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Application Service Providers and the Changing Landscape for Contact Center Managers

 

Provided by:

Gregory F. Borton

Primary Matters, Inc.

(902) 794-7095

 

December 21, 2000

 

Contact Center Delights and Nightmares

I have been in the customer contact business for a long time – long enough to remember simpler times when IBM mainframes with 3270 terminals provided the sole applications support. Over the years, I've done many consulting projects, built a software company selling products, designed and managed systems integration projects, pursued vendor selection, created budgets, and defined skill requirements. There has never been a dull moment.

One of the reasons contact centers are so interesting to me is their complexity. It requires me to know a lot about personnel management, ten or fifteen major technology categories, a variety of voice and data services, outsourcing alternatives, fail-over and disaster recovery, and budgeting. Activity reports alone are enough to cross my eyes. And we haven't even talked about managing customer relationships and increasing sales. I don't think any other corporate function has so many interesting areas in which to learn, work, and provide opportunities for success.

The backside of this fascinating ‘mirror' is the nightmare. Look at all the different challenges waiting to snare the contact center manager:

  • Everyone monitors your performance — especially quality of service goals.
  • Everyone expects you to support the latest Internet technologies yesterday — e.g., e-mail, Web-based self-service, Web chat, Co-Browse, etc.
  • Everybody thinks your budget should be lower.
  • Even when you have the budget, tight labor markets make skilled resources difficult to find.
  • Your colleagues in other parts of the organization don't understand the effect their actions have on your operations. (Did you get advanced warning of the marketing promotion that increased call volumes 25%?)
  • You must familiarize yourself with dozens of technologies and hundreds of vendors in order to make good decisions.
  • You have to manage vendors, system integrators, and software developers.
  • You have to deal with consultants!

No wonder contact center managers are becoming an endangered species. This environment can be a nightmare!

Relief Is At Hand

As part of the Web's continuing expansion into voice communications, a new group of Application Service Providers (ASPs) are bringing Web-enabled customer contact solutions to market. They provide a rich applications environment with the convenience of a managed service offering. They can augment or replace existing technologies — e.g., ACD, IVR, CTI, management reporting — as well as deliver advanced Web communications tools.

ASPs offer the potential to save hundreds of thousands in capital expenditures for equipment, software and systems integration. They allow you to realize material savings in operations management and system support personnel. They enable you to shed a host of operational worries, giving you time to focus on matters of strategic importance. In my opinion, ASP solutions should be taken very seriously — especially if you are establishing a new contact center.

What Is A Customer Contact ASP?

A Customer Contact ASP offers telephony services, software applications, and management tools that are delivered using the World Wide Web . Their service offerings are the foundation for excellence in customer care and include:

  • Basic inbound and outbound call management, including network-based call queuing, ANI- and DNIS-based call routing, conditional routing (based on contact center status and current activity), outbound dialing, and outbound notification.
  • Integrated Voice Response (IVR) for automated greetings and announcements, caller-directed call routing, and self-service applications (e.g., bank balances, order entry, delivery status).
  • Computer Telephony Integration (CTI) for skills-based routing, customized call handling based on customer profile information, “screen pop”, coordinated voice/data call transfer and call conferencing, and centralized resource monitoring and management reporting.
  • Web-based collaboration services including Web Chat, Co-Browse, Web seminars, Web forms, and Click-to-Call service.
  • Media-independent contact management tools which address contact prioritization, workflow and tracking across all modes of contact — real-time voice, voice mail, e-mail, Web-based collaboration, and facsimile.
  • Hosted customer service applications including Customer Relationship Management (CRM), Case Management, Knowledge Management, Workforce Management, and Agent Quality Monitoring.
  • Integrated Management Reports for activity across all media types —both real time as well as historical reporting.

An integrated system management environment that encompasses all administrative functions (e.g., creating agent profiles, specifying queuing parameters, establishing call routing instructions), system monitoring functions (e.g., resource utilization, alarms), and maintenance routines.

