How Contact Center On-Demand Creates New Opportunities for Telco Channel Partners

Channels who understand what kind of services are coming soon from the major telcos can prepare themselves for lucrative opportunities and be forewarned of new competitive threats. Major Network Service Providers (NSPs) are readying their Contact Center On-Demand offerings, and the channel partners who are ready to go when the telcos launch these services will be richly rewarded.

Telcos and Call Centers Today

Call centers are already the single biggest revenue source for most inter-exchange carriers. Toll-free inbound services have surpassed long distance as the largest source of revenue. In 2001, these services accounted for more than $20 billion in revenues to telcos in the US alone. And the majority of those calls are terminated into call centers and their modern, multimedia equivalents - contact centers.

But today telcos just deliver the calls and leave a lot of money on the table for vendors of high-value, premise-based ACDs and call center applications. Some of that money will migrate toward Hosted Contact Center or Contact Center On-Demand providers, and some of the traffic money will migrate with it. This is a risk that cannot be ignored.

But this risk is also an opportunity. Call center as a hosted service is not a new idea for telcos. Projects have been launched, and millions have been spent, both by internal telco R&D and by traditional ACD vendors wanting to address a potentially lucrative market opportunity. But until now, the limits of available technology have made telcos poor competitors for the premise-based call center solutions of the equipment vendors. This is precisely because in the old Centrex paradigm it was not possible to meet the complex IT requirements related to call centers.

Today there are service platforms that solve this problem and allow telcos to compete effectively with a much broader range of premise-based alternatives. New platforms are using IP technology and the On-Demand paradigm to bring a whole new level of feature-richness and cost effectiveness to hosted contact center offerings. Some of these are true carrier class, multi-tenant platforms designed from the ground up for the service provider market.

Network service providers have begun to shift their focus from across-the-board capex reductions to opportunities for growth via new, high-margin services. With hosted contact center solutions, NSPs have a new revenue opportunity that allows them to capitalize on their existing network infrastructure and, with relatively small incremental investment, to hold on to a major source of their core revenue in the face of a serious threat.

The Time is Right for Contact Centers On-Demand

Contact centers are more important than ever. Companies understand that they invest a lot to acquire customers, and would be smart to invest a little more to keep them. But many companies simply cannot afford the high capital investments and ongoing maintenance costs of building their own in-house contact centers. They can, however, afford reasonably priced contact center on-demand services from trusted carriers paid for as they are used. Contact center on-demand gives companies a chance to have the latest in contact center technology without the need to employ teams of IT rocket scientists to make it all work, while at the same time transforming prohibitively large capital expenditures into predictable and affordable monthly operating expenses. This is the On-Demand Computing value proposition.

For telcos, contact center on-demand is an opportunity to pair a low-margin core transport service with a high-margin, value added service. This pairing not only creates new revenue from the new service, but also makes the core transport service more lucrative than a mere commodity and less susceptible to churn. How many situations facing telcos today offer the potential to both raise prices and reduce churn? Consider this question for a moment, and you will see the significance of this particular opportunity, and the reason for its rapid uptake by the likes of BT, Cable & Wireless, France Telecom, Korea Telecom, NTT, Japan Telecom, PLDT, and TeliaSonera.

What About US Carriers?

Most of the carriers mentioned above who are already offering contact center on demand service are European and Asian. From one perspective, this is not surprising. The US contact center market is fairly mature. The number of agent positions in the US is growing only very slowly, and some analysts believe it may actually shrink as India and other offshore locales gear up to provide more cost effective agents. In Asia and in some parts of Europe, we see the opposite situation: a mix of high unemployment, low labor costs, good telecommunications infrastructure, and government incentives creating an immature and fast growing contact center market. These regions represent an ideal target for the contact center on-demand service providers.

However, there are very good reasons to predict that the US market for these services will also be taking off soon. The local exchange carriers (LECs) have begun their move into long distance, creating a whole new competitive force. So far, they have focused mostly on attracting consumers away from the traditional IXCs with aggressively priced bundles of local and long distance service. But there is little doubt that they are already thinking about how to capture some of that more than $20 billion in toll free inbound service to contact centers mentioned above.

What will their strategy be? Lower the per-minute price of 800 services by another half a cent? This will probably be a part of the mix, but it bodes an escalating price war and customer windfall that the industry can ill afford at this time. Those who are first to recognize the opportunity to add value to basic toll-free inbound service with a contact center on-demand offering will be able to capture and retain many customers without resorting to price reduction. Established IXCs will need to create defensive offerings. Within a year or two, a robust contact center on-demand service may well be table stakes for every player in the US toll-free inbound market. This is the kind of win-win situation that will help the industry: new and valuable services for customers; new and lucrative revenue sources for providers.

Who Will Sell Contact Center On-Demand?

Selling and supporting a complete contact center is not easy for commodity-oriented telcos. This, then, is the looming challenge, and it is also a tremendous opportunity for the channel. As much as they would like to be capable of envisioning, selling, and implementing more complex applications, services such as Contact Center On-Demand will always present a golden opportunity for channel partners that make themselves just a little more solution oriented, a little more integration oriented, and a little closer to their customers, than telcos tend to be.

Telcos will certainly recognize that they need the channel's help, and as quickly as they put together the basic CCOD services, they will create packages that make these attractive and lucrative services for their channels to sell. Of course, selling this product will be challenging for the channels, too. Today's CCOD service is "not your father's Centrex." It's a complex, interlocking set of functionalities in itself, including Automatic Call Distribution (ACD), Interactive Voice Response (IVR), Predictive Dialing (PD), and Recording. Each of these functions requires some configuration and customization for the individual client. In addition, every contact center requires some degree of integration to other facets of the IT environment, such as the Customer Relationship Management (CRM) application.

Channels that can provide system integration services to support the planning and implementation of a contact center will have an advantage in this area. Those that do not have such skills should create alliances with companies who do. Contact center projects can be lucrative for more than one provider.

New Channels in the Making

Just as we can foresee the need for existing telco channels to prepare for the CCOD opportunity, we can also see CCOD driving the emergence of new channels and new sales and marketing alliances for telcos. Readers of Phone+ who make up the traditional telco channel should be on the alert that their ranks will be expanding. New competitors may be on the way.

The most likely candidates will be companies that see themselves as IT-oriented and who, until now, when they participated in contact center projects would confine their role to implementing and integrating the database applications like CRM. There are many such companies, whose call center expertise excludes anything related to telephone lines and automatic call distribution. Traditionally these players share their call center projects with providers of premises switching equipment (ACDs) that also may be telco channels for the connectivity and transport elements of the deal.

This situation is especially likely to change in view of the new generation of CCOD platforms that require only IP connectivity and desktop PCs to enable all communication sessions including telephone calls. This environment puts the IT players squarely in their element, and increases the likelihood that they will form new channel relationships with telcos.

Room for Many Players

The Contact Center On-Demand industry is projected to grow to a $3.6 billion per year industry in North America alone, eventually supporting at least a million contact center agent positions. It's not surprising that new players will be lining up to share a piece of that pie, and in the long run, this expansion of the telecommunications market, which represents a shifting of value from the customer premises to the network, is one that benefits the entire industry and creates the headroom to support some of those new players as well as to improve the fortunes of the existing players who are wise enough to prepare themselves for these new opportunities.