Gaining a Detailed View of Cloud vs. Premise Contact Center Total Cost of Ownership (TCO)

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There are a lot of figures randomly tossed around about the total cost of ownership (TCO) for both cloud and premise-based contact center platforms. And, while some of the numbers being reported are factual, on their own the figures don’t provide executives with a comprehensive understanding of the various costs or business opportunities represented by aspects of each type of platform.

Industry estimates on cloud contact center ROI range from 9 percent to 27 percent. Although that’s a wide spectrum, there are a number of IT and operational differences between cloud and premise-based contact center platforms that are required to calculate the true TCO of a contact center. These include the size of a business along with the number of customers being supported, the number of IT personnel needed to maintain a contact center platform along with associated hardware and other IT components, and other factors.

Proprietary research by eLoyalty finds that the ROI related to IT personnel in shifting from a premise-based contact center environment to a cloud platform jumps to as much as a 15 percent reduction in IT personnel costs depending on the number of IT resources that are dedicated to supporting a premise environment. Overall, companies that deploy contact centers in the cloud spend 27 percent less on their annual contact center costs than their peers who rely on premise-based systems, according to a 2013 study by Aberdeen Group. The average size of the contact centers in the Aberdeen study is 252 seats.

eLoyalty has set out to make it easier for decision makers to get a better – and much more detailed – handle on the true TCO of cloud versus premise-based contact center platforms in order to help them make fully informed decisions. In fact, we’re about to publish a white paper based on comprehensive research that we’ve conducted that is supported by research from across the industry.

Critical factors: Speed to deploy and cost

While there are various differences in the TCO of cloud and premise-based contact center platforms, ultimately, the overwhelming benefits of a cloud contact center are speed to deploy and lower costs.

When executives compare cloud versus premise-based contact centers, they need to consider the loss of profits and revenue if it ultimately takes the company three to six months to deploy a premise–based platform. By comparison, a cloud solution is much faster to deploy and can help the company achieve business and productivity results faster.

Meanwhile, another significant financial advantage of shifting to a cloud contact center is the benefit realized by shifting from capital expenditures (CAPEX) for software, servers, etc. to an operating expenditures (OPEX) model. CAPEX typically requires a significant one-time investment in equipment (e.g., $100,000 for software) while there continue to be ongoing support costs for contact center applications along with the servers and other peripheral devices used to support them.

With cloud contact centers, companies don’t have to commit the significant amount of CAPEX as they would with premise-based deployments. Instead, they typically pay a monthly fee while freeing up cash for other purposes.

Our research at eLoyalty has found that cloud contact centers typically drive an 8 percent to 22 percent improvement in first contact resolution rates, depending on the size of the customer support team and the degree of advanced functionality that is adopted by a particular company.

A critical factor in first contact resolution is access to the right data. In order to resolve customer issues quickly and completely, associates require access to certain customer and product information. Cloud contact center platforms provide associates with improved access to data from across various functions and business units.

FCR improvements have also been shown to have a direct impact on customer and employee satisfaction. According to SQM Group, for every 1 percent of FCR improvement, contact centers will see a 1 percent improvement in customer satisfaction rates (CSAT) and 1 percent to 5 percent improvement in employee satisfaction. Other studies have found that positive improvements in customer satisfaction result in higher profitability per customer and greater customer lifetime value.