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Calculating the Cost of Cloud Contact Centre Solutions

Historically, one of the biggest reasons that UK businesses had for considering implementing cloud contact centre solutions was the potential cost reduction. While this is less of a driver than had been the case previously, contact centres looking to implement a cloud-based solution still need to be able to understand and calculate their return on investment (ROI).

Issues affecting the total cost of ownership (TCO) for a cloud contact centre solution include:

Reduction or redistribution of agents (e.g. through homeworking 
or virtualisation) expanding the agent pool and service levels without increasing agent numbers overall. This is particularly the case for businesses requiring highly skilled and trained agents - health, medical, technology, life sciences and pharmaceuticals for example - as homeworking is seen as an effective agent retention and recruitment method


Impact of increased functionality on call handling times and first-contact resolution rates (e.g. having multi-site skill-based routing strategies supported in the cloud) 

The in-house cost associated with the maintenance and management of on-premise hardware and software, compared with that spent monitoring cloud-based systems (although minimal, businesses will still want to be aware of what is happening, when upgrades are scheduled, supplier liaison, etc.)

Initial cost of CPE (customer premise equipment) and the structure of financial payments, effect of depreciation, etc. (NB – CPE costs are likely to be substantially higher than cloud at first, but lower as time passes and costs are written-off. It is important to compare the overall cost of any cloud contract with the TCO of the CPE solution over the appropriate timescale)


The value of staying current with technology, both in terms of reduced licence fees and the impact of superior systems on agent performance. Include the cost of additional training requirements in a frequent release environment


Whether additional functionality provided by the cloud provider over time is included in the fixed monthly payment, and if so, what would be the cost of upgrading on-premise solutions to include this functionality?


Cost of calls, the ease of moving between telephony providers, and the extent to which calls are included in the cloud package

Compare the cost of staffing for seasonal volumes and spikes (licences, recruitment, training, staff salaries etc.) compared to cloud-based pay-as-you-go, homeworkers or short-shift workers, as well as attendant additional hardware fees for major on-premise volume increases (e.g. adding an extra server).


The distribution of payments is very different, as well as the overall fee paid. Although there may be an initial fee associated with cloud-based solutions (connected with the discovery and implementation phase, as well as a payment in advance), this upfront cost is likely to be far lower than with traditional on-premise purchases, although the latter may be alleviated somewhat in the case of a leasing arrangement.

TCO assessments of cloud vs on-premise deployments generally reach a conclusion that cloud-based cost savings are proportionately larger with increasing contact centre size, and also where the level of functionality is greater too. However, some solution providers report that longer-term, the depreciation associated with on-premise solutions means that the TCO gap narrows, so that after 7 years or more, the difference is much less, if not wiped out totally.

There is no single right calculation to the ROI question, although payback is stated by most solution providers to be within 12 months in virtually all cases, and in many, a considerably shorter timescale (perhaps 3-6 months). The actual figure depends on factors such as number of seats, the number of contact centre locations, the functionality employed, the costs of integration or customisation and other such factors. Most vendors have an ROI calculator for prospective clients to use. Any choice
not to move to cloud is less frequently financial than for many other types of technology decision (except perhaps in cases where there has been large recent capital investment made), but may be more concerned with cultural issues, existing IT infrastructure and expertise, and other concerns such as security, customisation or integration with irreplaceable legacy systems.

Contract lengths vary, but are generally in place for at least a year, more often two or three. Some vendors provide a zero-commitment option but these are likely to work out pro-rata perhaps 40-50% more expensive than long-term contracts. Solution providers differ widely in their contract offers, with some operating a very flexible 'per logged hour' billing system, whereas others will want an agreed minimum number of agents per month, with additional users billed as required.

For most vendors, especially those offering a multi-tenant model, the cost of maintaining and upgrading the solution is lower, which impacts positively upon their own costs.

Pricing will of course depend on the features and functionality that client choose to use, although the following table gives a rough idea of what users can actually expect to pay. Generally speaking, when comparing similar levels of functionality, price points have come down over the past three years. Cost tends to be 10-20% higher for small operations on a per-agent basis. Businesses should note that per-minute telecoms charges may not be included in the monthly cost.

Figure
: Pricing examples

Functionality / size

Price (typical £ per agent per month)

Basic - voice only, may have recording

£25 - £70

Advanced – may have routing, automated outbound, reporting

£60 - £100

Enterprise - full blended and omnichannel,  may include WFM, disaster recovery, quality management, analytics

£90 - £150


Further notes on pricing

Potential cloud clients should also check and include the cost per minute of delivering and making calls, as well as any additional platform usage fee (e.g. per logged-in agent minute)

Non-standard service requests (such as customisation, extra reporting etc.) will also usually be charged for separately, with a rate of £70-£100 per hour being typical

Omnichannel functionality may be added on a per-seat basis, including email, social media and chat. Extra pricing of £20-30 per agent per month per extra channel can be expected

Potential customers should also take into account any per supervisor/manager licence costs

Most cloud-based providers offer pricing based on concurrent users, rather than specific named users, which reduces wasted licence fees

Most cloud vendors offer pricing on a per-seat/per-month basis, but some offer the even more granular approach of per logged hour or even per minute, which is of particular interest to outbound telemarketing companies and outsourcers, for whom this directly impacts upon profitability, with daily viewing of billing offered by some vendors

Businesses may be charged separately for connectivity to the data centre which may be on a per minute basis, so will need to make sure that any request for quotation includes the same levels of access, data and voice traffic. Solution providers also note that prospective customers should ask about minimum call charges, per second billing, per digit billing and the rounding up or down of telco charges

Standard service level agreements start at around 99.7% guaranteed availability, with some vendors offering 99.999% on a premium contract. If these SLAs are not met, vendors will offer reduced rates as compensation. Service levels offered by some vendors may differ depending on contact type, although with the multi-tenancy approach, everyone gets the same service levels.

Contact centres will experience significant reductions in one-off implementation costs, as there is little or no hardware or software to be deployed in the contact centre environment. It is likely, especially in multitenant environments, that any maintenance fee will either be included within the package, or at least much less than the typical CPE maintenance charge, which can be around 15-20% of the original licence cost per year).

Solution providers comment that the majority of savings realised in the first year are due to the elimination of maintenance and implementation costs, particularly in environments where there is a single cloud provider delivering all of the services, rather than the organisation still running some functionality itself, which would still require maintenance and effort to keep software levels compatible between products.

The length of the contract is also an issue. Cloud solution providers prefer long-term multi-year contracts, and offer significant discounts to encourage this, enabling them to predict their revenues more accurately and thus be able to invest in the solution with some confidence. Customers which are new to cloud may prefer to have shorter contracts, with the option to break, at least until they become familiar with the offering. In theory, longer-term contracts benefit everybody, in that customers of businesses which are financially secure are more likely to benefit from the stability and consistent levels of R&D that such a supplier can provide, as well as not having to re-engineer their customer contact environment and processes every few years.







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