CRM - August 2008 - (Page 49)

SCOUTING REPORT Aspect Software Cisco Systems Oracle UCN West There is no typical ROI.* 6 months Less than 6 months (for a 100-seat call center) 2 months Less than 2–3 months (on average) * Aspect has anecdotal evidence of system paybacks in as little as three months, but ROI depends on the technology and business processes being replaced. Source: DMG Consulting LLC, April 2008 Figure 1: Return on investment from hosted contact center infrastructure offerings RETURN ON INVESTMENT Return on investment (ROI) is a measure used by companies to determine the financial outcome of an initiative. In its broadest sense, it is calculated by subtracting the cost of an investment from the benefits. However, ROI is really an investment analysis that uses commonly accepted investment calculations, such as net present value (NPV), internal rate of return (IRR), or payback period (generally expressed in months or years). Most organizations use one or a combination of these methods to identify the financial benefits realized from investments. The key to identifying the ROI is to focus on hard benefits that can be quantified, such as cost savings, productivity gains, increased revenue, or improved customer retention. Soft benefits represent items such as improved customer service and brand image; while very significant, it’s often difficult to measure (and hard to associate a dollar value to) these benefits. Chief financial officers are more likely to approve investments where the gains can be quantified, particularly in tough economic times. For this reason, it is recommended that hard benefits be used in business cases to obtain approval for investments. Soft benefits may be used to lend additional support to business cases, but they should not be used alone. From an ROI perspective, hosted contact center infrastructure solutions generally shorten time-to-value. Prospects should carefully calculate their ROI prior to making an investment. Most vendors tend to express ROI in terms of a payback period in months. The average payback for hosted contact center infrastructure solutions from five leading vendors varies from two months to six months, with the most typically cited time frame being approximately two to three months. (See Figure 1.) TOTAL COST OF OWNERSHIP ROI is used to measure the impact of a cash outlay; total cost of ownership (TCO) takes into account ongoing costs associated with an investment. Typically, a TCO www.destinationCRM.com analysis for an on-premise contact center solution takes into account costs for vendor hardware, software, applications, start-up, training, professional services, and ongoing maintenance and support (for both the software and hardware). A TCO analysis should also include internal staff (contact center and IT personnel) and other costs, such as disaster-recovery systems, real estate, travel, and software and hardware upgrades that are outside of regular maintenance and support. With a hosted solution, many of these costs become transparent because they are incorporated into the monthly fees. Many businesses choose the hosted model because they can achieve a robust solution without the initial capital expense. They eliminate expenses for software and hardware purchase and implementation, as well as ongoing maintenance and upgrades, as the hosting vendor bears these responsibilities. Because the initial costs are less for hosted solutions than for traditional on-premise implementation projects, the avoidance of first-year costs—accompanied by savings from reductions in internal contact center and technology support staff and the elimination of upgrade fees—translates into a considerably shortened payback period and a lower TCO. If a hosted contact center solution is going to be used for a long period of time, however, prospects should assess the hosting lease by conducting a leaseversus-buy analysis—that will help determine if and at what point the ongoing lease payments exceed the savings realized from avoiding large upfront costs. [For more on this value proposition, see “The Hidden Cost of SaaS,” May 2008. –Ed.] CONCLUSION The adoption rate for hosted contact center infrastructure has been slower than projected, but is expected to pick up in the next 24 months, particularly if the economy goes into a full recession. Hosting is an attractive approach to acquiring technology without a large capital investment. The current set of hosted solutions is compelling, while still maturing. This market has been confronting a paradox: The standalone contact center vendors were waiting for the market to pick up before making significant additional investments in their offerings, and end users were waiting for the vendors to further enhance their solutions before they invested. This dilemma is finally over: There are many good hosted contact center solutions available in the market from both infrastructure vendors and standalone providers. End users interested in acquiring a hosted solution should conduct a selection process as thoroughly as if they were purchasing the solution. Donna Fluss (donna.fluss@dmgconsult.com) is founder and president of DMG Consulting LLC, a leading provider of contact center and analytics research, market analysis, and consulting. Beth Eisenfeld (beth.eisenfeld @dmgconsult.com) is a senior consultant at the firm. 49 CUSTOMER RELATIONSHIP MANAGEMENT | AUGUST 2008 http://www.destinationCRM.com

Table of Contents Feed for the Digital Edition of CRM - August 2008

CRM - August 2008 Contents Front Office Feedback Reality Check Customer Centricity The Tipping Point Maximum Security A Code Win Doesn’t Blow Forming the Platform CRM on Twitter CRM Class Is in Session Making CRM Mandatory for University Administration Required Reading Cover Story: Calling it Quits Wouldja Look at That? 8 Enterprise Strategies That Stick CRM Searches for Search All Lines Are Not Busy UC: As Easy as A-B-C Even Contact Centers Have Room for Improvement Money Lying Around? Secret of My Success Re:Tooling Scouting Report Pint of View

CRM - August 2008

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