Traditionally, contact centers used to set-up their whole infrastructure within the premise, but in recent years, cloud contact centers have become more popular. Most of the contact centers have shifted to the cloud, and many more are planning for it. According to a market report, the cloud contact center market is expected to grow from USD 6.80 billion in 2017 to USD 20.93 billion by 2022, at a compound annual growth rate (CAGR) of 25.2%.
When companies think of investing in a business, the primary concern arises about the costs. Various call centers are doubtful regarding the cost-effectiveness of migration to the cloud for extended periods. However, cloud-hosting comes out as a cheaper decision in an initial couple of years. When estimated for a longer duration, many other factors like security, technology, and flexibility comes into the picture which complicates the decision making in case of a contact center.
Generally, the total cost of ownership (TCO) of a business is an estimated cost which gives an idea about the direct and indirect costs. Direct cost includes data storage cost, software installation cost, cost of land equipment supports cost and regulatory requirements. On the other hand, indirect cost consists of customer support, internal tickets, upgrades, and releases.
On-premise and cloud-based contact centers have different parameters in the calculation of total cost of ownership. So, before understanding TCO for on-premise and cloud contact center, let’s understand both the contact centers in brief.
On-Premise Contact Centers:
These contact centers are traditional and hardware-based and hence require upgrades every few years which makes it costly. For on-premise contact center, a dedicated communication server is needed within the premises.
Cloud Contact Centers:
The third-party service providers host the contact centers in the cloud. Users can easily access the services via web login on their computer or mobile. The service provider takes care of hosted servers’ maintenance.
Now, let’s see a comparison between the total cost of ownership for on-premise and cloud contact centers.
Cloud vs. On-Premise Contact Centers:
On-premise contact centers take time to set-up hardware and software infrastructure. Cloud-hosted call center does not need to maintain the equipment, and the third-party service provider takes care of all hardware assembly so that business operations run smoothly. The complete TCO calculation has many factors, let’s find out which factors make a difference in the total cost of ownership of contact centers:
1. Security Cost:
Cloud contact centers have a lower price for data security in comparison to the on-premise contact center because on-premise contact centers need to maintain their equipment. However, in the case of a cloud-based contact center, it doesn’t have to worry about security costs. A third-party service provider takes care of all costs. Some of the standard costs described below:
Data Storage Cost: –
This includes maintenance of on-premise servers along with data storage expenses.
Software Installation Cost: –
This includes software installation, updating and troubleshooting cost.
Cost of Land: –
On-premise contact centers need at least one physical location. However, in the case of geographical expansion, multiple sites are required.
Equipment Support Cost: –
It includes the cost of access controls, secured facility, electricity backup, and temperature control.
Regulatory Requirements: –
In this, compliance costs which are specific to industry regulations are involved.
It reduces the nuances of daily operations and helps to focus on more critical areas of agent performance and customer experience.
2. Staffing Cost:
An On-premise contact center is a staff-based place where employees manage all operations. It requires different departments to run the contact center effectively. The costs factors involved in staffing are mentioned below:
Customer Support: –
To run an active contact center 24×7 customer support is a crucial element. It requires the availability of customer support team 24×7 to resolve customer’s queries.
Internal Tickets: –
Apart from customer queries or requests, day to day, several internal tickets generated by agents which include adding, installing, changing or removing agent logins as well.
Upgrades and Releases: –
All technology upgrades and new releases come under this. This need to be planned effectively for new features, security updates and bug fixes. Regular updating of the technology can take up much time. Failure to upgrade may result in increased cost for businesses in the longer run.
Key Account Management: –
On-premise contact centers need a robust system for the vendor management so that the managers can well manage manufacturers, telecom providers, maintenance and support team.
Recovery and Continuity: –
Businesses need to have a backup of their data in case of any system failure or disasters. For which, they store data in multiple locations for recovery. So, the storage of data at various locations is again a costly operation.
OPEX vs. CAPEX:
On-premise contact center takes massive CAPEX (capital expenditure), which means it requires a considerable cost for the contact center deployment. Besides, maintenance costs paid regularly can increase over time.
On the other hand, cloud contact centers are OPEX (operational expenditure) intensive; this means that it needs a per-user fee which is easier to pay in regular periods. Operating costs can easily analyze over the time according to the number of users. OPEX is essential because it fragments the money in small sections and avoids paying in big chunks.
It is necessary to find the right fit solution for business so that it can sustain for a long time, helps to grow and be cost-effective simultaneously. Let’s analyze the total cost of ownership (TCO) for the cloud-based and on-premise contact center:
Analysis of Total Cost of Ownership:
To explain the full TCO, contact center should include various components with their relative weightage. Meanwhile, a clear demarcation is essential between cloud-based and on-premise contact center.
According to the Aberdeen research (2013), cloud contact center can save 27% than their premise-based counterparts as their average costs are $112.5 million compared to $155 million for the latter.
As explained in the previous section, the significant advantages of the cloud-based contact center to the on-premise contact center listed below:
|Quick, Less costly||Tedious, Costly|
|In line with industry||Complicated, Cost inclusive|
Contact Center Efficiency
In a cloud-based or hosted contact center, all agents are available over the cloud. It becomes easier to perform more efficiently towards business advantages. It can’t be realized for an on-premise contact center. A centralized point of access can route calls more accurately to the most appropriate agents based on their relative skills matching and customer needs. Let’s understand the benefits of hosting below.
Lower Average Speed of Answer (ASA):
By putting many agents together to handle the calls results in increased productivity as well as cutting the call queue and holding time.
Lower Abandonment Rate (ABA):
The cloud contact centers help to lower the abandonment rate.
Enhanced Customer Service Levels (CSL):
When the calls route to the right agents, customers feel more satisfied. Agents have access to customer history including customer concerns and preferences. Hence, CSL gets improved which includes attending, acknowledging or resolving customer queries.
Increase First Contact Resolution (FCR):
Routing of customer calls to the available resource and best-qualified agents for handling their queries, increase chances of first contact resolution (FCR).
According to a marketing study – Ambidextrous behavior, inbound call centers incorporating omnichannel generate a minimum of 10% of total revenue from the new product sale and services.
Cloud contact center enable companies to respond more quickly and effectively while delivering the better overall experience. According to the Aberdeen group, companies opting for a cloud model are therefore more likely to achieve favorable business results than their premise-based counterparts.
Impact of Cloud on Contact Centers:
As shown below, contact centers that use a cloud-based infrastructure are more likely than their peers to integrate with the CRM system. Once the agent can identify the channel of the previous conversation of a customer, they can utilize that information to recognize the determining factors in the further customer response.
From Customer Satisfaction to Loyalty:
Forrester Research says that a 10 percent advancement in customer experience of a company can move into more than 1 billion dollars in increased revenue and other benefits. On the other side, only one or two negative interactions can cause customers to switch the brand. Also according to this research, around one-third of a company’s customers face poor experiences that are equivalent to lost revenue of millions of dollars.
Enhancing the Agent Experience:
To gain better customer experience, it is necessary to improve the agent experience. Agents should have access to the right information and tools to handle customer queries. Though the agent experience is intangible to measure, it is nevertheless critical for calculating their productivity and satisfaction, ultimately measuring customer satisfaction.
All of the above factors can ease the calculation of the total cost of ownership of a contact center. Cloud contact centers are scalable and secure to set up without taking care of technical support and cloud services. Whereas, on-premise contact centers have to spend more on starting a business because of huge CapEx and infrastructure requirements in the beginning. Understanding TCO for either of the contact centers over a considerable period can help in crucial business decisions.