Hosted Contact Center Solutions

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1 Hosted Contact Center Solutions Setting the Record Straight Donna Fluss President & Founder DMG Consulting, LLC

2 Table of Contents Summary... 3 Introduction... 4 Concern #1: Hosting is only for small contact centers Concern #2: Hosted contact center solutions are functionally inadequate Concern #3: Hosted contact centers solutions are inflexible and not customizable Concern #4: Hosted contact center implementations and integrations are more difficult than premise-based initiatives Concern #5: Hosting has a higher total cost of ownership than premise-based solutions. 7 Final thoughts... 7 Copyright DMG Consulting LLC. All rights reserved. Brand and product names referred to in this document are the trademarks or registered trademarks of their respective companies. Rev , version DMG Consulting, LLC 2 Hosted Contact Center Solutions

3 Summary Hosted contact center infrastructure solutions, also referred to as Software-as-a-Service (SaaS) or Communications-as-a-Service (CaaS), are steadily gaining ground in enterprises of all sizes and in a variety of public and corporate verticals. Hosted solutions are reaching unprecedented levels of customer satisfaction because of the minimal cash outlay required, quick deployments, rapid and quantifiable return on investment, scalability and agility, ongoing investment protection, a reduced maintenance burden, and the opportunity to try before you buy. Vendors also continue to expand functionality through product enhancements and improved deployment and integration models. Internet Protocol (IP) and Session Initiation Protocol (SIP)-based technologies have additionally eliminated physical communications constraints, empowering enterprises to be more responsive to their customers using the virtual, multi-channel and flexible servicing infrastructures of hosted solutions. Enterprises are looking for ways to leverage these new technologies, and contact center hosting is an ideal, cost-effective fit. Moreover, the new generation of hosted/caas-based contact center infrastructure has overcome the technical and functional limitations of older solutions. Now the leading vendors need to correct the misperceptions that are hindering more widespread adoption of these solutions. DMG s findings identify the five top misconceptions as: Concern #1: Hosting is only for small contact centers. The Reality: Hosting vendors have given small as well as mid-sized enterprises new servicing capabilities that do not require them to compromise on functionality. Typical buyers are indeed mid-sized customers, and the majority of purchases are to replace an existing premise-based solution that no longer meets the organization s needs. Concern #2: Hosted contact center solutions are functionally inadequate. The Reality: In fact, hosted contact center infrastructure providers offer some of the most competitive and functionally rich solutions in the contact center market. The range of choices available to users has never been greater. Concern #3: Hosted contact centers solutions are inflexible and not customizable. The Reality: The opposite is true. In general, end users consider hosted vendors and solutions to be very flexible and scalable, although there are significant differences among hosted contact center providers. Concern #4: Hosted contact center implementations and integrations are more difficult than premise-based initiatives. The Reality: Some hosted contact center platforms use newer standards-based and open technology than many of the older premise-based contact center offerings. The more standards-based and open the underlying system, the easier the integration DMG Consulting, LLC 3 Hosted Contact Center Solutions

4 Concern #5: Hosting has a higher total cost of ownership than premise-based solutions. The Reality: Based on a three-year host vs. buy analysis, if the calculation includes the cost of upgrades and a significant amount of internal resources needed to support a premise-based solution, the hosted alternative will often have a lower TCO. Introduction Hosted contact center infrastructure solutions are steadily gaining ground in enterprises of all sizes and in a variety of public and corporate verticals. (Hosting is also referred to as Software-as-a-Service (SaaS) or Communications-as-a-Service (CaaS).) Among the many reasons why customer satisfaction with hosted contact center solutions is at an unprecedented high are the minimal cash outlay required, quick deployments, rapid and quantifiable return on investment, scalability and agility, ongoing investment protection, reduced maintenance burden and the opportunity to try before you buy. Ongoing vendor investment and product enhancements continue to expand product functionality at the same time as vendors are introducing improved deployment and integration models. The strength of the hosted contact center infrastructure sector is evident in the market share it has taken away from traditional premise-based solutions; hosted infrastructure revenue is expected to grow by 35% in 2010, and 20% in both 2011 and Changing business dynamics have created the need for virtual, multichannel, and flexible servicing infrastructures. Internet Protocol (IP) and Session Initiation Protocol (SIP)-based technologies have eliminated physical communications constraints, empowering enterprises to be more responsive to the needs of their customers. Enterprises are looking for new ways to leverage these new technologies, and contact center hosting is an ideal, cost-effective fit. Vendors need to correct the misperceptions that are hindering widespread adoption of hosted contact center solutions The new generation of hosted/caas-based contact center infrastructure has overcome the technical and functional limitations of older solutions. Now the leading vendors need to invest in marketing efforts to correct the misperceptions that are still hindering more widespread adoption of hosted contact center solutions. The five top hosted contact center infrastructure misconceptions are discussed as follows, along with responses to each issue. The most convincing support for the viability and broad capabilities of hosted contact center infrastructure solutions comes from enterprise users of these solutions. In DMG Consulting s most recent customer satisfaction study of hosted contact center infrastructure customers, an unprecedented 50% of surveyed customers rated themselves completely satisfied with their product. Key drivers for product satisfaction were product flexibility, scalability and ease of use. (See DMG Consulting LLC s, 2009 Hosted Contact Center Infrastructure Market Report, issued in September 2009.) DMG Consulting, LLC 4 Hosted Contact Center Solutions

