowledge of hundreds of technology providers means we can deliver education and expertise to our clients to increase the value they derive from technology investments while reducing time, cost and risk. Ventana Research provides the most comprehensive analyst and research coverage in the industry; business and IT professionals worldwide are members of our community and benefit from Ventana Research s insights, as do highly regarded media and association partners around the globe. Our views and analyses are distributed daily through blogs and social media channels including Twitter, Facebook, LinkedIn and Business Week s Business Exchange. To learn how Ventana Research advances the maturity of organizations use of information and technology through benchmark research, education and advisory services, visit Ventana Research 2011 Page 5

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