How Are ASP Solutions Built?

Some ASPs canvas the marketplace to identify “best of breed” applications for each element of their service offering. The ASP assumes the role of system integrator, linking the individual components into a seamless applications suite. On the plus side, this approach leverages the expertise and development resources of a broad range of suppliers, and enables rapid deployment of new service offerings. However, the ASP sacrifices control of its service offerings. This choice of feature-richness over control makes the most sense for ASPs targeting the “high end” of the market.

Other ASPs choose to develop their applications in-house and/or make selected acquisitions. As before, the ASP melds both in-house developed and acquired solutions into an integrated offering. In the short run, they deliver a comparably broad spectrum of applications; however, each application may not be as fully featured as the “best of breed” alternative. However, the ASP gains control of the environment. In addition, service costs can be trimmed because the ASP does not have to factor in royalty payments to third parties. This approach is favored by ASPs whose target markets are smaller contact centers and start-up environments. Here, the immediate presence of every “bell and whistle” is less important.

All ASPs endeavor to provide a single user interface at the agent desktop. This feature brings relief to agents, supervisors, and managers who currently face an array of different applications, each with a different look and feel, a different feature set (with some redundancy), separate user IDs and passwords, and independent reports. The ASP offering has the appearance of a single, multi-faceted application, but with the underpinnings of several discrete applications.

How Are Their Services Delivered?

Exhibit I provides a high level view of the ASP environment. Note that:

  • The enterprise manages its staff of customer contact personnel. The ASP supports agents in formal contact centers, in small offices, or in home offices.
  • The enterprise maintains its customer database and “back office” systems. The ASP builds links to these systems in support of customized contact routing and transaction processing applications.
  • The ASP provisions and hosts the contact center applications software. Host sites are designed for high availability and reliability. They may be built by the ASP or provisioned using third party services, such as Exodus or Abovenet.
  • The ASP assumes responsibility for applications development, system integration, release management, operations management, and help desk.

The World Wide Web is at the heart of the ASP's communications infrastructure. It provides the means to link enterprise-housed databases and “back office” systems to the ASP-hosted contact center applications. This link is used in custom call routing, in self-service transaction processing applications, and in coordinated voice and data delivery to the agent desktop (“screen pop”). The Web is also the means through which contact center personnel access the rich applications content housed at the ASP. Connections are generally managed by Internet Service Providers, with preference for entities that provide service level guarantees (e.g., Abovenet). Some ASPs install dedicated T1 circuits between their host sites and the client LANs to further ensure high performance. At present, there is disagreement among the players as to whether or not this extra measure is worth the effort.

ASPs are starting to use the Web to carry voice traffic using Voice-over-IP. For example, remote agents can be supported with a single high bandwidth communications channel that carries both voice and data traffic. As long as agents have links to the Web and PCs with headsets, they become full-fledged members of the contact center.


Exhibit I: Overview of an ASP

 

For both historical and technical reasons, the Public Switched Telephone Network (PSTN) and traditional voice communications services will continue to play a major role for years to come. ASPs support hybrid environments, bridging circuit-switched and Voice-over-IP connections.

Is An ASP Right For My New Contact Center?

If you are creating a new contact center, I can make a strong argument for using an ASP. You can save time, talent, and money without sacrificing function. And it's a whole lot less painful. Let me explain why.

Right from the start, it is easy to underestimate the amount of upper management time it's going to take to build your own center. Your organization must learn and understand multiple technologies, find and listen to multiple vendors, check references, make decisions, negotiate contracts, deal with the legal department, manage design efforts, and ensure that your business requirements are embodied in the customized solution. At a minimum, you are looking at one full-time project manager plus a quarter- to half-time of several other managers for at least six months. You could easily spend $80,000 to $200,000 on consultants. And you may need to hire software engineers to address system integration. Suffice it to say, it's an awful lot of work.

