- Cloud-based contact centers offer lower total cost of ownership, more deployment options, and better service results compared to on-premise contact center systems. - Modern cloud-based contact centers provide improved customer service capabilities through tools like integrated knowledge bases, social media integration, and better agent productivity. - Cloud platforms reduce IT management needs and make systems more configurable, customizable, scalable, and able to easily support new locations or users without additional hardware or software costs compared to on-premise systems.

1. The Benefits of Modern Customer Service:
Moving Your On-Premise Contact Center to the Cloud
Many contact center managers are now deliberating whether to
upgrade their traditional systems or start over with cloud-based
technology. Recent end-of-life announcements by some contact center
vendors and the high costs associated with upgrading to new versions
of their systems are forcing the issue for numerous contact centers.
Upgrading to new versions of on-premise systems means continuing
the same software paradigm that has resulted in today’s decision
point. The alternative to conventional premise-based contact center
systems is one that is cloud-based. Cloud-based contact centers are a
better option because they offer lower total cost of ownership, more
deployment options and better service results. This Beagle Research
Group executive white paper describes these advantages.
July 2010

2. Introduction
It has become a truism in the software industry that major systems need to
be re-thought and re-built about once every decade. Nowhere is this truer
than in the contact center where traditional, labor-intensive modes of assisted
service — phone, email and chat — are being superseded by multichannel
operations that use integrated, labor-saving Web self-service, social media,
search engines, knowledge bases and crowdsourcing. Moreover, on-premise
legacy call and contact centers were designed for client-server computing and
based on a slow and expensive software-coding paradigm. Whether this truism
holds in the age of multi-tenant cloud computing bears watching because cloud
computing eliminates many of the attributes of legacy software that contribute
to obsolescence.
The legacy on-premise contact center has reached the point where it needs
replacement. When today’s legacy on-premise contact center systems were
conceived, designed and deployed, social media were not on the radar and
so no provision was made for the technology and the changes it wrought in
business processes. Consequently, in today’s dynamic business environment,
where innovation is highly prized, legacy on-premise contact center systems,
and their owners, are uniquely exposed.
The problems associated with legacy on-premise software — that it is hard
to change when innovation is called for and that it is expensive to own and
operate — all apply to conventional call and contact centers. In contrast, the
cloud-based call center has removed or significantly simplified these issues to
the point that it can out-compete legacy on-premise systems on any dimension.
And as this paper will show, cloud-based call and contact centers save upwards
of 20 to 30 percent of the five-year total cost of ownership compared with
legacy systems.
We believe that a cloud-based call and contact center developed on the
modern concepts of multi-tenancy and social media present the next logical
advance in contact center operations for technological fitness, economic
necessity and service rigor. This Beagle Research white paper examines these
issues in light of available technology and customer necessity.
New Business Challenges and the Modern Contact Center
In the years since the legacy on-premise contact center was introduced, there
have been numerous changes to business. New technologies for networking
and communicating have entered the scene, and people are generally more
attuned to using them. Customers have turned to these tools for answers to
their service problems. The client-server call center was a solution limited
to phone, email and chat for handling customer calls, but today’s customers
use search engines, social media, Wikis and other tools to get their questions
answered faster and with greater reliability.
This multi-channel approach is both a boon and a challenge to the conventional
contact center. It is a boon because it reduces call volumes, but it also
challenges the service organization to deliver on multiple fronts. Users of
conventional contact centers have tried to stay abreast of changes in the

3. industry by adding functionality. But, as is often the case, these add-on
remedies have resulted in complexity layered on complexity and solutions that
are hard to manage or change.
The accumulation of many changes has resulted in a decision point for many
businesses that boils down to determining when to stop investing in the old
technology and turn to what’s new. End-of-life announcements by some
contact center vendors such as Oracle-Siebel have brought that decision to a
head.
Modern Contact Center Capabilities
A modern cloud-based contact center brings together cloud architecture and
multi-channel support to provide solutions designed around the tools and
techniques needed to compete in today’s marketplace. At the same time, it
presents a profile of efficiency and cost-effectiveness that is highly desirable
in a world that is much more competitive than a decade ago. The following
sections describe some of the needs and benefits that a cloud-based contact
center delivers.
Improved customer service with updated capabilities
Contact centers continuously strive for improved agent productivity, which is
boosted in three important ways. First, the cloud-based contact center enables
service organizations to improve service quality and timeliness by incorporating
the latest multi-channel and social media solutions to complement service
offerings. For instance, multi-tenant systems are more flexible and configurable
than conventional client-server architectures so that user interfaces can evolve
with business processes. System evolution drives agent evolution, which can
reduce the need for periodic long training sessions.