5 Concern #1: Hosting is only for small contact centers The Reality: Approximately 8 years ago, when some hosted contact center infrastructure vendors were looking for funding and sought to explain their value to the market, one of their standard arguments was that this new business model would democratize the world of contact center. This meant that small and mid-sized organizations that could not afford to purchase a premise-based contact center platform could now realize the same benefits as companies that had the financial and IT resources to acquire these solutions and support them on an ongoing basis. Hosting vendors have given small and mid-sized enterprises new servicing capabilities that do not require them to compromise on functionality. DMG research shows that the typical buyers of these solutions are mid-sized customers; the majority of purchases are to replace an existing premise-based contact center solution that no longer meets the organization s needs. Concern #2: Hosted contact center solutions are functionally inadequate The Reality: There are many hosted contact center infrastructure solutions available in the market, each with its own unique design, architecture and functionality. (A few hosting vendors have built their offerings upon premise-based contact center platforms.) Just as no two premise-based solutions are alike, neither are the hosted contact center solutions. As the market is still evolving, leading providers are moving toward a common set of capabilities that includes call routing and queuing, interactive voice response, dialing, computer telephony integration and recording. A few of the vendors have taken an all-in-one approach and have started to include modules for the applications most commonly used by contact centers, such as workforce management, quality assurance, surveying, performance management, coaching and knowledge management. Get applications for workforce management, quality assurance, surveying, performance management, coaching, and knowledge management Each of the hosted vendors has a different packaging and pricing strategy. Some of the vendors give all users their entire set of modules, while others offer standard capabilities and then sell optional add-on modules for a fee. Some of the hosted contact center infrastructure vendors partner to deliver certain functional capabilities; they generally assume responsibility for supporting these modules because they run on their hosted platforms. In fact, a number of the hosted contact center infrastructure providers offer some of the most competitive and functionally rich solutions in the contact center market. This is one of the most exciting aspects of this sector; the range of choices available to users has never been greater DMG Consulting, LLC 5 Hosted Contact Center Solutions

6 Concern #3: Hosted contact centers solutions are inflexible and not customizable The Reality: Based on the findings of DMG Consulting s customer reference calls, the opposite is true. In general, end users consider the hosted vendors and solutions to be very flexible and scalable, although there are significant differences among hosted contact center providers, just as there are among the premise-based competitors. There are a couple of aspects of the flexibility issue that prospects should address when making a selection. The first is ease of setting up and modifying the application, and the second is the vendor s flexibility in making upgrades to their solution. A major advantage that hosting vendors have over premise-based providers is the ease with which they can offer new functionality. Hosting vendors simply load up new software, making it immediately available, as compared to premise-based vendors who either ship out upgrades on a CD or have customers download them from a support site. In both scenarios, end user involvement is required to integrate and apply the enhancements in their operating environment. Just as prospects looking to purchase premise-based solutions can negotiate system enhancements as part of their purchase agreement (along with delivery time frames), hosting customers can do the same. Managing the relationship with the vendor is always an important aspect of using a third-party application, whether it is premisebased or SaaS. Hosted solutions are also highly scalable and allow users to add and reduce contact center functionality as needed. This enables users to meet cyclical or seasonal volume peaks and valleys, paying for only as much capacity as they use. Concern #4: Hosted contact center implementations and integrations are more difficult than premise-based initiatives The Reality: Few integrations are easy, whether the solutions are premise-based or hosted. Fortunately, some of the hosted contact center platforms have been built using newer, more standards-based and open technology than many of the older premisebased contact center offerings. The more standards-based and open the underlying system, the easier the integration. And, some of the hosted contact center offerings are built upon a premise-based contact center system, so that they cannot be any harder to integrate than their underlying core technology. Hosted solution vendors are highly motivated to get their offerings up and running as quickly as possible because they do not earn revenue until the system is in production. Additionally, end users have made it clear that a primary reason for selecting a hosted offering is because they do not have the money to pay for an expensive and lengthy implementation. While it took the hosting vendors a few years to respond appropriately, most are now doing a very good job of keeping their implementation and integration costs down. Many of the hosted vendors offer fixed implementation and integration fees that compare very favorably to the cost of premised-based efforts. This is another reason why the hosting vendors are highly committed to performing rapid integrations and efficient implementations DMG Consulting, LLC 6 Hosted Contact Center Solutions

