The Benefits of Modern Customer Service: Moving Your On-Premise Contact Center to the Cloud

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1 The Benefits of Modern Customer Service: Moving Your On-Premise Contact Center to the Cloud Many contact center managers are now deliberating whether to upgrade their traditional systems or start over with cloud-based technology. Recent end-of-life announcements by some contact center vendors and the high costs associated with upgrading to new versions of their systems are forcing the issue for numerous contact centers. Upgrading to new versions of on-premise systems means continuing the same software paradigm that has resulted in today s decision point. The alternative to conventional premise-based contact center systems is one that is cloud-based. Cloud-based contact centers are a better option because they offer lower total cost of ownership, more deployment options and better service results. This Beagle Research Group executive white paper describes these advantages. July 2010

2 Introduction It has become a truism in the software industry that major systems need to be re-thought and re-built about once every decade. Nowhere is this truer than in the contact center where traditional, labor-intensive modes of assisted service phone, and chat are being superseded by multichannel operations that use integrated, labor-saving Web self-service, social media, search engines, knowledge bases and crowdsourcing. Moreover, on-premise legacy call and contact centers were designed for client-server computing and based on a slow and expensive software-coding paradigm. Whether this truism holds in the age of multi-tenant cloud computing bears watching because cloud computing eliminates many of the attributes of legacy software that contribute to obsolescence. The legacy on-premise contact center has reached the point where it needs replacement. When today s legacy on-premise contact center systems were conceived, designed and deployed, social media were not on the radar and so no provision was made for the technology and the changes it wrought in business processes. Consequently, in today s dynamic business environment, where innovation is highly prized, legacy on-premise contact center systems, and their owners, are uniquely exposed. The problems associated with legacy on-premise software that it is hard to change when innovation is called for and that it is expensive to own and operate all apply to conventional call and contact centers. In contrast, the cloud-based call center has removed or significantly simplified these issues to the point that it can out-compete legacy on-premise systems on any dimension. And as this paper will show, cloud-based call and contact centers save upwards of 20 to 30 percent of the five-year total cost of ownership compared with legacy systems. We believe that a cloud-based call and contact center developed on the modern concepts of multi-tenancy and social media present the next logical advance in contact center operations for technological fitness, economic necessity and service rigor. This Beagle Research white paper examines these issues in light of available technology and customer necessity. New Business Challenges and the Modern Contact Center In the years since the legacy on-premise contact center was introduced, there have been numerous changes to business. New technologies for networking and communicating have entered the scene, and people are generally more attuned to using them. Customers have turned to these tools for answers to their service problems. The client-server call center was a solution limited to phone, and chat for handling customer calls, but today s customers use search engines, social media, Wikis and other tools to get their questions answered faster and with greater reliability. This multi-channel approach is both a boon and a challenge to the conventional contact center. It is a boon because it reduces call volumes, but it also challenges the service organization to deliver on multiple fronts. Users of conventional contact centers have tried to stay abreast of changes in the

3 industry by adding functionality. But, as is often the case, these add-on remedies have resulted in complexity layered on complexity and solutions that are hard to manage or change. The accumulation of many changes has resulted in a decision point for many businesses that boils down to determining when to stop investing in the old technology and turn to what s new. End-of-life announcements by some contact center vendors such as Oracle-Siebel have brought that decision to a head. Modern Contact Center Capabilities A modern cloud-based contact center brings together cloud architecture and multi-channel support to provide solutions designed around the tools and techniques needed to compete in today s marketplace. At the same time, it presents a profile of efficiency and cost-effectiveness that is highly desirable in a world that is much more competitive than a decade ago. The following sections describe some of the needs and benefits that a cloud-based contact center delivers. Improved customer service with updated capabilities Contact centers continuously strive for improved agent productivity, which is boosted in three important ways. First, the cloud-based contact center enables service organizations to improve service quality and timeliness by incorporating the latest multi-channel and social media solutions to complement service offerings. For instance, multi-tenant systems are more flexible and configurable than conventional client-server architectures so that user interfaces can evolve with business processes. System evolution drives agent evolution, which can reduce the need for periodic long training sessions. Second, too often older on-premise architectures tie business processes in knots to accommodate the technology. Cloud-based contact centers enable businesses to reconfigure service processes or build new ones and to scale their service offerings to meet demands regardless of size or complexity. Third, the cloud-based contact center provides additional tools such as an integrated knowledgebase and social media connectivity. The knowledgebase serves as a repository for everything that a company knows about servicing customers as well as much of what the customers know and contribute. And the knowledge base is accessible to agents and customers alike through various channels that can include search engines and social media as well as conventional agent interactions. Modern Enterprise 2.0 techniques such as crowdsourcing drive the accumulation, sorting and distribution of the best answers to customer questions. A contact center that connects with customers on social media makes it possible for customers to contribute service ideas that the company can vet, and the same social tools enable wider, faster and less-costly information distribution through all channels. If a customer prefers finding an answer through a search engine or through a social interface, the knowledge base easily enables that kind of information distribution. At the same time, though, the integrated knowledge base is also a resource for agents, enabling them Page 2