And it is risky. If you are opening a center supporting the Web, you may become enamored of the latest technologies. But many of these solutions are more promise than reality, backed by field organizations that have yet to be battle-tested. This doesn't mean that some of them are not great and well worth the effort. But understand that it is likely to take much longer to get it working the way you want than you initially imagine.

You have to choose your CRM solution and design your user interface — a minimum of a 1- to 2-month effort by a small team, even if you enforce a discipline of limited changes.

You may need to delay system integration efforts for CTI and management reporting. If you try to do too much too quickly, you will jeopardize your ability to acquire, install, test and deploy the essential technologies in the allotted time frame.

Finance and legal need to get involved in contract negotiations with four to ten vendors. Terms must be agreed upon and documents prepared, proofread, approved, and signed. This activity consumes a great deal of management time and energy. It can eat into precious calendar time that could otherwise be spent planning, implementing, and testing.

You have to hire operations personnel. Good ones are hard to find. Even the very best require training and a certain amount of hands-on experience with each product offering before they can make the technology “sing”. And with each software upgrade, there will be new experiences to absorb — some of which are less than pleasant.

Perhaps the biggest risk is the time line. It will always take longer than you anticipate because there are surprises. If you think it will take three months, tell your management group it will take six. While it's possible to launch a center in three months, plan on a minimalist approach — only one or two of the most critical components (e.g., voice calls and PCs that have the customer database and nothing else.)

Thus, the ASP opportunity begs you to ask these questions:

  • Are the contact center technologies so central to meeting your business goals that you should make a major investment in time and money to build your own solution?
  • Or, does a full-service ASP come “close enough” to offload this burden and allow you to focus on superior customer care?

Is There A Place For An ASP In An Established Center?

For the established contact center, the embedded investment in technology will add a few wrinkles to the evaluation process. However, the decision to use an ASP is not an “all or nothing” argument. They can certainly support some of your needs, and can integrate their services with your in-house environment. Here are a few areas to consider.

On the call management front, ASPs create virtual contact centers out of the disbursed agent pools. Any call can be routed to any agent, based on enterprise-defined business rules. Moreover, management reports and real-time statistics for all agents and activities are merged into a common framework. If you are looking to create stronger linkages between your contact centers and/or remote agents, an ASP could provide the glue.

If you need to add Web-based collaboration tools, you might consider deploying them through an ASP. You can leverage their technical expertise and operational experience. You can bring new services to market faster. And nothing precludes you from bringing these functions in-house downstream if you really feel it is in your best interest to do so.

Finally, the value of an integrated applications environment at the agent desktop should not be underestimated. Training requirements and costs are lowered significantly. Call processing times are reduced; agents are not bouncing in and out of different systems to respond to caller requests and queries. This translates into more efficient use of agent resources and higher caller satisfaction. And the enterprise saves thousands — if not millions — of dollars it would otherwise spend attempting to achieve this level of integration on its own. In all my experience, I have never seen a contact center with the same “single solution look and feel” being offered by the ASPs.

Is It Affordable?

Full featured ASP monthly fees per agent average about $1300. They can go upwards of $2000. Pricing structures include transaction only, subscription only, and a combination of the two. There are tiered pricing options to benefit larger centers, but the drop is not much more than 20% to 25% for incremental agent seats. In addition to the monthly fees, one-time fees up to a maximum of about $35,000 cover initial set-up and system integration.

Cost savings for the ASP solution come in two flavors. First, ASPs can provision services at a cost-per-seat that is far lower than an enterprise's in-house solution. Their software license fees, software development expenses, and system integration costs are amortized across a broad population of users. The singular focus of ASP programmers, system integrators, and service technicians enables them to deploy new applications, diagnose troubles, and execute maintenance functions more efficiently than their multi-function enterprise counterparts. And ASPs can realize economies of scale in hardware provisioning, balance peak load requirements across multiple enterprises, and offer cost effective alternatives for “hot standby” and disaster recovery sites.