Second, too often older on-premise architectures tie business processes in
knots to accommodate the technology. Cloud-based contact centers enable
businesses to reconfigure service processes or build new ones and to scale
their service offerings to meet demands regardless of size or complexity.
Third, the cloud-based contact center provides additional tools such as an
integrated knowledgebase and social media connectivity. The knowledgebase
serves as a repository for everything that a company knows about servicing
customers as well as much of what the customers know and contribute. And
the knowledge base is accessible to agents and customers alike through
various channels that can include search engines and social media as well as
conventional agent interactions. Modern Enterprise 2.0 techniques such as
crowdsourcing drive the accumulation, sorting and distribution of the best
answers to customer questions.
A contact center that connects with customers on social media makes it
possible for customers to contribute service ideas that the company can vet,
and the same social tools enable wider, faster and less-costly information
distribution through all channels. If a customer prefers finding an answer
through a search engine or through a social interface, the knowledge base
easily enables that kind of information distribution. At the same time, though,
the integrated knowledge base is also a resource for agents, enabling them
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4. to access and forward service information through all media touch points,
including social media and traditional channels.
Leveraging cloud computing platforms and infrastructure
Cloud computing’s technological underpinnings are significant in areas
like security, configurability and customization. Once organizations fully
understand cloud benefits, many seriously consider if they could accomplish as
much with a premise-based system — whether built by a software vendor or
developed internally.
Cloud computing is, by now, well understood, but it bears reviewing, briefly. All
hardware, operating system, database, middleware, application and platform
considerations are supplied by resources on the Internet, which presents the
customer organization with a streamlined deployment proposition. Scaling
the number of users or expanding to other locations, for instance, are simple
matters of provisioning. No one at the client organization has to figure out how
many open slots are available on a switch and no one has to track the number
of software licenses in use and in inventory. When a businessperson makes a
decision to expand or contract use, it is a simple matter for an administrator to
make an adjustment online.
Cloud security provisions are also robust. The top vendors use SaaS 70 Type
II networks of mirrored data centers to ensure that data is secure and, in the
event of down time for any single element, the redundancy built into the
system helps to ensure processing continues.
The Business Benefits of a Modern Contact Center
Cloud computing, modern channels such as social media and powerful
knowledge bases help to lower costs throughout the service organization.
Fewer components to manage simplifies IT’s role, greater application flexibility
reduces time to change applications and speeds upgrades and additional
communication channels increase customer involvement in problem resolution.
The result is a call and contact center that is less costly to own and operate,
better service outcomes and more satisfied customers.
Agility
Where conventional call centers require significant labor and expertise
to deploy, maintain, modify and tune all of the hardware and software
components, cloud computing provides a simple Internet connection that
handles these issues without user concern.
Businesses can spend more of their time and resources servicing customers,
innovating new service approaches, developing knowledge base articles and
generally focusing more of their resources on the customer rather than on the
system. When a company brings out a new product or service, or needs to
deploy new contact centers quickly in response to product recalls or disasters,
cloud-based contact center technology enables its agents to be ready and able
to respond. This increased ability to innovate provides tremendous agility to
the business.
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5. Lower total cost of ownership (TCO)
Cloud-based contact center implementations are less costly to deploy and
they stay cost-effective over time. Scalability, license flexibility and numerous
advantages that come from easy and fast configuration and customization may
be hard to quantify because they are completely dependent on usage patterns
which, naturally, vary from location to location. But if we analyze only the
cost of acquisition and five-year deployment costs, a clear picture emerges
nonetheless.
By our estimates, a cloud-based contact center is more cost-effective at all
deployment sizes (see appendix) from very small contact centers to some of
the largest. Figure 1 shows the five-year total cost of ownership comparison
between a typical legacy contact center and a modern cloud-based contact
center with 1,000 seats. Notice that the middle years — two through four
— are slightly more expensive with cloud computing. However, the slight
additional cost is still lower overall compared to the on-premise system with its
high up-front costs and substantial upgrade costs in year five.
Of course, even this modeling only presents a static view of the situation. What
Figure 1 Five-year TCO comparison: On-Premise vs. Cloud-Based Call Center
Systems - 1,000 Seats.
On‐Premise
7000000
6000000
5000000
Cloud‐Based
License Fees
4000000
Hardware/Infrastr.
On‐Premise
Maint. Fees
3000000 Personnel Costs
Cloud‐Based
Cloud‐Based
Cloud‐Based
Cloud‐Based
On‐Premise
On‐Premise
On‐Premise
2000000
1000000
0
Year 1 Year2 Year 3 Year 4 Year 5
Source: Beagle Research Group, July 2010
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6. it does not show directly is the cost avoidance when an organization drops
seats to adjust for seasonal variations in demand, for example. The cloud’s
continuously variable provisioning means a contact center no longer has to
have important components or licenses in inventory to handle peak demand.
