Contact center on-demand: An opportunity for telcos to be leaders in the grid-computing revolution

Grid computing, also known as utility computing or computing on-demand, is a trend that is gaining momentum in the world of information technology (IT) because of its potential to improve computing efficiency and reduce the total cost of ownership for IT resources. As with most innovations, grid computing brings both new opportunities and new risks for telcos. The obvious opportunity for telcos is to provide the bandwidth that grid computing will inevitably consume. At the same time, there is a very real risk that companies providing the grid-based applications, such as the major IT outsourcers, will compete successfully with telcos to provide some or all of the related communication services as well. To mitigate this risk, telcos need to be leaders in this field. They need to be not just providers of ancillary enabling technology, but providers of some of the core grid applications themselves, drawing upon their many years of relevant experience as service providers.

What is grid computing?

Readers who can remember that ancient era when the combined processing power of all the computers in the world was less than that of the average desktop today may well ask, "Isn't this just timesharing all over again?" There is a sense in which grid computing is a full-circle phenomenon. However, it's happening on a completely different scale. In the age of timesharing, no individual and few companies could afford to own their own computer. Timesharing brought raw power for complex calculations to desktops that could otherwise never have performed these tasks. That is no longer an issue. Today's grid computing paradigm promises to bring not only enormous processing power, but also the most advanced, seamlessly distributed applications, providing all the benefits of dedicated desktop, server and mainframe hardware with only a fraction of the associated capital and maintenance costs.

The modern contact center is such an application, and this is exactly where telcos should look for services they can offer that fit the grid-computing paradigm. 

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 U.S. 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 grid computing providers, and some of the communication services 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 without grid computing it was not possible to meet the complex IT requirements related to call centers.

Today there are grid computing-oriented 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 grid-computing 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. 

As network service providers begin to shift their focus from across-the-board capex reductions to considering their opportunities for growth via new, high-margin services, the need to actively meet the challenges posed by Grid computing is a high priority point to consider.  With hosted contact center solutions, service providers have a new revenue opportunity that allows them to capitalize on their existing network infrastructure and, with relatively small incremental investment, take a leadership position as Grid computing gains momentum.

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 grid-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, KT, NTT, PLDT and TeliaSonera. 

What about U.S. carriers?

Most of the carriers mentioned above that are already offering contact center on-demand service are European and Asian. From one perspective, this is not surprising. The U.S. contact center market is fairly mature. The number of agent positions in the U.S. is growing 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 certain 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 good reasons to predict that the U.S. market for these services will also be taking off soon. First, the U.S. is leading the world in grid computing, and this puts pressure on telcos to respond as explained above. There is another reason, based on the specific dynamics of telco evolution in the U.S. 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 that 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 U.S. 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.

Of course, selling and supporting a complete contact center is not easy for today's commodity-oriented telcos. But this is exactly the kind of challenge telcos need. The old capital-intensive model, where telcos invest heavily in network plant and equipment, and reap the returns for decades, is running out of steam because of the bandwidth glut and the ease of adding intelligence to the network with relatively inexpensive edge devices. The telcos that will prosper are the ones that invest aggressively in upgrading the skills of their people, skills that qualify them to envision, sell, and implement complex grid computing applications on top of their basic commodity services. The move to offer contact center on-demand as a hosted service is a perfect example of this trend. The telcos who can rise to this challenge are doing exactly what will allow them to thrive in the 21st century.

Steve Kowarsky is Executive Vice President of CosmoCom.

Visit CosmoCom online.