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The Hosted/Cloud-Based Contact Center Infrastructure Market Hits its Stride

by Donna Fluss, DMG Consulting

Hosted, software-as-a-service (SaaS) or cloud-based solutions – whatever you’d like to call them – have caught on in the contact center world. This has happened while some of the market leaders continue to look on skeptically and enter the hosted market too slowly to satisfy many of their customers. Given the pace of adoption for hosted/cloud-based solutions in the technology market, it was inevitable that contact center buyers would participate; the only question was timing. This question was answered in 2011, as adoption of these solutions hit its stride.

Cloud-Based Competitors

The contact center infrastructure market remains somewhat unique, due to the mix of competitors. Contact center infrastructure market leaders, too concerned that the cloud-based model would cannibalize their traditional revenue streams, opened the door to a new set of competitors. End users now have more choices than at any time in the past. These competitors include (in alphabetical order):  8 x 8 (which acquired Contactual), Convergys, EchoPass, Enghouse (which acquired CosmoCom), Five9, inContact, Interactive Intelligence, LiveOps, NewVoiceMedia, Transera, USAN, Verizon, VoltDelta, West, and many more. What’s so interesting about this list of vendors is that only one of the 14 vendors that DMG follows closely in this sector is a traditional contact center infrastructure competitor. This won’t last. In the next 18 to 24 months, market leaders who are now losing deal after deal to hosting vendors they consider “inferior upstarts” will make acquisitions to give them a presence in this booming segment. While it will still take them a while to understand the hosted business model, customer demand will ultimately get them to where they need to be. 

“Upstarts” Deliver Differentiated Offerings

In the meantime, some of these “upstarts” are coming on strong and delivering differentiated functionality and platforms. End users should look for innovation in the area of adaptive routing and broader suites, for example. Cloud-based providers have the great advantage of being able to deliver new capabilities and functionality without having to worry about backwards compatibility with older versions of their solution or upgrade cycles – major and costly concerns for premise-based providers. Without this baggage, these new competitors can quickly ramp up their R&D capabilities and give end users what they want in time frames that premise-based providers are unlikely to be able to match.

Hosting is Still Not for Everyone

Despite the classic benefits of hosted offerings – no major capital outlays, lower start-up costs, more rapid implementations, ease of scaling up and down, no upgrade fees, no need to have in-house support resources, just to mention a few – hosting is still not the right choice for all companies. DMG recommends that any organization considering an acquisition/replacement of a contact center infrastructure solution add cloud-based solution providers to their mix and then conduct a lease (hosting) vs. buy analysis as well as a total cost of ownership analysis. (Keep in mind that this approach should also get premise-based providers to be more price competitive.)

There are situations where it absolutely makes more sense to purchase a contact center solution rather than host it. Organizations that have the resources to maintain a solution and plan to implement it and keep it in place without making significant upgrades for 5 or more years will probably save money by purchasing their solution, and are ideal candidates for the traditional approach. And, despite the claims being made by the hosted providers, companies that require a significant amount of customization are also better off with a premise-based solution. In general, however, it’s a toss-up, and both solution sets – premise-based and hosted – should be considered.

Final Thoughts

When hosting was first conceived and introduced into the contact center market, its primary mission was to “democratize” the contact center world by making these solutions cost-effective for companies of all sizes. This goal has been achieved in a number of countries. Companies of all sizes that want a hosted contact center solution can now find an affordable solution that meets their needs. 

Having achieved its original objective, cloud-based computing is now challenging the market’s status quo. As these vendors are setting their sights on larger implementations with hundreds and possibly even thousands of users, they are making the necessary investments in resources to perform customized integrations, provide experienced professional services and provisioning environments that truly empower their users. In the next five years, the most innovative of the hosted vendors are expected to reach true functional parity and then surpass their premise-based competitors. It’s no longer a question of if this will happen – it’s just a question of when.

DMG Consulting LLC (www.dmgconsult.com) specializes in customer-focused business strategy, operations, and technology for contact centers. DMG helps end users build differentiated contact centers by increasing operational efficiency, providing outstanding customer experiences, enhancing loyalty, and increasing sales and profits.