Friends in the call center software industry are telling me that they’ve noticed a decided pickup in their business. What’s interesting about that tidbit is that these people are also saying that the interest is in on-demand solutions, and that opens a lot of topics for discussion. For example, we could look at the economic causes of this interest as well as the down stream ramifications of it. Let’s do both — first, the drivers.
I have always believed that economics was the primary driver — at least initially — of the on-demand movement. Lurking just beneath the surface, however, was the idea of risk. When on-demand pioneers talked about the lower costs of their services versus traditional systems, the subtext was always focused on risk. You didn’t need to be a Ph.D. candidate to know that spending a little on an on-demand solution was better than spending a lot on the behind-the-firewall variety, especially if the project went south. On-demand made sense because it hurt your career less if you were wrong.
Making the Investment Work
On-demand was not wrong for a lot of companies — in fact, it was very right — but the call center always seemed rooted in the traditional approach to licensing software. I attribute that to several causes. First, the call center is hardware intensive, more so than any other part of CRM. It took some time for vendors to bring together the technology and a business model that enabled them to provide call centers as a service in the same manner as SFA, but they’ve finally gotten it.
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Having the technology and the business model was not enough, however, especially in this market, because once a company made the big call center investment, it had to make the investment work out — and that meant following a depreciation schedule.
Depreciation schedules have posed an interesting barrier to entry for on-demand call center operators. Early adopter companies that bought their call centers were out of play while they wrote off their initial investments.
The good news for larger call centers is that their original investments are reaching maturity, and there is a whole new generation of technology that many companies are deciding to rent via the on-demand model rather than buy as components age out. Meanwhile, the on-demand call center industry cut its teeth on the smaller market made up of companies that could never afford to bring a call center in-house, but who could definitely make good use of one. Smaller companies were a perfect match to the supply of on-demand call centers, and many of them were either offshore or specialty groups.
I know of operators that specialize in distributed call centers manned by agents who are all Native Americans or disabled American veterans, as well as other groups. Of course, there are plenty of operators in other countries too — India always comes to mind, but the Philippines is another great example. Those operators are strapped for capital and on-demand solutions make perfect sense for them.
That brings us to the other driver, competition. Many call centers in the U.S. have been stuck with in-house systems, but that has not stopped CFOs from trying to lower costs, and that has partially driven the offshoring drive. Today, offshoring is seen as a limited success, and it looks like multi-sourcing is now the flavor of the month. In multi-sourcing you keep your in-house call center, but it doesn’t grow indefinitely, you augment it with remote workers in the same area or in different states and possibly different countries as part of a follow-the-sun strategy.
As I see it, the tipping point I mentioned above is being driven by, what else, economics. Users of on-demand call center technologies are able to favorably compete against call centers that live behind the firewall, so if the established centers are to survive, their best course is to reduce their overhead. Agents who work remotely don’t take up valuable floor space, which reduces real estate costs, and that’s just one cost saving that comes with adopting on-demand technology.
Another cost cutter is reliance on IP telephony. You don’t need to use on-demand call center infrastructure to use IP phone service, but it’s one of those things that simply comes along as a bonus with some on-demand call center vendors. Simply put, the easiest way to gain a lot of improvements is to swap technologies, hence the rise in on-demand’s popularity.
Managing People, Costs
My last point is management. Multi-sourcing gives you the flexibility to manage costs and to deliver different services through different routes, but it also opens up a new challenge, and that brings us to the down stream effects I mentioned earlier.
The most obvious challenge is how to manage all of those people working in spare rooms, on their kitchen tables, or in other time zones. Traditional management solutions do a good job of recording customer interactions for later playback and analysis, but even in traditional call centers, managers have a tough time doing the analysis and finding time to sit with agents. The degree of difficulty rises exponentially when the agents are not simply down the hall or on the floor.
Automated solutions that analyze agent performance and proactively prescribe and schedule time to improve agent knowledge and performance are going to be in high demand if multi-sourcing is to flourish. There are products on the market doing just those things and delivering them on-demand, a good match for the on-demand call center. The trick here is that by being proactive and initiating corrective action where needed, automation plays a bigger part in management than simply tracking a call. I suspect on-demand management solutions will begin to displace the variety of tools that live behind the firewall and simply alert a manager to a discrepancy. That’s something every call center, regardless of its model, can use.
This is a great example of how one niche opens and follow-on niches are created. It’s one reason I like watching this space.
Denis Pombriant runs the Beagle Research Group, LLC, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing, and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at [email protected]