The Lippis Report

Thanks for visiting the Lippis Report. We provide access to thousands of industry white papers, case studies, presentations and podcasts, all you need to do is register. Enjoy!

Until recently, call center technology was relatively static, designed with TDM-based PBXs, automatic call distribution (ACD) and interactive voice response (IVR) systems. With the high cost of acquisition, call centers were affordable mainly to very large enterprises, disregarding the small and mid markets. Not only was the economic barrier of entry high, sometimes in the millions of dollars, but disparate call center technologies convoluted the application and associated networking environment, increasing integration efforts and complexity with back-end corporate databases.

But over the past ten years customer contact interaction has changed significantly. Widespread use of voice mail, e-mail, cell phones and web-based applications has enabled new ways in which corporations can connect with customers and prospects. Customers now want around-the-clock access, independent of both end-point device and communications method. One technology in particular, IP telephony, is fundamentally changing the design for call centers and has transformed a call center into a contact center. IP is providing the ability to share resources, including applications and infrastructure across geographies and in some cases across completely different businesses. IP, in combination with multiple points of customer interaction and channel integration augmented with Customer Relationship Management (CRM) data, is the basis for today´s contact centers. Contact centers deliver robust application support which provides unprecedented customer information and analysis of customer interactions.

There are many options for larger firms to procure and manage a contact center. Corporations can design, build, staff and manage their own contact center(s). They can also choose to outsource the management of their contact centers and/or agent pool(s). But now corporations are able to procure an IP Contact Center through a hosted delivery model which in many cases offers the same functionality as an on-premise or fully outsourced option, but provides excellent risk mitigation and flexibility.

On-Demand Contact Centers

Large Network Service Providers are in a unique position to offer IP Contact Center applications through a hosted delivery model over their MPLS networks. By partnering with vendors like Avaya to offer the application, service providers are offering hosted contact center applications pricing on a per-seat, per-month basis over their network, eliminating most, if not all, up-front cost.

Hosted Contact Center Defined

A hosted contact center can be viewed as a subscription from a service provider to procure bundled contact center services and connectivity for a monthly fee per user.The best versions of the hosted contact center scale seamlessly up and down with usage, allowing businesses to simply add or remove agents to achieve, and pay for, the appropriate capacity. Because business customers don´t need to purchase and manage the equipment themselves, a hosted contact center lowers the barrier of entry both in terms of upfront capital expenditure and internal knowledge required to design, build and manage the solution. And because some of these hosted solutions support very small contact centers, even small- and medium-sized firms can offer the customer service of a larger firm without the capital cost required to build and maintain their own contact center(s).

To deliver the hosted contact center model, application vendors such as Avaya or Contactual Inc., formerly W hite Pajama, provide platforms and applications to outsourcers and service providers who bundle the application with their network and management services. In general, service providers are bullish on their entry into the hosted contact center market, and justifiably so. This market is projected to grow at some 105% Compound Annual Growth Rate (CAGR) between 2004 and 2008. This kind of growth is topped only by the hosted IP telephony market which is targeted to grow at a 132% CAGR over the same period. Behind the huge upswing in hosted contact center spending is the fact that customers see business value in purchasing contact center solutions in a hosted model, because of the low-risk nature of this type of arrangement plus the elimination of acquisition and lower maintenance and operational costs.

Hosted Contact Center Business Drivers

Hosted contact centers offer a myriad of benefits, because they not only offer the latest contact center technology, but the delivery method serves to mitigate risk in several ways.Small- and medium-sized firms can now access the same features as the largest enterprises. That´s not to say hosted contact centers don´t make sense for larger multi-national firms too. Those organizations with operations around the world can leverage the global reach provided within IP-based hosted contact centers to standardize the contact center platform, maximize resource management efficiency, and minimize cost.

With workforces becoming increasingly distributed, IT departments are challenged to improve employee and agent productivity by eliminating the barriers distance creates. IT resources in most companies have been overburdened with shrinking resources and increased expectations. Rapid technology churn has increased the risk of technology obsolescence too, as CIOs have less staff to analyze technologies. Factor in today´s cut-throat competitiveness and uncertain global economy, and you have an unprecedented need to drive customer loyalty and speed to market for new products and services. Hosted IP contact centers address these constraints. Hosted contact center providers are crafting their offerings to address these corporate dynamics. In addition to the business drivers referred to above, perhaps the largest benefit of a hosted IP contact center offering is its ability to mitigate risk - financial, technology/obsolescence, management, integration and business discontinuity jeopardies — which all need to be managed.

