Premise Vs. Hosted Contact Center: Total Cost Of Ownership Analysis - NECCF
Premise vs. Hosted Contact Center:Total Cost of Ownership AnalysisA Frost & Sullivan White PaperSponsored By
TABLE OF CONTENTSIntroduction .3TCO Analysis .4Background.4Systems and Applications .4Implementation .4Maintenance and Upgrades .5Subscription Costs .5Total Costs .5N-Year TCO .5N-Year % Cost Savings .6Conclusions .6Appendix I—TCO Analysis Charts .7Appendix II—TCO Analysis Tables . 11Frost & Sullivan
INTRODUCTIONThe majority of North American contact centers today are supported by premise-basedcontact center and telephony systems. Key benefits of the premise model include: a matureand proven deployment model; complete control over the systems and applications(functionality, data integrity/privacy, security, reliability); connection with other businesssystems and applications; as well as the financial advantages ownership affords. Typically,these systems and applications are acquired through the outright purchase of the hardwareand licenses for the software and applications. While many financial arrangements can bemade for these purchases, including leasing, most enterprises account for these transactionsas capital equipment expenses.The leading alternative to premise-based systems and applications is hosted services. Theseservices are owned and operated by third-party service providers who provisionthe desired contact center systems and applications functionality for the enterprisecustomer. The advantages of this model include: rapid start up, little or no capital expensesrequired, flexibility to add or remove functionality on an agent-by-agent basis, flexibilityto increase or decrease the number of agents supported, access to the latest technologies,and fewer staff required to support the systems. Typically, these services are priced onthe basis of monthly fees per agent supported and vary based on the number of agents andthe functionality delivered. Enterprises usually account for hosted contact center feesas operating expenses.As input to enterprises' contact center acquisition and deployment decisions,Frost & Sullivan has created a total cost of ownership (TCO) model for comparingpremise-based and hosted contact center solutions. Total cost of ownership is avaluable way to compare contact center acquisition/deployment alternatives. However,it should be viewed as one element in a comprehensive decision process.This whitepaper presents the results of the TCO analysis for twelve (12) contact centerconfigurations. The configurations varied by the size of the contact center organization interms of the number of agents, and by the level of contact center application functionalitysupported. The sizes of contact centers compared were: 50 seats100 seats250 seats500 seatsThe levels of contact center application functionality compared were: ACD only ACD : defined as ACD, IVR, chat, and outbound dialer Full-function: defined as ACD, IVR, chat, outbound dialer, quality monitoring, workforcemanagement, customer feedback, agent hiring, and eLearningTCO analysis was conducted for all of these configurations for hosted andpremise deployments.Frost & Sullivan3
TOTAL COST OF OWNERSHIP ANALYSISBackgroundA total cost of ownership analysis (TCO analysis) is a business case designed to find thelifetime costs of acquiring, operating, and maintaining something. In this TCO analysis,Frost & Sullivan has designed TCO models to compare the costs of acquiring, operating, andmaintaining similarly configured contact centers over their useful lifetime. The primarypoint of comparison is premise-based contact center systems/applications versus hostedcontact center services.The contact center configurations compared have two dimensions: size and contactcenter application functionality. On the size dimension, four configurations were compared:Premise systems and hosted services that support 50, 100, 250, or 500 concurrently