4 to access and forward service information through all media touch points, including social media and traditional channels. Leveraging cloud computing platforms and infrastructure Cloud computing s technological underpinnings are significant in areas like security, configurability and customization. Once organizations fully understand cloud benefits, many seriously consider if they could accomplish as much with a premise-based system whether built by a software vendor or developed internally. Cloud computing is, by now, well understood, but it bears reviewing, briefly. All hardware, operating system, database, middleware, application and platform considerations are supplied by resources on the Internet, which presents the customer organization with a streamlined deployment proposition. Scaling the number of users or expanding to other locations, for instance, are simple matters of provisioning. No one at the client organization has to figure out how many open slots are available on a switch and no one has to track the number of software licenses in use and in inventory. When a businessperson makes a decision to expand or contract use, it is a simple matter for an administrator to make an adjustment online. Cloud security provisions are also robust. The top vendors use SaaS 70 Type II networks of mirrored data centers to ensure that data is secure and, in the event of down time for any single element, the redundancy built into the system helps to ensure processing continues. The Business Benefits of a Modern Contact Center Cloud computing, modern channels such as social media and powerful knowledge bases help to lower costs throughout the service organization. Fewer components to manage simplifies IT s role, greater application flexibility reduces time to change applications and speeds upgrades and additional communication channels increase customer involvement in problem resolution. The result is a call and contact center that is less costly to own and operate, better service outcomes and more satisfied customers. Agility Where conventional call centers require significant labor and expertise to deploy, maintain, modify and tune all of the hardware and software components, cloud computing provides a simple Internet connection that handles these issues without user concern. Businesses can spend more of their time and resources servicing customers, innovating new service approaches, developing knowledge base articles and generally focusing more of their resources on the customer rather than on the system. When a company brings out a new product or service, or needs to deploy new contact centers quickly in response to product recalls or disasters, cloud-based contact center technology enables its agents to be ready and able to respond. This increased ability to innovate provides tremendous agility to the business. Page 3

5 Lower total cost of ownership (TCO) Cloud-based contact center implementations are less costly to deploy and they stay cost-effective over time. Scalability, license flexibility and numerous advantages that come from easy and fast configuration and customization may be hard to quantify because they are completely dependent on usage patterns which, naturally, vary from location to location. But if we analyze only the cost of acquisition and five-year deployment costs, a clear picture emerges nonetheless. By our estimates, a cloud-based contact center is more cost-effective at all deployment sizes (see appendix) from very small contact centers to some of the largest. Figure 1 shows the five-year total cost of ownership comparison between a typical legacy contact center and a modern cloud-based contact center with 1,000 seats. Notice that the middle years two through four are slightly more expensive with cloud computing. However, the slight additional cost is still lower overall compared to the on-premise system with its high up-front costs and substantial upgrade costs in year five. Of course, even this modeling only presents a static view of the situation. What Figure 1 Five-year TCO comparison: On-Premise vs. Cloud-Based Call Center Systems - 1,000 Seats On Premise Cloud Based On Premise Cloud Based On Premise Cloud Based On Premise Cloud Based On Premise Cloud Based License Fees Hardware/Infrastr. Maint. Fees Personnel Costs 0 Year 1 Year2 Year 3 Year 4 Year 5 Source: Beagle Research Group, July 2010 Page 4