When Upgrading to a Cloud-Based Contact Center
Everything wears out eventually. The complication with information systems
is that they continue running well beyond their useful lives so it is sometimes
hard to justify a new implementation based on age. But although the
technology may continue to work, in many cases the legacy contact center
system has become obsolete, a latter-day antique.
When considering upgrading or replacing a legacy contact center system,
you need to evaluate additional metrics beyond simply whether or not the
current system still functions. Here are some ideas to keep in mind as you
contemplate your next move in call center information systems:
1. Take a cold analytic look at all aspects of your current
implementation. It might be hard to ignore the time, effort and expense
that went into your current deployment, but rationally speaking, the only
thing that counts is the future.
2. Realistically evaluate costs. If your company currently hosts the
contact center, then you have hardware, operating system, database and
a variety of middleware, application and labor costs to consider. Because
you can’t easily buy a 0.5 FTE, your labor costs may be comingled with
other IT responsibilities. You don’t need a to-the-penny accounting,
but you should strive to be as accurate as possible. Also, there may
be hardware in mid-life cycle that you wish to preserve in a new
conventional system. That’s fine, but make sure to include replacement
costs in your five-year projection. Lastly, the most difficult part of cost
evaluation is provisioning for the future because you don’t know what
the future holds. Nonetheless, some trends are apparent, like the trend
for agents to work remotely either at home or at satellite locations. You’ll
need to provision for things like that which cloud-based contact centers
do automatically.
In contrast, the costs for a cloud-based contact center deployment are
neatly summed up into a single bill. Given your ability to add and delete
users as needed, there’s more flexibility in provisioning your contact
center, so take advantage of it. If you have a seasonal business, budget
for the slow times by having fewer seats as well as for the busy season.
Also, try to get a sense from your current vendor of the costs for
upgrading within the product family. If upgrade projects require
additional personnel or investment in new infrastructure, these costs
need to be factored in. With cloud computing, upgrades are automatic
throughout the year and there is no concept of a separate upgrade.
3. Get advice from others by networking with those who have already
moved to the cloud. Their experiences can be invaluable, especially when
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7. it comes to hearing about their realistic results. Your peers had many of the
same issues you have, so ask about everything that’s on your mind.
4. Get familiar with the underlying platform. You don’t need to know
how to make a watch to understand one, but knowing that it is mechanical
tells you it will need daily winding. In the same way, a call center system
based on the same technology you are now using will have the same
issues you have now and will age in a similar way. A cloud-based contact
center will save you from many of the issues you now face with your legacy
system. Find out how the cloud platform differs in the important areas of
deployment, upgrade and maintenance. You can, and should, put a price
on that.
5. Set realistic goals and hold to them. Many years ago we researched
why so many CRM system deployments failed. Our surprising finding was
that the majority of customers had failed to perform even a rudimentary
needs analysis. Without that, and without the goal setting that goes with
this analysis, the companies with failing deployments had no basis for
claiming a failure, but they didn’t feel good about what they had achieved
either. It’s critical whenever deploying a new system to understand
your starting point and to set goals for improvement. If you can’t set
improvement goals, why spend the money?
The Service Cloud from Salesforce.com
Salesforce.com’s Service Cloud is a good example of a modern, cloud-based
contact center solution, and it has been rated very highly by numerous industry
experts; in fact, Gartner placed salesforce.com in the Leaders Quadrant
in its recent “Magic Quadrant for CRM Customer Service Contact Centers”
report. The Service Cloud provides the attributes and benefits of a modern
cloud-based contact center discussed in this paper, including Web self-service,
a public knowledge base, and social media integration with Facebook and
Twitter. But in addition, the Service Cloud goes several steps further through
its integration with a complete CRM package and its enhanced system
management.
The Service Cloud is part of a full cloud-based front office system, and this
integration ensures that all users have a consistent understanding of the
customer. For instance, salespeople can easily see what is happening with their
customers, and executives can monitor their business through configurable
dashboards. In addition the Service Cloud offers an advanced multi-tenant
architecture in which companies leverage shared services from a powerful
cloud-based infrastructure.
Among the many benefits, all companies are on the same version of software
and receive upgrades and new feature innovations instantaneously. In
addition, a new management feature is being introduced to provide access to
data during system upgrades, further improving availability and performance
over conventional rival systems.
A new feature, Salesforce Chatter, makes it easy for anyone in the organization
to subscribe to real-time feeds about a customer, a service issue, a sector
of the business or any object tracked in Chatter. Contact centers can use
Chatter to proactively “swarm” on challenging cases and collaborate on
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8. potential solutions. This new capability makes it possible for an organization to
collaborate and quickly respond whenever a need surfaces.