loggedcontact center agents. On the application functionalitydimension, three sets offunctionality were compared: ACD-only (ACD, reporting); ACD (ACD, reporting, IVR, chat,outbound dialer); and Full-function (ACD, reporting, IVR, chat, outbound dialer, qualitymonitoring, workforce management, customer feedback, agent hiring, eLearning).Deployments were assumed to be a mix of single-site and multi-site. Networking costswere assumed to be roughly comparable for premise and hosted. Staffing costs for contactcenter agents are not included in the model, as they are assumed to be the same forpremise and hosted configurations. Contact center application functionality was assumed tobe roughly comparable for premise and hosted, by configuration. Premise system upgradecosts are included in maintenance fees; no significant capital expenses would be requiredafter the initial installation during the comparison timeframes of three and five years.Systems and ApplicationsSystems include all hardware and operating system software components required for eachconfiguration. Consideration was given to the incremental systems required to supportlarger agent populations and additional functionality. Additional servers and redundantprocessors are needed to deliver the performance and reliability required of larger andmore feature-rich systems.Applications includes all contact center application software for automatic call distribution,interactive voice response, outbound dialer, chat, workforce management, and reporting.ImplementationImplementation costs include system installation, configuration, and routine integrations.Implementation costs are modeled as a percentage of the initial systems' costs, withpercentages increasing with system size and functionality to reflect the additional effortrequired for these implementations. Additional effort areas include: configuration of moresophisticated contact routing schemas, development of customized reports, buildingadditional application integration points, and configuring additional applications.4Frost & Sullivan
Customer staffing costs are included in the model for the initial implementation/start up.For premise configurations, the bulk of the implementation work is done by the systemvendor's professional services group or those of a partner. And, for hosted configurations,the bulk of the implementation work is done by the hosted service provider. But, in allcases, a customer representative must be involved in the projects. For premiseconfigurations of all sizes, these functions are typically performed by IT-skilled individuals,which the model reflects at a fully-loaded rate of 120,000/year. For smaller hostedconfigurations, such as to support less than 100 agents, customer liaison efforts aretypically performed by contact center managers or supervisors. For larger hostedconfigurations, such as to support more than 100 agents, customer liaison efforts aretypically performed by an IT-skilled individual. The model reflects the fully-loaded costs fora contact center manager at 80,000/year.Maintenance and UpgradesFor hosted configurations, upgrades and maintenance fees are included in the monthly fees.For premise configurations, the first year's upgrade and maintenance fees are included inthe original sales price. And, for the following years, the fees reflected in the model are18 percent of the original purchase price per year. Typical fees for premise systems’upgrades and maintenance are between 15 percent and 20 percent per year.Customer staffing costs are included in the model for ongoing maintenance and upgrades.For premise configurations, the full costs of system monitoring, tuning, and administrationare included. In addition, for premise configurations of all sizes, these functions are typicallyperformed by an IT-skilled individual, which the model reflects at a fully-loaded rate of 120,000/year. For smaller hosted configurations, such as to