The Hosted/Cloud-Based Contact Center Infrastructure Market Hits Its Stride

By Donna Fluss

Hosted, software-as-a-service (SaaS), or cloud-based solutions – whatever you’d like to call them – have caught on in the contact center world. This has happened while some market leaders continued to look on skeptically, entering the hosted market too slowly to satisfy many of their customers. Given the pace of adoption for hosted/cloud-based solutions in the technology market, it was inevitable that contact center buyers would participate; the only question was timing. This question was answered in 2011, as adoption of these solutions hit its stride.

Cloud-Based Competitors: The contact center infrastructure market remains unique, due to the mix of competitors. Contact center infrastructure market leaders, too concerned that the cloud-based model would cannibalize their traditional revenue streams, opened the door to a new set of competitors. End users now have more choices than at any time in the past. These competitors include (in alphabetical order): 8 x 8 (which acquired Contactual), Convergys, EchoPass, Enghouse (which acquired CosmoCom), Five9, inContact, Interactive Intelligence, LiveOps, NewVoiceMedia, Transera, USAN, Verizon, VoltDelta, and West. What’s so interesting about this list of vendors is that only one of the fourteen vendors that DMG follows closely in this sector is a traditional contact center infrastructure competitor. This won’t last. In the next eighteen to twenty-four months, market leaders who are now losing deal after deal to hosting vendors they consider “inferior upstarts” will make acquisitions to give them a presence in this booming segment. While it will still take them a while to understand the hosted business model, customer demand will ultimately get them to where they need to be.

“Upstarts” Deliver Differentiated Offerings: In the meantime, some of these “upstarts” are coming on strong and delivering differentiated functionality and platforms. End users should look for innovation in the area of adaptive routing and broader suites, for example. Cloud-based providers have the great advantage of being able to deliver new capabilities and functionality without having to worry about backwards compatibility with older versions of their solutions or upgrade cycles – major and costly concerns for premise-based providers. Without this baggage, these new competitors can quickly ramp up their R&D capabilities and give end users what they want in time frames that premise-based providers are unlikely to be able to match.

Hosting Is Still Not for Everyone: Despite the classic benefits of hosted offerings – no major capital outlays, lower start-up costs, more rapid implementations, ease of scaling up and down, no upgrade fees, and no need to have in-house support resources, just to mention a few – hosting is still not the right choice for all companies. DMG recommends that any organization considering an acquisition or replacement of a contact center infrastructure solution first add cloud-based solution providers to their mix and then conduct a lease (hosting) versus buy analysis, as well as a total cost of ownership analysis. As an added benefit, this approach should also get premise-based providers to be more price-competitive.

There are situations where it absolutely makes more sense to purchase a contact center solution rather than host it. Organizations that have the resources to maintain a solution and plan to implement it and keep it in place without making significant upgrades for five or more years will probably save money by purchasing their solution; they are ideal candidates for the traditional approach. And, despite the claims being made by the hosted providers, companies that require a significant amount of customization are better off with a premise-based solution. In general, however, it’s a toss-up, and both solution sets – premise-based and hosted – should be considered.

Final Thoughts: When hosting was first conceived and introduced into the contact center market, its primary mission was to “democratize” the contact center world by making these solutions cost-effective for companies of all sizes. This goal has been achieved in a number of countries. Any company that wants a hosted contact center solution can now find an affordable solution that meets their needs.

Having achieved its original objective, cloud-based computing is now challenging the market’s status quo. As these vendors set their sights on larger implementations with hundreds and possibly even thousands of users, they are making the necessary investments in resources to perform customized integrations, provide experienced professional services, and provisioning environments that truly empower their users.

In the next five years, the most innovative of the hosted vendors are expected to reach true functional parity and then surpass their premise-based competitors. It’s no longer a question of if this will happen – it’s just a question of when.

Donna Fluss is the founder and president of DMG Consulting LLC, a provider of contact center and analytics research, market analysis, and consulting. She is the author of industry reports on contact center hosting, IVR, speech analytics, performance management, workforce management, surveying and analytics, and quality management/liability recording. Contact Donna at

[From Connection Magazine Jan/Feb 2012]

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