Conclusion
Upgrading and modernizing a contact center should not be a big decision, but
for many organizations using legacy systems, it is. Cloud-based contact center
technology has raced ahead of the conventional systems employed by many
companies today. The cloud-based contact center represents a significant
improvement in tools, methods, business processes and affordability over
conventional solutions. Businesses contemplating their next move in contact
center systems would be wise to evaluate the benefits of cloud-based systems
side-by-side with on-premise replacements. In the process, they may discover
that the cloud offers a superior solution and an architecture that will make the
on-premise upgrade a thing of the past.
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9. Appendix
The cloud-based call center represents a good value for most organizations.
Here we provide some data on which we based our comparisons and drew the
conclusion that cloud-based call centers represent a good value.
Table 1 shows our basic assumptions for such essentials as hardware, software,
labor and maintenance through five years of ownership for a conventional
1,000 seat on-premise contact center. This model also assumes an upgrade
in year five, which requires additional personnel for re-implementation and
training. As you can see, the total cost for 1,000 seats over five years is over
$11 million.
Table 1 Five-year costs for a conventional on-premise contact center - 1,000
seats.
Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost
Application License Costs $2,000,000 $0 $0 $0 $0 $2,000,000
(CRM + add-ons)
Vendor Support & $440,000 $440,000 $440,000 $440,000 $440,000 $2,200,000
Maintenance Fees (18-23%)
Implementation Costs: $2,000,000 $0 $0 $0 $1,000,000 $3,000,000
Initial deployment +
upgrades
Hardware (procure, $200,000 $0 $0 $0 $100,000 $300,000
prepare, test. provision)
IT Infrastructure $100,000 $100,000 $100,000 $100,000 $100,000 $500,000
Maintenance & Support
Application Admin, $400,000 $400,000 $400,000 $400,000 $400,000 $2,000,000
Maintenance & Support
User Training & Ramp Up $1,200,000 $0 $0 $0 $300,000 $1,500,000
Total On-Premise Costs $6,340,000 $940,000 $940,000 $940,000 $2,340.000 $11,500,000
Source: Beagle Research Group, July 2010
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10. Table 2
Table 2 shows the same basic assumptions for a cloud-based contact
center. Cloud contact centers derive much of their savings from the many
things customers do not pay for because they are included in the basic fee.
Additionally, because upgrades are automatic with the cloud-based contact
center, companies can avoid substantial personnel costs after the initial
implementation.
Table 2 Five-year costs for a cloud-based contact center - 1,000 seats.
Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost
Application Subscription $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $6,000,000
Costs (CRM + add-ons)
Vendor Support & $0 $0 $0 $0 $0 $0
Maintenance Fees
Implementation Costs: $1,200,000 $0 $0 $0 $0 $1,200,000
Initial deployment +
upgrades
Hardware (procure, $0 $0 $0 $0 $0 $0
prepare, test. provision)
IT Infrastructure $0 $0 $0 $0 $0 $0
Maintenance & Support
Application Admin, $160,000 $160,000 $160,000 $160,000 $160,000 $800,000
Maintenance & Support
User Training & Ramp Up $400,000 $0 $0 $0 $0 $400,000
Total Cloud-Based Costs $2,960,000 $1,360,000 $1,360,000 $1,360,000 $1,360,000 $8,400,000
Source: Beagle Research Group, July 2010
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11. Table 3
Table 3 provides cost comparisons for a variety of deployments based on the
assumptions of Tables 1 and 2. Note that savings for cloud contact centers
range from 50 percent to 22 percent. Also, larger contact center often possess
greater economies of scale for personnel and hardware investments than
smaller contact centers, providing the latter with greater percentage-based
savings.
Table 3 Cost comparisons for different seat levels.
Number of users Total cost Total cost Savings
Conventional Service Cloud
100 $3,130,000 $1,560,000 50%
500 $6,750,000 $4,600,000 32%
1,000 $11,500,000 $8,400,000 27%
2,500 $27,750,000 $20,600,000 26%
5,000 $51,500,000 $39,600,000 23%
10,000 $99,000,000 $77,600,000 22%
Source: Beagle Research Group, July 2010
Table 4
Finally, Table 4 provides a comparison in per-seat cost over the five-year span
of this analysis. Again, greater economies of scale in personnel and hardware
help larger contact centers realize a lower overall cost per seat.
Table 4 Five-year cost per seat comparison.
Number of users Conventional CC Service Cloud
100 $31,300 $15,600
500 $17,500 $9,200
1,000 $11,500 $8,400
2,500 $11,100 $8,240
5,000 $10,300 $7,920
10,000 $9,900 $7,760
Source: Beagle Research Group, July 2010
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