support less than 100 agents,customer liaison efforts are typically performed by contact center managers. For largerhosted configurations, such as to support more than 100 agents, customer liaison effortsare typically performed by an IT-skilled individual. The model reflects the fully-loaded costsfor a contact center manager at 80,000/year.Subscription CostsSubscription costs are the fees hosted service providers charge to use their contact centersystems and applications. They are reflected in the model as per agent per month fees andvary by the level of functionality supported. In addition to the use of systems andapplications, these fees cover system monitoring, maintenance, and upgrades.Total CostsTotal costs are the sum of the costs incurred for the configuration for the year. Totalcosts include: systems and applications, implementation (year one only), maintenance andupgrades (year two and beyond), and subscription costs.N-Year TCON-year TCO is the total cost of ownership calculated to the end of the Nth year. In otherwords, N-year TCO is the cumulative costs incurred to that point for the given contactcenter configuration.Frost & Sullivan5
N-Year % Cost SavingsN-year % cost savings is the fractional difference between the N-year TCO of thecomparable premise and hosted configurations. It represents the cost savings realized bythe hosted model, over the corresponding premise deployment.CONCLUSIONSHosted contact center services delivered significantly lower TCO than comparablepremise-based systems for all configurations analyzed for both the three-year andfive-year timeframes.Additionally, the TCO analysis demonstrates that:1. Cost savings with the hosted model increases with the size of the contact centerorganization, for all configurations analyzed2. Cost savings with the hosted model increases as more contact center applications aredelivered as a hosted serviceThe following Table highlights the 3-Year and 5-Year TCO savings achieved with the hostedmodel, over comparable premise systems for various contact center configurations.3-Year TCO Hosted Cost Savings % over corresponding Premise 4%35%ACD 19%33%43%53%Full Function30%42%51%58%5-Year TCO Hosted Cost Savings % over corresponding Premise 19%ACD 7%21%28%39%Full Function8%23%34%43%The findings essentially imply that as the size of your contact center organization grows,you only have greater cost savings to realize with the hosted model. At the same time,moving more contact center applications into the cloud helps your organization achievegreater cost savings.6Frost & Sullivan
APPENDIX I—TCO ANALYSIS CHARTS50-Seat Configurations50 Agent TCO Comparison: Hosted versus PremiseACD Only 250,000PremiseHosted 200,000Hosted % Savings:3-Year TCO: 12%5-Year TCO: 5% 150,000 100,000 50,000 0Year 1Year 2Year 3Year 4Year 550 Agent TCO Comparison: Hosted versus PremiseACD 300,000PremiseHosted 250,000Hosted % Savings: 200,0003-Year TCO: 19%5-Year TCO: 7% 150,000 100,000 50,000 0Year 1Year 2Year 3Year 4Year 550 Agent TCO Comparison: Hosted versus PremiseFull Function 700,000Premise 600,000Hosted 500,000Hosted % Savings: 400,0003-Year TCO: 30%5-Year TCO: 8% 300,000 200,000 100,000 0Year 1Year 2Year 3Year 4Year 5Frost & Sullivan7
100-Seat Configurations100 Agent TCO Comparison: Hosted versus PremiseACD Only 600,000Premise 500,000Hosted 400,000Hosted % Savings: 300,0003-Year TCO: 18%5-Year TCO: 9% 200,000 100,000 0Year 1Year 2Year 3Year 4Year 5100 Agent TCO Comparison: Hosted versus PremiseACD 700,000Premise 600,000Hosted 500,000Hosted % Savings:3-Year TCO: 33%5-Year TCO: 21% 400,000 300,000 200,000 100,000 0Year 1Year 2Year 3Year 4Year 5100 Agent TCO Comparison: Hosted versus PremiseFull Function 1,600,000Premise 1,400,000Hosted 1,200,000Hosted % Savings:3-Year TCO: 42%5-Year TCO: 23% 1,000,000 800,000 600,000 400,000 200,000 0Year 18Frost & SullivanYear 2Year 3Year 4Year 5