6 it does not show directly is the cost avoidance when an organization drops seats to adjust for seasonal variations in demand, for example. The cloud s continuously variable provisioning means a contact center no longer has to have important components or licenses in inventory to handle peak demand. When Upgrading to a Cloud-Based Contact Center Everything wears out eventually. The complication with information systems is that they continue running well beyond their useful lives so it is sometimes hard to justify a new implementation based on age. But although the technology may continue to work, in many cases the legacy contact center system has become obsolete, a latter-day antique. When considering upgrading or replacing a legacy contact center system, you need to evaluate additional metrics beyond simply whether or not the current system still functions. Here are some ideas to keep in mind as you contemplate your next move in call center information systems: 1. Take a cold analytic look at all aspects of your current implementation. It might be hard to ignore the time, effort and expense that went into your current deployment, but rationally speaking, the only thing that counts is the future. 2. Realistically evaluate costs. If your company currently hosts the contact center, then you have hardware, operating system, database and a variety of middleware, application and labor costs to consider. Because you can t easily buy a 0.5 FTE, your labor costs may be comingled with other IT responsibilities. You don t need a to-the-penny accounting, but you should strive to be as accurate as possible. Also, there may be hardware in mid-life cycle that you wish to preserve in a new conventional system. That s fine, but make sure to include replacement costs in your five-year projection. Lastly, the most difficult part of cost evaluation is provisioning for the future because you don t know what the future holds. Nonetheless, some trends are apparent, like the trend for agents to work remotely either at home or at satellite locations. You ll need to provision for things like that which cloud-based contact centers do automatically. In contrast, the costs for a cloud-based contact center deployment are neatly summed up into a single bill. Given your ability to add and delete users as needed, there s more flexibility in provisioning your contact center, so take advantage of it. If you have a seasonal business, budget for the slow times by having fewer seats as well as for the busy season. Also, try to get a sense from your current vendor of the costs for upgrading within the product family. If upgrade projects require additional personnel or investment in new infrastructure, these costs need to be factored in. With cloud computing, upgrades are automatic throughout the year and there is no concept of a separate upgrade. 3. Get advice from others by networking with those who have already moved to the cloud. Their experiences can be invaluable, especially when Page 5

7 it comes to hearing about their realistic results. Your peers had many of the same issues you have, so ask about everything that s on your mind. 4. Get familiar with the underlying platform. You don t need to know how to make a watch to understand one, but knowing that it is mechanical tells you it will need daily winding. In the same way, a call center system based on the same technology you are now using will have the same issues you have now and will age in a similar way. A cloud-based contact center will save you from many of the issues you now face with your legacy system. Find out how the cloud platform differs in the important areas of deployment, upgrade and maintenance. You can, and should, put a price on that. 5. Set realistic goals and hold to them. Many years ago we researched why so many CRM system deployments failed. Our surprising finding was that the majority of customers had failed to perform even a rudimentary needs analysis. Without that, and without the goal setting that goes with this analysis, the companies with failing deployments had no basis for claiming a failure, but they didn t feel good about what they had achieved either. It s critical whenever deploying a new system to understand your starting point and to set goals for improvement. If you can t set improvement goals, why spend the money? The Service Cloud from Salesforce.com Salesforce.com s Service Cloud is a good example of a modern, cloud-based contact center solution, and it has been rated very highly by numerous industry experts; in fact, Gartner placed salesforce.com in the Leaders Quadrant in its recent Magic Quadrant for CRM Customer Service Contact Centers report. The Service Cloud provides the attributes and benefits of a modern cloud-based contact center discussed in this paper, including Web self-service, a public knowledge base, and social media integration with Facebook and Twitter. But in addition, the Service Cloud goes several steps further through its integration with a complete CRM package and its enhanced system management. The Service Cloud is part of a full cloud-based front office system, and this integration ensures that all users have a consistent understanding of the customer. For instance, salespeople can easily see what is happening with their customers, and executives can monitor their business through configurable dashboards. In addition the Service Cloud offers an advanced multi-tenant architecture in which companies leverage shared services from a powerful cloud-based infrastructure. Among the many benefits, all companies are on the same version of software and receive upgrades and new feature innovations instantaneously. In addition, a new management feature is being introduced to provide access to data during system upgrades, further improving availability and performance over conventional rival systems. A new feature, Salesforce Chatter, makes it easy for anyone in the organization to subscribe to real-time feeds about a customer, a service issue, a sector of the business or any object tracked in Chatter. Contact centers can use Chatter to proactively swarm on challenging cases and collaborate on Page 6

