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Feb 21 2017 To Answer “Cloud VS. On-Premise”,”CAPEX VS. OPEX” First

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I’d like to think I’m a smart guy, or at least I am good at giving the impression of one. I’ll take either. But when I was asked to develop a series “or even a single blog” on the infamous “cloud vs. on-premise” debate as it relates to call center technology, I struggled at first. Where do I even start?

Well, at this point I have read over 100 blogs on the topic, listened to countless hours of presentations at trade show events and browsed through no fewer than 20 whitepapers on the topic. And after all that I have decided to throw down the gauntlet.

Today, I stand before you (okay, okay, I’m sitting at my computer) to challenge some of the prevailing wisdom around why you should move to the “[Fill in the Blank] as a Service” for call center technology.

Most of what I have read leads me to compare the material to Stephen Covey’s “character vs. personality” teachings in the book 7 Habits of Highly Effective People. In it, Covey brought to light that for decades the world shifted away from change at the “character” level, which drives improvement at your personal or business core – to the “personality” level, which aims to solve all problems with quick fix techniques that provide short-term gain but fail over time. Like trying to put a band-aid on a bullet wound.

I categorize most of what exists on the Internet today when discussing cloud vs. on-premise falling into the “personality” bucket, because vendors are just trying to get people to buy their products. They may sound great, but they’re probably not going to deliver their stated value in the long run.

Debunking the CapEx vs. OpEx Myth

Typically, the first articulated perk of cloud call center technology involves detailing the benefits realized through a buy-vs.-rent debate, by shifting from a capital expenditure (CapEx) model to that of an operating expenditure (OpEx) model.

Since I care about you, I will spare you yet another tired example of a five-year total cost of ownership model, but rather recommend the software advice online tool as a great resource to develop one for your project.

I argue you do not need to sign-up for “vendor x” and utilize their cloud service to leverage software as an operational expense. This amounts to a contract negotiation between your company and the software manufacturer to provide the software using an operational expense model, on-premise or cloud.

Is cost is the number one issue and not the value of the software provider? Then I recommend peeling back the onion and play a spirited round of the margin removal game, “Who your cloud’s daddy?”

“Who’s Your Cloud’s Daddy?”

You should force any cloud provider to reveal the underlying infrastructure or provider that powers their call center technology for two very important reasons.

First, empowered with this knowledge, you’ll be able to use a reputable source such as Gartner to compare which cloud infrastructure provides the best overall service. (Amazon provides a great summary and links to leading industry reports.) Second, you’ll have the option to contract directly with a Microsoft, Google, Amazon or Rackspace versus paying a markup to use the same cloud infrastructure through a software company. If your organization already utilizes a cloud infrastructure provider, why not place your call center technology into that same cloud environment?

From a cost perspective, let’s breakdown a $100-per-month call center agent software suite as a service:

  • $10 allocated to labor for maintenance and support;
  • $30 allocated to the cloud infrastructure & monitoring; and
  • $60 applied to the call center technology software.

You could probably negotiate the same OpEx contract, but reduce the per-month fee to only include the software and maintenance/support. After all, cloud call center technology providers are not simply passing on the infrastructure provider fees at cost, so you will pay a margin. If you have 100 agents, you should save 20 to 25 percent off the monthly cost for the software.

The True Costs of Implementation

In my eyes, the most hyped and overstated benefit of the cloud is comparison of implementation costs for on-premise deployment.

If you’re in the business, you’ve probably heard the persistent and admittedly catchy refrain of a call center in the cloud being stood up in minutes, rather than the weeks or months required for a premise installation. That is followed by large sums of professional services costs for the installation, configuration and integration to data sources necessary for the premise software to meet your business needs. Moreover, the fees are left out of the cloud deployment scenario, likely to make the cloud case more compelling.

The key item that drives the cost of implementation involves the integration to data sources and the amount of data sources continue to grow.

Personally, I say some data sources should cost less with on-premise deployment vs. the cloud.

For example, if you have a system that stores personally identifiable information (PII) data on-premise and need to integrate that to the new cloud, you are now injecting security, networking and encryption. That drives up costs and time. Installed on-premise, you can already check off several integration tasks as you are behind the same secure firewall.

The cost difference for integration to data sources should be minimal, if not identical, regardless of how you decide to deploy the technology. For companies that already integrated the call center technology to an existing data source, that integration works from both the cloud and premise.

It comes back to negotiating the terms and conditions on value, that provides your company with the “character” impact described by Covey. That value needs to be analyzed in all phases, especially support contracts as outlined in our blog on ROI from support contracts.’