250-Seat Configurations250 Agent TCO Comparison: Hosted versus PremiseACD Only 1,200,000PremiseHosted 1,000,000Hosted % Savings: 800,0003-Year TCO: 24%5-Year TCO: 10% 600,000 400,000 200,000 0Year 1Year 2Year 3Year 4Year 5250 Agent TCO Comparison: Hosted versus PremiseACD 1,800,000 1,600,000Premise 1,400,000Hosted 1,200,000Hosted % Savings: 1,000,0003-Year TCO: 43%5-Year TCO: 28% 800,000 600,000 400,000 200,000 0Year 1Year 2Year 3Year 4Year 5250 Agent TCO Comparison: Hosted versus PremiseFull Function 4,500,000Premise 4,000,000Hosted 3,500,000 3,000,000Hosted % Savings: 2,500,0003-Year TCO: 51%5-Year TCO: 34% 2,000,000 1,500,000 1,000,000 500,000 0Year 1Year 2Year 3Year 4Year 5Frost & Sullivan9
500-Seat Configurations500 Agent TCO Comparison: Hosted versus PremiseACD Only 2,500,000PremiseHosted 2,000,000Hosted % Savings: 1,500,0003-Year TCO: 35%5-Year TCO: 19% 1,000,000 500,000 0Year 1Year 2Year 3Year 4Year 5500 Agent TCO Comparison: Hosted versus PremiseACD 4,000,000Premise 3,500,000Hosted 3,000,000Hosted % Savings: 2,500,0003-Year TCO: 53%5-Year TCO: 39% 2,000,000 1,500,000 1,000,000 500,000 0Year 1Year 2Year 3Year 4Year 5500 Agent TCO Comparison: Hosted versus PremiseFull Function 12,000,000PremiseHosted 10,000,000 8,000,000Hosted % Savings: 6,000,0003-Year TCO: 58%5-Year TCO: 43% 4,000,000 2,000,000 0Year 110Frost & SullivanYear 2Year 3Year 4Year 5
APPENDIX II—TCO ANALYSIS TABLES50-Seat ConfigurationsContact Center TCO 50 Agents, ACD OnlyYear 1PremiseSystems and Applications 32,500Implementation 43,000Year 2HostedTotal CostYear ted 40,850 12,000 40,850 12,000 40,850 12,000 40,850 12,000 33,000 75,500Year 4 15,000Maintenance and UpgradesSubscription CostsYear 3 48,000 33,000 40,850 45,000N-year TCON-year % costs savings 33,000 40,850 45,000 157,200 138,00036% 33,000 40,850 45,000 33,000 40,850 45,000 238,900 228,00012%5%Contact Center TCO 50 Agents, ACD Year 1PremiseSystems and Applications 46,500Implementation 60,750Year 2HostedTotal CostYear 5PremiseHostedPremiseHostedPremiseHosted 43,370 12,000 43,370 12,000 43,370 12,000 43,370 12,000 39,000 107,250Year 4Hosted 16,875Maintenance and UpgradesSubscription CostsYear 3Premise 55,875 39,000 43,370 51,000N-year TCON-year % costs savings 39,000 43,370 51,000 193,990 157,87548% 39,000 43,370 51,000 39,000 43,370 51,000 280,730 259,87519%7%Contact Center TCO 50 Agents, Full FunctionYear 1PremiseSystems and Applications 146,500Implementation 220,800Year 2HostedTotal Cost 129,400N-year TCON-year % costs savingsYear 5PremiseHostedPremiseHostedPremiseHosted 61,370 12,000 61,370 12,000 61,370 12,000 61,370 12,000 61,370 108,000 61,370 108,000 61,370 108,000 61,370 108,000 490,040 345,400 612,780 561,400 96,000 367,300Year 4Hosted 33,400Maintenance and UpgradesSubscription CostsYear 3Premise65% 96,000 96,000 96,000 96,00030%8%Frost & Sullivan11
100-Seat ConfigurationsContact Center TCO 100 Agents, ACD OnlyYear 1PremiseSystems and Applications 86,250Implementation 88,125Year 2HostedTotal CostYear ted 75,525 18,000 75,525 18,000 75,525 18,000 75,525 18,000 66,000 174,375Year 4 32,500Maintenance and UpgradesSubscription CostsYear 3 98,500 66,000 75,525 84,000N-year TCON-year % costs savings 66,000 75,525 84,000 325,425 266,50044% 66,000 75,525 84,000 66,000 75,525 84,000 476,475 434,50018%9%Contact Center TCO 100 Agents, ACD Year 1PremiseSystems and Applications 141,500Implementation 144,688Year 2HostedTotal CostYear ted 85,470 18,000 85,470 18,000 85,470 18,000 85,470 18,000 78,000 286,188Year 4 36,563Maintenance and UpgradesSubscription CostsYear 3 114,563 78,000 85,470 96,000N-year TCON-year % costs savings 78,000 85,470 96,000 457,128 306,56360% 78,000 85,470 96,000 78,000 85,470 96,000 628,068 498,56333%21%Contact Center TCO 100 Agents, Full FunctionYear 1PremiseSystems and Applications 366,250Implementation 561,938Year 2HostedTotal Cost 269,250N-year TCON-year % costs savings12Year 5PremiseHostedPremiseHostedPremiseHosted 125,925 18,000 125,925 18,000 125,925 18,000 125,925 18,000 192,000 928,188Year 4Hosted 77,250Maintenance and UpgradesSubscription CostsYear 3Premise 192,000 125,925 210,000 192,000 125,925 210,000 1,180,038 689,25071%Frost & Sullivan42% 192,000 125,925 210,000 192,000 125,925 210,000 1,431,888 1,109,25023%
