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One of the biggest, most critical choices facing contact centers when looking at buying and upgrading the enabling existing contact center solutions is whether to go hosted, or software as a service (Saas) a.k.a. cloud vs. buying software to be installed on-premises.

The decision that is made will affect capital and operating costs, including support; entail how the cutover is carried out from the existing software, and hardware if the plan is to go to a soft product; and may well impact on performance such as ease of use by agents and for self-service, by customers and users. There are also security considerations.

Each contact center solutions delivery method type -- hosted and on-premise -- has their benefits and challenges. To gain insight into them, TMCnet contacted Interactive Intelligence: one of the most innovative and iconoclastic contact center solutions firms.

Here is the interview that we had on this vital topic with Roe Jones, product manager, Interactive Intelligence (News - Alert):

TMCnet: Compare and contrast (a) the benefits and (b) the challenges of hosted and premise-installed solutions.

RJ: Benefits of hosted solutions include the following: lower up-front capital expenditure and “pay-as-you-go” pricing model; easy to provision multiple sites and remote agents; reduced IT maintenance and management costs; faster application deployment and access to upgrades; and flexible scalability to quickly adjust capacity as business needs change.

The challenges of hosted solutions include lack of control over applications, and security and reliability concerns. Benefits and challenges of premise-based solutions tend to mirror the flip-side of hosted benefits and challenges. Specifically, premises-based benefits tend to be maximum control over applications and fewer concerns about reliability and security.

It’s important to note, however, that over the last couple of years hosted solution vendors have made great strides in these areas. For instance, Interactive Intelligence has addressed these concerns by offering a unique local control VoIP delivery model that enables customers to keep all voice traffic on their network and record and store all recordings inside their firewall. Interactive Intelligence also offers scalable server virtualization architecture that provides dedicated servers for increased reliability, security and control. Of course, Interactive Intelligence always recommends that buyers conduct a thorough audit of a vendor’s hosted facility (both the infrastructure and policies) to ensure maximum security and redundancy.

TMCnet: Outline the advantages and downsides of OEM-hosted versus third-party hosted solutions.

RJ: The advantages of OEM-hosted over third-party solutions are greater flexibility (e.g. bug fixes, new features, migration to premises-based solution); lower costs by eliminating a third party; and simplified vendor sourcing and management, again, by eliminating a third party. A potential downside of using an OEM-hosted solution might be lack of vendor experience in hosting applications, however, this will vary significantly so a thorough evaluation of a vendor’s hosting track record is recommended – particularly access to hosted customer references.

TMCnet: What technology applications are best suited for hosting and which ones should be premise-installed and why?

RJ: Today, virtually all contact center applications can be delivered as hosted solutions. These include CRM, sales force automation, help desk/tech support, and the traditional contact center features such as for IVR, ACD, screen-pop, monitoring/recording and reporting.

One consideration for hosting, however, is the degree of application customization and complexity required. Some hosted vendors offer very limited customization options. In addition, should the customer want to eventually migrate from a hosted to a premises-based solution, many vendor solutions will require a complete re-write of applications – a daunting task when these have been highly customized. Interactive Intelligence recommends that buyers ask if a hosted to a premises-based migration is even possible, and if so, what potential application re-writes will be required. If the hosted vendor also offers premises-based solutions, and if they also function as the ISV, then odds are good that this migration is possible with no impact on applications, regardless their customization or complexity.

TMCnet: For what contact center functions, e.g. sales, lead generation, market research, customer service, tech support, collections, and for what size of contact centers and organizations are hosted solutions are ideal for? Which ones should consider having their solutions delivered on-premises?

RJ: Hosted solutions make the most sense for customers with any of the following requirements: fast deployment schedule; minimal capital expenditure; and flexible purchasing model that accommodate spikes in interaction volume (e.g. businesses that are seasonal or event-driven such as retailers and ticketing companies). [It also makes the most sense for] cost-effective disaster recovery (DR) and business continuity (premises-based buyers can also deploy a DR-only hosted solution); and for multi-location and teleworker support. Some criteria that may make a premises-based solution more desirable are organizations that have very strict regulatory and compliance requirements.

As mentioned before, in some cases hosted solutions will not meet the needs of organizations that require highly customized applications. Finally, though hosted vendors are rapidly adding sophisticated applications to their offering, some may still not exist via this delivery model. For instance, business process automation will be difficult if not impossible to find via a hosted model. In addition, the degree of customization and complexity would likely make this type of application more ideal for a premises-based deployment.

In terms of size, many industry analysts report that larger hosted deployments are already beginning to outpace SMB deployments and they expect this trend to continue. This is understandable given that hosted vendors are addressing the reliability and security concerns that are most prevalent among very large organizations. In addition, while cost is a main hosted driver among SMBs, for larger organizations the breadth and depth of applications is a key driver. Many hosted vendors now offer very sophisticated applications for both the contact center and enterprise.