7 Concern #5: Hosting has a higher total cost of ownership than premise-based solutions The Reality: Many chief financial officers prefer to invest in hosted solutions rather than purchasing licenses for systems and applications. Hosted solutions require no capital investment, no or low implementation and integration fees, payments that scale in line with business activity, no support costs, limited risk and obligations, and ongoing investment protection (no need to pay for upgrades). Total cost of ownership (TCO) looks at the cost of an asset or investment over its lifetime. It takes into account the purchase price, cost of internal and external resources to support the solution, hardware costs, maintenance, and upgrade fees. While the numbers vary for every acquisition, in general, DMG Consulting has found that if an enterprise were to conduct a three-year host vs. buy analysis for a contact center solution, assuming no functional (hardware or software) upgrades, the maintenance fee would not increase; where minimal IT and business resources are required to manage the solution, purchasing looks to be less expensive than hosting. However, if the calculation includes the cost of upgrades and a significant amount of internal resources needed to support a premise-based solution, the hosted alternative will often have a lower total cost of ownership. Final thoughts It s not surprising that there are so many misconceptions in the market about hosted contact center infrastructure solutions. The growing acceptance of functionally rich, flexible and responsive SaaS-based offerings that deliver significant benefits has revitalized the contact center competitive landscape. Contact center infrastructure buyers should consider hosted/saas/caas based solutions when making a selection. The numbers tell the story although the final results are not yet in, DMG s preliminary research reveals that in 2009, revenue for hosted based contact center vendors increased by 20% - 30%, while premise-based contact center infrastructure revenue dropped. While capabilities vary among the providers, the hosted contact center infrastructure market is viable and coming on strong DMG Consulting, LLC 7 Hosted Contact Center Solutions

8 DMG Consulting, LLC is a firm specializing in contact centers and real-time analytics. We are a strategic advisor to end users and vendors, large and small. Our mission is to help our clients build world-class contact centers by leveraging technology, process and people. We assist management in optimizing the performance of their contact centers by increasing operational efficiency, providing an outstanding customer experience, enhancing loyalty and increasing sales and profits. And, we help vendors develop products and services that deliver differentiated innovation and benefits that suit the current and future needs of end users. Our actionable strategies and tactics effect change in process and technology to maximize the return from all customer-facing activities sales, marketing and customer service. We provide solutions that pay for themselves in 3 to 9 months and give enterprises a lasting competitive advantage. Interactive Intelligence, Inc. Interactive Intelligence Inc. (Nasdaq: ININ) is a global provider of unified business communications solutions for contact center automation, enterprise IP telephony, and business process automation. The company has developed an all-in-one IP communications software suite that s scalable and standards-based, offering single-platform architecture with inherent multichannel processing to deliver comprehensive applications minus the cost and complexity introduced by multipoint products. Founded in 1994 and backed by more than 3,500 customers worldwide, Interactive Intelligence is an experienced leader delivering a comprehensive solution-set composed of premise-based and on-demand Communications as a Service (CaaS) offerings, including software, hardware, consulting, support, education and implementation DMG Consulting, LLC 8 Hosted Contact Center Solutions

9 The Author Donna Fluss is the founder and President of DMG Consulting, LLC, the leading provider of contact center and analytics research, market analysis and consulting. Ms. Fluss is a recognized thought leader and innovator in contact center and real-time analytics. For over 26 years, she has helped end users build world-class differentiated contact centers and vendors develop high-value solutions for the market. She is the author of the book, The Real-Time Contact Center, the Contact Center QA Guide, the PCI-DSS Guide for Contact Center Managers, and many leading annual industry reports on contact center hosting, IVR, speech analytics, performance management, workforce management, surveying/enterprise feedback management, quality management/liability recording and contact center analytics. Donna is a highly respected speaker whose articles and columns are carried by publications around the world DMG Consulting, LLC 9 Hosted Contact Center Solutions

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