250-Seat ConfigurationsContact Center TCO 250 Agents, ACD OnlyYear 1PremiseSystems and Applications 268,750Implementation 248,125Year 2Hosted 148,375Subscription Costs 165,000 516,875HostedPremise 24,000 148,375Year 4HostedPremise 24,000 148,375Year 5HostedPremise 24,000 148,375Hosted 76,667Maintenance and UpgradesTotal CostPremiseYear 3 241,667 165,000 148,375 189,000N-year TCON-year % costs savings 165,000 148,375 189,000 813,625 619,66753% 165,000 148,375 189,000 24,000 165,000 148,375 189,000 1,110,375 997,66724%10%Contact Center TCO 250 Agents, ACD Year 1PremiseSystems and Applications 437,500Implementation 457,813Year 2HostedTotal CostYear 5PremiseHostedPremiseHostedPremiseHosted 178,750 24,000 178,750 24,000 178,750 24,000 178,750 24,000 195,000 895,313Year 4Hosted 86,250Maintenance and UpgradesSubscription CostsYear 3Premise 281,250 195,000 178,750 219,000N-year TCO 195,000 178,750 219,000 195,000 178,750 219,000 1,252,813 719,250N-year % costs savings69% 195,000 178,750 219,000 1,610,313 1,157,25043%28%Contact Center TCO 250 Agents, Full FunctionYear 1PremiseYear 2HostedSystems and Applications 1,098,875Implementation 1,903,144 260,665Maintenance and UpgradesSubscription CostsTotal CostN-year TCON-year % costs savingsYear 4PremiseHostedPremiseHostedPremiseHosted 297,798 24,000 297,798 24,000 297,798 24,000 297,798 24,000 480,000 297,798 504,000 480,000 297,798 504,000 480,000 297,798 3,597,614 1,748,66575%Year 5Hosted 480,000 3,002,019 740,665Year 3Premise 504,000 480,000 297,798 504,000 4,193,209 2,756,66551%34%Frost & Sullivan13
500-Seat ConfigurationsContact Center TCO 500 Agents, ACD OnlyYear 1PremiseSystems and Applications 643,750Implementation 699,375Year 2Hosted 265,875Subscription CostsHostedPremise 40,000 265,875Year 4HostedPremise 40,000 265,875Year 5HostedPremise 40,000 265,875Hosted 150,000Maintenance and UpgradesTotal CostPremiseYear 3 330,000 1,343,125 480,000 330,000 265,875 370,000N-year TCO 330,000 265,875 370,000 330,000 265,875 370,000 1,874,875 1,220,000N-year % costs savings64% 40,000 330,000 265,875 370,000 2,406,625 1,960,00035%19%Contact Center TCO 500 Agents, ACD Year 1PremiseYear 2HostedSystems and Applications 1,042,500Implementation 1,322,813 168,750Maintenance and UpgradesSubscription CostsTotal CostYear 4HostedPremiseHostedPremiseHostedPremiseHosted 337,650 40,000 337,650 40,000 337,650 40,000 337,650 40,000 390,000 337,650 430,000N-year TCO 390,000 337,650 430,000 390,000 337,650 430,000 3,040,613 1,418,750N-year % costs savingsYear 5Premise 390,000 2,365,313 558,750Year 376% 390,000 337,650 430,000 3,715,913 2,278,75053%39%Contact Center TCO 500 Agents, Full FunctionYear 1PremiseYear 2HostedSystems and Applications 2,564,250Implementation 5,180,288 828,563Maintenance and UpgradesSubscription CostsTotal Cost 960,00014Year 4Year 5HostedPremiseHostedPremiseHostedPremiseHosted 611,565 40,000 611,565 40,000 611,565 40,000 611,565 40,000 960,000 960,000 960,000 960,000 7,744,538 1,788,563 611,565 1,000,000 611,565 1,000,000 611,565 1,000,000 611,565 1,000,000N-year TCON-year % costs savingsYear 3Premise 8,967,668 3,788,56377%Frost & Sullivan58% 10,190,798 5,788,56343%