8 potential solutions. This new capability makes it possible for an organization to collaborate and quickly respond whenever a need surfaces. Conclusion Upgrading and modernizing a contact center should not be a big decision, but for many organizations using legacy systems, it is. Cloud-based contact center technology has raced ahead of the conventional systems employed by many companies today. The cloud-based contact center represents a significant improvement in tools, methods, business processes and affordability over conventional solutions. Businesses contemplating their next move in contact center systems would be wise to evaluate the benefits of cloud-based systems side-by-side with on-premise replacements. In the process, they may discover that the cloud offers a superior solution and an architecture that will make the on-premise upgrade a thing of the past. Page 7

9 Appendix The cloud-based call center represents a good value for most organizations. Here we provide some data on which we based our comparisons and drew the conclusion that cloud-based call centers represent a good value. Table 1 shows our basic assumptions for such essentials as hardware, software, labor and maintenance through five years of ownership for a conventional 1,000 seat on-premise contact center. This model also assumes an upgrade in year five, which requires additional personnel for re-implementation and training. As you can see, the total cost for 1,000 seats over five years is over $11 million. Table 1 Five-year costs for a conventional on-premise contact center - 1,000 seats. Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost Application License Costs $2,000,000 $0 $0 $0 $0 $2,000,000 (CRM + add-ons) Vendor Support & $440,000 $440,000 $440,000 $440,000 $440,000 $2,200,000 Maintenance Fees (18-23%) Implementation Costs: $2,000,000 $0 $0 $0 $1,000,000 $3,000,000 Initial deployment + upgrades Hardware (procure, $200,000 $0 $0 $0 $100,000 $300,000 prepare, test. provision) IT Infrastructure $100,000 $100,000 $100,000 $100,000 $100,000 $500,000 Maintenance & Support Application Admin, $400,000 $400,000 $400,000 $400,000 $400,000 $2,000,000 Maintenance & Support User Training & Ramp Up $1,200,000 $0 $0 $0 $300,000 $1,500,000 Total On-Premise Costs $6,340,000 $940,000 $940,000 $940,000 $2, $11,500,000 Source: Beagle Research Group, July 2010 Page 8

10 Table 2 Table 2 shows the same basic assumptions for a cloud-based contact center. Cloud contact centers derive much of their savings from the many things customers do not pay for because they are included in the basic fee. Additionally, because upgrades are automatic with the cloud-based contact center, companies can avoid substantial personnel costs after the initial implementation. Table 2 Five-year costs for a cloud-based contact center - 1,000 seats. Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost Application Subscription $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $6,000,000 Costs (CRM + add-ons) Vendor Support & $0 $0 $0 $0 $0 $0 Maintenance Fees Implementation Costs: $1,200,000 $0 $0 $0 $0 $1,200,000 Initial deployment + upgrades Hardware (procure, $0 $0 $0 $0 $0 $0 prepare, test. provision) IT Infrastructure $0 $0 $0 $0 $0 $0 Maintenance & Support Application Admin, $160,000 $160,000 $160,000 $160,000 $160,000 $800,000 Maintenance & Support User Training & Ramp Up $400,000 $0 $0 $0 $0 $400,000 Total Cloud-Based Costs $2,960,000 $1,360,000 $1,360,000 $1,360,000 $1,360,000 $8,400,000 Source: Beagle Research Group, July 2010 Page 9

11 Table 3 Table 3 provides cost comparisons for a variety of deployments based on the assumptions of Tables 1 and 2. Note that savings for cloud contact centers range from 50 percent to 22 percent. Also, larger contact center often possess greater economies of scale for personnel and hardware investments than smaller contact centers, providing the latter with greater percentage-based savings. Table 3 Cost comparisons for different seat levels. Number of users Total cost Conventional Total cost Service Cloud Savings 100 $3,130,000 $1,560,000 50% 500 $6,750,000 $4,600,000 32% 1,000 $11,500,000 $8,400,000 27% 2,500 $27,750,000 $20,600,000 26% 5,000 $51,500,000 $39,600,000 23% 10,000 $99,000,000 $77,600,000 22% Source: Beagle Research Group, July 2010 Table 4 Finally, Table 4 provides a comparison in per-seat cost over the five-year span of this analysis. Again, greater economies of scale in personnel and hardware help larger contact centers realize a lower overall cost per seat. Table 4 Five-year cost per seat comparison. Number of users Conventional CC Service Cloud 100 $31,300 $15, $17,500 $9,200 1,000 $11,500 $8,400 2,500 $11,100 $8,240 5,000 $10,300 $7,920 10,000 $9,900 $7,760 Source: Beagle Research Group, July 2010 Page 10