Risk Mitigation

Financial Risk Mitigation: Hosted IP contact center offerings are available as turn-key solutions with a monthly usage-based pricing model.This can eliminate major capital outlays, improving cash flow, asset utilization and return on assets, because businesses don´t account for these assets on their books. Furthermore, the hosted solution allows for capacity on demand, which virtually eliminates stranded capital ?¢‚Ǩ‚Äú a significant risk for owners of on-premise contact centers who must deploy equipment for the highest capacity needed year-round. Since the contact center is located at the service provider facility, corporations will realize a variety of financial benefits such as reduction in operational costs, data center space, power, equipment, and management burdens. In the uncertain business times in which we now live, the hosted IP contact center economic model mitigates many of the key financial risks which concern CFOs.

Technology Obsolescence Risk Mitigation:Technology obsolescence is mitigated in a hosted IP contact center because the service provider owns and maintains the contact center solution. For example, Avaya, one of the leaders in providing contact center solutions to service providers, includes free software updates to their service provider customers, which guards against obsolescence for the SPs and the enterprise customers.

Management Risk Mitigation: Agent pool size is a variable in contact center design with most corporations staffing for peak call volume utilization. Business demand and agent pool sizing are multivariable business problems which include factors such as uncertain business climate, macro economics, seasonality, etc. Companies with on-premise contact centers are forced to design, build and pay for the maximum number of agents required all year long. Essentially, they build and pay for peak capacity, even when they don´t need or use it. Hosted contact centers can scale up and down every month, if required, reducing cost by eliminating unused capacity. A hosted contact center is a more scalable solution which ebbs and flows with business demand.

Management and control risk also need to be mitigated by many companies.The perceived trade-off between on-premise and outsourced that corresponds to more or less control respectively is becoming moot. First, many service providers offer service level agreements (SLAs) to ensure availability and performance. Secondly, the modular solutions being deployed by the service providers allow customers to customize contact center functionality to meet their unique business requirements: no longer are hosted solutions a one-size-fits-all.

Integration Risk Mitigation:Since the entire contact center is tested and packaged together in a kit, the service provider becomes a single source provider of hosted contact center solutions made up of best-of-breed equipment vendors, saving customers the arduous task of evaluating, negotiating and testing a complex contact center environment themselves. Skipping this process can be a big time saver for many companies.

The level of integration required to stitch together a best of breed contact center solution can be very complex.System design, vendor review, trials and vendor negotiation process consume IT resources. Small or mid-size firms do not normally have the staff to perform integration or troubleshooting and seldom do they receive the high level of support from their vendors they would like. Hosted contact centers mitigate these risks by being a single point of contact for customers and taking responsibility for most contact center configuration, testing and integration efforts, leaving only the integration between the service and the business’s own back office systems and databases.

Business Discontinuity Risk Mitigation: One of the natural design benefits of contact centers hosted in a service provider´s facilities is disaster recovery through redundancy and security built into their considerable data centers. Service provider facilities are often designed with the highest concern for availability and reliability. Redundancy, security and disaster recovery are provided at the facility and the infrastructure layers. This eliminates the design and cost of contact center business continuity from the corporate IT department. In addition, most corporations can measure, to the dollar, the economic impact of lost contact center time. In some cases, a short time of lost contact center time can be material to the quarterly economic performance of the company.

Hosted Contact Center Leaders

European and Asian service providers are ahead of the pack in offering hosted IP contact centers: with North American and CALA providers closely following with service introductions. As an example, The Philippine Long Distance Telephone Co. (PLDT) launched their PLDT On-Call service, which was powered by Avaya Hosted Contact Center technology, in 2004. PLDT has positioned On-Call for three market segments:

1. New entrants who require an off-the-shelf contact center service;
2. Existing call centers that require additional infrastructure to handle call overflow;
3. Existing call centers that need to replace their existing contact center infrastructure.

The On-Call service offers a managed customer care platform and telecom facilities, reports and even agents if needed. PLDT is responsible for all software and hardware upgrades mitigating the obsolescence risk for customers. The On-Call hosted contact center service is feature-rich, including automatic call distribution, conferencing, paging and intercom, message integration, system management and telephony features. There are over 86 off-the-shelf reports available plus customized reports. Their pricing model is simple: a one-time installation charge plus a monthly rate per agent. The install change can be negotiated based upon the contract term.

The appeal of the hosted contact center is going global, with both large and small service providers in EMEA, APAC and North America joining in. Look for more announcements from US-based service providers over the next six months.