Silicon Valley331 E. Evelyn Ave. Suite 100Mountain View, CA 94041Tel 650.475.4500Fax 650.475.1570C O N TAC TUSSan Antonio7550 West Interstate 10, Suite 400,San Antonio, Texas 78229-5616Tel 210.348.1000Fax 210.348.1003London4, Grosvenor Gardens,London SWIW ODH,UKTel 44(0)20 7730 3438Fax 44(0)20 7730 támyfrost@frost.comBuenos Aireshttp://www.frost.comCape TownChennaiColomboDelhi / NCRDhakaDubaiFrankfurtHong KongIstanbulJakartaKolkataKuala LumpurLondonMexico CityMilanMoscowMumbaiManhattanOxfordParisABOUT inContactinContact (NASDAQ: SAAS) helps contact centers around the globe create profitablecustomer experiences through its powerful portfolio of cloud-based contact centersoftware solutions. The company's services and solutions enable contact centers to operatemore efficiently, optimize the cost and quality of every customer interaction, create newpathways to profit and ensure ongoing customer-centric business improvement and growth.To learn more, visit www.inContact.com.Rockville CentreSan AntonioSão PauloSeoulShanghaiSilicon ValleySingaporeSophia AntipolisSydneyTaipeiABOUT FROST & SULLIVANFrost & Sullivan, the Growth Partnership Company, partners with clients to accelerate theirgrowth. The company's TEAM Research, Growth Consulting, and Growth TeamMembership empower clients to create a growth-focused culture that generates,evaluates, and implements effective growth strategies. Frost & Sullivan employs over 50years of experience in partnering with Global 1000 companies, emerging businesses, and theinvestment community from more than 35 offices on six continents. For more informationabout Frost & Sullivan’s Growth Partnership Services, visit http://www.frost.com.Tel AvivTokyoTorontoWarsawFor information regarding permission, write:Frost & Sullivan331 E. Evelyn Ave. Suite 100Mountain View, CA 9404115
Premise Hosted Hosted % Savings: 3-Year TCO: 30% 5-Year TCO: 8% 50 A gent TCO Com parison: Hosted versus Premise ACD Only 250,000 200,000 150,000 100,000 50,000 0 Year 1 Year 2 Year 3 Year 4 Year 5 Premise Hosted Hosted % Savings: 3-Year TCO: 12% 5-Year TCO: 5% 50 A gent TCO Com parison: Hosted versus Premise ACD 0 50,000 100,000 .
Hosted PBX does not include any of the above items and this would be an upfront capital expenditure. The only item not being purchased in a Hosted PBX solution, in comparison to a Premise Based solution, is the actual core Premise Based PBX. However, and as you will see later on in this white paper, today's Premise ased PX is extremely cost
and mid-sized businesses (SMBs) should seriously consider the use of a hosted PBX instead of deploying an on-premise system. Use of a hosted PBX is significantly less expensive than the use of an on-premise system, as demonstrated in the following figure. Three-Year Cost of Ownership for On-Premise and Hosted PBX Solutions in a 50-User Organization
Hosted Voice vs On-Premise Phone Systems "Mobile VoIP users alone is expected to reach 1 billion by 2017" - Juniper Research. ProOnCall.com 3 o oc OnPrm Pon m We'll be going over the cost considerations for both a hosted and on-premise phone solution to aide you
premise than in restaurants. If a restaurant does not have an off‐premise dining program, they can lose vital revenue. Off‐premise dining can is a great revenue driver during times of crisis. Vehicles for off‐premise dining include 1.Curbside Pick‐Up Service 2.3rd Party Delivery Service
VMware App Defense Cloud hosted managed solution (SaaS) from VMware that is hosted on AWS Works with Cloud based as well as on premise vSphere solutions For on premise: a proxy appliance will act as the broker Future road map items will include extending capabilities to non vSphere, as well as bare metal workloads For on premise: vCenter is the only mandatory
Contact Center Enterprise OpenScape Contact Center V10 is an omni-channel integrated contact center solution for on-premise and hosted cloud environments that empower organiza-tions to connect with customers for effec-tive communication and collaboration while improving agent operational effi-ciency, customer and business engage-
Contact Center Enterprise OpenScape Contact Center V10 is an omni-channel integrated contact center solution for on-premise and hosted cloud environments that empower organiza-tions to connect with customers for effec-tive communication and collaboration while improving agent operational effi-ciency, customer and business engage-
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