Second, ASPs provide the technical support infrastructure to manage contact center applications. Enterprise clients realize hard-dollar savings by streamlining their in-house information technology departments.

Exhibits II provides a “ball park” cost comparison for an in-house provisioned solution versus an ASP. The message is clear — the ASP solution is quite economic. Even if you are able to squeeze costs out of the in-house model, you must ask yourself if the payoff is really worth the sacrifice in management time?   Do you want to bear the risk of system deployment?   Can you achieve the same degree of seamless integration within this budget?   Do you want to burn that much cash building your own center?

These figures also dispel a myth that many of us looking at the ASP market have held – specifically, ASP solutions are mainly for low end, start-up operations. If the ASP companies can maintain the current price levels that they are introducing to the market, there is a strong reason to choose the ASP solution even if you operate a fairly large contact center.

How Do I Evaluate An ASP?

As a starting point, I'll refer back to the feature descriptions presented on page 3 and decide which of these capabilities is most important for immediate consideration, and which you hope to deploy within the next 18 to 24 months. This initial screening will identify the service providers with whom you should entertain discussions. As you evaluate their feature offerings, I would pay particular attention to their system integration capabilities and the presentation of a single user interface at the agent desktop. I would also take note of their support for Voice-over-IP. While some may argue that this technology is not ready for “prime time”, it is surely close enough to warrant a good migration story.

I talked earlier about some ASP models being built around “best of breed” solutions. It appears to be an effective model for bringing advanced capabilities to market quickly. However, the flip side to that argument is that the service providers are dependent on the resources and development talent of third

parties. So, if you are considering one of these offerings, you'd be wise to investigate the organizational and financial stability of the third party solution partners, and take a good look at their future development plans.

As for performance, your service provider should use an Internet Protocol Virtual Private Network (IP VPN) for its backbone communications channel. The public Internet simply cannot provide the requisite quality of service, data integrity, security, and reliability. In addition, their host sites should provide redundancy in key components and communications links with automated fail-over wherever possible. A functional, tested disaster recovery plan should also be in place. Finally, their network capacity should easily accommodate the collective traffic of all of their clients with managed excess for traffic surges. Look at their plans for building out their networks. Find out how nimble they can be in responding to capacity shortfalls.

Finally, it goes without saying that the provider needs solid financial resources adequate to meet its near term cash requirements as well as long term growth objectives. Make sure you look at their historical financial statements and evaluate future projections. Do their expectations for market growth seem reasonable?   Does the organization appear to be ready to take advantage of these opportunities?

A Few Words Of Caution

The Customer Contact ASP marketplace is very new. Only a few full-service ASPs have a sizable customer base in production . However, all of the full-service providers have a lot of customers waiting to be brought on-line. Unfortunately, you can't really determine the “goods, bads, and uglies” of an offering until you see it out there and working. We will all learn a lot in the next 6 months.

The economic argument is highly compelling at this time. But the ASPs will need time and experience to see whether or not their pricing models sustain profits. As they scale into production with multiple clients, they will see if their expectations for contact volumes, resource utilization, and quality of service match reality. There is no guarantee that their prices will remain attractive.

Finally, as an ASP client, you will be subject to the application choices made by your service provider. As new hardware and software solutions “leapfrog” existing offerings, you will not be in the driver's seat with respect to adopting these new technologies. It is still too early to tell how inertial the ASPs will be. It's my guess that they won't introduce change unless they can make it relatively transparent to the client population. Even so, I would argue that an ASP could effect change faster and at lower cost than its in-house counterpart. Again, its technical resources are highly focused and specialized, and the switching costs are born by multiple enterprises.


In Short…

I think ASPs represent an exciting new opportunity in the contact center space. They offer feature-rich managed service solutions that can both alleviate your operational nightmares AND save you money. Your spare moments can be spent crafting strategy rather than collecting technologies.

Aren't they worth your consideration?


