• March 17, 2011
  • By Ian Jacobs, vice president and research director, Forrester Research

Hosted Contact Centers Poised for Growth

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At the risk of sounding like the proverbial “boy who cried wolf,” I believe the market for hosted contact center services will take off soon. For several years, hosted contact center service providers—and plenty of analysts—have argued that the promise of reduced capital expenditures would entice enterprises to cut the cord and switch from on-premises technology to hosted solutions. But it didn’t happen.

The recession that slammed into mature contact center markets, such as those in the United States, the United Kingdom, and France, slowed deployments of all types of technology, regardless of methodology. Contact centers were consistently forced to hear that tired warhorse of corporate life: Do more with less. Now that spending has started to free up, however, pent-up demand for customer service-focused projects will drive enterprises toward the rapid deployments that are possible with hosted contact centers.

My firm forecasts the annual growth rate for hosted contact center agent positions will grow by more than 45 percent in 2011. In North America, home of most of the large hosted contact center deployments, that figure comes in at 63.1 percent. The explosive growth makes sense given recent history: The height of the recession marked the nadir of IT spending, as enterprises had to defer IT projects related to customer service. Now the pressure is on to kick-start projects.

Many contact center managers and IT purchasing decision makers still maintain a recessionary mind-set in which cost reduction is the number one strategic goal. Hosted contact centers can help on the cost front; reductions in toll charges as well as administration and maintenance are hallmarks of hosted applications. Some companies have even reduced power consumption.

Those benefits, as well as the rapid deployment possible with a hosted service, however, are strictly short term. Once enterprises have opened the doors to new capital-intensive projects, IT decision makers will have the latitude to make purchasing decisions based on more than just the ability to turn on a service quickly. To create a sticky service, one for which enterprises will continue to pay month after month, service providers must highlight the ways in which hosted contact center service deployments are ideal opportunities for business transformation, as well as tools to directly improve relationships with customers.

Pricing of enterprise applications has been a murky art. Hosted contact centers, on the other hand, let enterprises create a predictable IT spend, letting them experiment with new programs and processes. Also, providers have begun to experiment with multiple pricing models for hosted contact center services: concurrent users; named users; per seat/per month; per minute; per transaction/call; and licenses for non-contact center agents, such as branch or retail employees. That allows enterprises to transform their customer support organizations into new configurations. For example, those businesses could hire social-savvy agents using a work-at-home model or recruit partners in the support process.

Additionally, savvy companies will soon figure out that by off-loading the management and administration of the contact center infrastructure to a service provider, those organizations would free up some intelligent people to work on other things.
One contact center that went to a hosted model, for example, created a program to automate collections of small debts—so small that a single outbound call from an agent would cost more than the value of the debt. But that enterprise used its people to devise a way to make that micro-collection process possible. There are other ways that hosted contact centers allow enterprises to focus on transformative issues. Those enterprises are doing new things, not the same old thing in a hosted environment.

Hosted contact center service providers must hammer home those benefits, because it is the ability to help enterprises transform into more customer service-obsessed companies that will keep the monthly checks coming.

Ian Jacobs (ian.jacobs@ovum.com) is a senior analyst at Ovum. He can be reached on Twitter as @iangjacobs.

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