Call Center TCO: Why It Doesn’t Matter

Spoken | August 9, 2016

Why you should stop trying to figure  Total Cost of Ownership in the call center

calculator for call center tcoAny call center leader making the switch from on-premises infrastructure to cloud-based, has one goal in mind: to reduce CAPEX and increase OPEX while gaining scalability and reducing costs and complexity. Due to this main objective, many people attempt to calculate and subsequently compare the total cost of ownership (TCO) between the two infrastructures. But is this the right approach to determining which solution is best suited for your company?

“On the premises side, I think TCO is largely a fantasy,” Dave Michels a No Jitter contributor and TalkingPointz analyst said in a recent post. “… We often use TCO as a means to justify a decision, but to really gather TCO for any given product or solution is pretty darn hard, and it’s filled with a lot of assumptions… Our assumptions are borderline correct tomorrow and almost always wrong five years from now.”

Due to this ambiguity when it comes to gathering an accurate TCO, call center leaders tend to shy away from diving into the pros and cons of adopting cloud infrastructure in their businesses, as there is so much that must be taken into account. For instance, many call center leaders find it difficult to calculate the total cost of ownership (TCO) of implementing cloud infrastructure compared to that of their current on-premises infrastructure because they aren’t sure what features must be accounted for or what numbers to plug in to make an accurate calculation.

If you insist on TCO

If you really want to compare the total cost of ownership, you can gain the clearest view of the cost and operational differentiation between on-premises and cloud infrastructure, begin by addressing the features and advantages that you currently pay for with your on-premises system—licenses and subscription fees, maintenance, customization and integration, hardware, etc. Then, address the features and advantages that you wouldn’t have to pay for (or pay as much for) by implementing cloud—for instance, in-house maintenance, applications, vendor support, implementation, hardware, training, etc.

  • List current on premise features
    • Licenses
    • Subscription fees
    • Maintenance
    • Customization
    • Integration
    • Hardware and software updates
  • List included cloud features
    • Included applications
    • Additional security
    • Geographic redundancy
    • Training

Then, it’s possible to use a pre-built TCO calculator to help determine an accurate number. For instance, Software Advice created an online calculator meant specifically for on-premises versus SaaS comparisons; test it out for yourself by clicking here.

What isn’t included in TCO

But keep in mind that these calculators don’t cover the hidden costs of on premise systems:

  • More IT staff required to maintain
  • Opportunity costs of a rigid system that can’t scale
  • Opportunity costs of long-term contract
  • Opportunity costs of a lack of agility to move with the market

In a nutshell: cloud usually wins

We’ve conducted our own research and found that, over a five-year time span, the TCO of a cloud call center model remains significantly lower than that of on-premise infrastructure. The consistent cost reduction is largely due to the various advantages of cloud, including:

  • Flexible pay per use without assuming the risk of idle capacity
  • Reduced need for IT staff
  • Time value of money (delayed cash flow)
  • Reduced opportunity cost
  • Predictable operational expenses
  • No obsolescence of equipment
  • Cost of 24/7/365 support and maintenance is built-in
  • Ability to extend to other geographical regions without additional investment

And we aren’t the only ones who realize how immensely these features and advantages correlate to the cost efficiency of SaaS infrastructure. As a matter of fact, a survey from Gartner revealed fourty-four percent of survey respondents said that overall cost reduction continues to dominate as th emain reason for investment.* What’s more, the traditional deployment model for on-premises software is expected to significantly shrink from 34 percent today to 18 percent bt 2017.*

Don’t make TCO the driving factor

But what many call center experts are finding is that TCO isn’t always the driving factor for cloud adoption. In fact, there are many other reasons why more call centers are adopting cloud outside TCO:

  • Increased reliability: A best-in-class SaaS platform should provide two geographically diverse, fully redundant data centers as well as a live-live configuration that protects you against outages that could bring your productivity to an abrupt halt.
    Heightened scalability: When you don’t have to manage your on-premises infrastructure, you are free to move about the country, the continent … heck, why not the whole world? When you don’t have to pay to physically move your infrastructure to new locations, the world becomes your oyster.
  • Heightened security: Most cloud call center providers offer higher levels of security than are typically implemented for on-premise systems. Vendors offer security features such as PCI-compliant data centers, unique, on-the-fly call encryption and credit card masking, to name a few.

Go for value over TCO

So if you feel that it’s a must try using a pre-built TCO calculator to compare the costs of on-premises and cloud infrastructure. But remember that cloud is advantageous for more reasons than just cost efficiency. What business goals might the cloud facilitate for you: agility, scalability, reliability, security or control?


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