Exhibit II:   Cost Comparison

This approach is what is often built for centers using more advanced equipment and software – it is not going overboard! The ASPs high end is comparable or better than what you would obtain by investing in your own high end.

 

Contact Center Size, in Number of Agents

 

5

10

25

50

1 0 0

 

 

 

 

 

 

Total ASP Monthly Cost (at $1300/month declining at high end) (1)

 

$6,500

 

$13,000

 

$32,500

 

$65,000

 

$130,000

 

Build You Own Center:

 

 

 

 

 

 

 

 

 

 

 

  • ACD and Server Investment (2)

 

$100,000

 

$130,000

 

$175,000

 

$450,000

 

$850,000

  • Software Product Investment (2)

 

$35,000

 

$40,000

 

$60,000

 

$100,000

 

$200,000

  • System integration

-

$30,000

$60,000

$200,000

$400,000

 

TOTAL Investment

 

$135,000

 

$200,000

 

$295,000

 

$750,000

 

$1,450,000

 

 

 

 

 

 

Monthly Capital Cost Estimate (3)

 

$5,060

 

$7,500

 

$11,060

 

$28,125

 

$54,375

 

 

 

 

 

 

S/I Upgrade Labor, R&D in support of Center, etc., Monthly Costs (4)

 

 

$6,000

 

 

$6,000

 

 

$12,000

 

 

$40,000

 

 

$60,000

 

 

 

 

 

 

Additional Monthly Management Labor Allocation (5)

 

 

$6,000

 

 

$6,000

 

 

$8,000

 

 

$25,000

 

 

$30,000

 

 

 

 

 

 

Total Monthly Cost if You buy it yourself

 

 

$17,060

 

$19,500

 

$31,060

 

$93,125

 

$144,375

 

 

 

 

 

 

Monthly Savings w / ASP

 

Annual Savings w/ASP

 

3-Year Savings w/ASP

$10,560

 

$126,720

 

$380,160

$6,500

 

$78,000

 

$234,000

$1,440

 

$17,280

 

$51,840

$28,125

 

$337,500

 

$1,012,500

$14,375

 

$172,500

 

$517,500

 

 

 

 

 

 

 

  1. If you take advantage of all high end ASP features, the cost is about $1,300 per month per agent, fully loaded. In some cases, this includes a low-end CRM Solution
  2. This expense includes the ACD, servers, and associated reporting products with no common reports. Telephone wiring, upkeep, installation, room preparation are not included. This does not include a high-end CRM System, only a low-end solution, and not much more. A high-end CRM solution will more than double the investment in software. Thus, the CRM solution in this table is similar to that available from the ASP vendor.
  3. This rough estimate covers depreciation (5 years, maintenance fees or 15% per year, computer room, cost of servers, required version upgrades, etc.). Here it is assumed that the cost of these items is about 45% of the total investment per year.
  4. These monthly costs represent the compensation and fully loaded expenses associated with the personnel and software engineers who acquire systems, do customization and ongoing software support, major software upgrades, and testing. It assumes 1 full-time equivalent (FTE) at 25 agents, 3 FTEs at 50 agents, and 5 FTEs at 100 agents.
  5. Management Labor is for making technology choices, project management, vendor selection, negotiations, etc. Once one reaches 50 agents, this is a full time role. At a hundred agents, it takes two full time manager equivalents.
  6. The telephone service expenses (toll free services) are assumed to be about $0.045 per minute with usage of 110 hours per month per agent.

 

 

About the Author

Gregory Borton is Co-founder and CEO of Primary Matters, Inc. Primary Matters is a software development company focused on the customer contact center discipline. Their proprietary tool, The Contact Center Guide™, provides activity based decision support that enables users to evaluate an existing or proposed contact center and plan for future growth and change.

Prior to forming Primary Matters, Greg was Founder and CEO of Nabnasset Corporation, a Computer Telephony Integration (CTI) middle ware firm that was sold to Quintus Corporation in 1997. Greg is widely regarded as the ‘inventor' of CTI.

 

 


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