I recently studied pricing trends in the contact center market, looking at the ways vendors price cloud and on-premises platforms in various configurations based on size and complexity. The goal was to come up with a way to compare the total cost of ownership of cloud and on-premises platforms and to follow up on a similar study done in 2013.
The last time we conducted this research, the industry's pricing was all over the map. Cloud pricing in particular was extremely variable from one supplier to another. This time out, though, the landscape has settled down, and I found some interesting surprises lurking in the data.
The first thing of note was that cloud pricing has become much more uniform across vendors and much lower than it was three years ago. (As much as 15 percent to 20 percent lower, depending on configuration.) On-premises system vendors have also dropped their list prices, but not by as much. Instead, several of them have pivoted to improve their cloud or hybrid offerings to provide fuller portfolios.
One reason that prices are dropping is because of bundling. Vendors are building things like call recording and workforce optimization into their core cloud platforms and throwing those features in without raising the overall costs of the bundle. Something similar is happening with multichannel capabilities, and even with predictive dialing in some cases.
This sorting out process has been a long time coming, and it suggests that buyers should be looking at factors other than pricing when they make the cloud versus on-premises decision. Issues like flexibility, speed of deployment, and long-term planning can come to the fore when pricing is simplified and harmonized.
What surprised me most was that there is still no one answer to the on-premises versus cloud question. When you look at the most likely real-world centers--the midsized ones with medium levels of technological complexity--you see a lot of wiggle room available to make a more reasoned decision. Yes, it's probably true that smaller centers are more likely to gravitate to the cloud, partly due to cost and partly because of a reluctance to take on the headache of an on-premises automatric call distributor or dialer on site. But most solutions are more complex and nuanced, and cost is just one factor among many, including future-proofing and the existence of legacy on-premises tools.
Given our current level of innovation, it seems untenable to plan for five years, seven years, or longer. Collapsing time horizons, coupled with the trend toward adding customer contact channels (and moving customers to new forms of communication) tend to favor cloud deployments.
My sense is that buyers need a clearer sense of how their futures are going to play out with regard to expected growth and the kinds of technology integrations than they did before. Generally, contact center systems are going to have to integrate more cleanly with other tools that are used by other departments within organizations. This will likely include back-office systems, marketing automation software, even CRM. Many of these tools are moving toward cloud deployment models in parallel with contact center systems (and sometimes ahead of them).
Several things are happening right now that will affect the deployment decision for the next year. Cloud platforms are on a parity with their on-premises brethren when it comes to features. That makes cloud platforms much more appealing to larger enterprises, which means that cloud platforms will need to co-exist for a little while longer with legacy on-premises installations of one kind or another. Buyers need to be aware of that need for co-existence.
In most cases, adding cloud tools to the mix is not going to suddenly render existing legacy infrastructures obsolete. A lot of it will remain in place for some years yet, and all will need to be tied together.
At the same time we're looking at an increased appetite in call centers for tools that don't have legacy installed bases--elements like multichannel contact front-ends; tools for customer mobility; analytics of all stripes; and marketing automation platforms. It’s a safe bet that in a lot of enterprises, newly emergent tools will migrate to cloud versions.
With pricing coming down, it will also be easier for enterprise buyers to compare similar solutions across the landscape. Within just a few more years, contact centers will be driven more by how well tools integrate with each other and how quickly they can be extended into new areas than they will by pure price considerations. But there is no question that we are in one of those transformative moments when an entire decades-long technology paradigm is being overturned. Legacy on-premises vendors have recognized this and are fine-tuning their offerings to compete with cloud providers.
So in the end, facing feature parity and packaging complexity, buyers will have to look carefully at their vendors, who will increasingly differentiate based on how well they can act as knowledgeable guides through the thicket of technology options.
My study of pricing, "The Total Cost of Ownership of Cloud- and Premise-Based Contact Center Platforms: A look at the five-year cost comparisons for technology infrastructure deployment," was published in March by Ovum.;
Keith Dawson is a principal analyst in Ovum's customer engagement practice.