Beagle Research Group

On-Demand Call Center

Friends in the call center software industry are telling me that they’ve noticed a decided pick up in their business.  What’s interesting about that tidbit is that these people are also saying that the interest is in on-demand solutions and that opens a lot of topics for discussion.  For example, we could look at the economic causes of this interest as well as the down stream ramifications of it.  Let’s do both—first, the drivers.

I have always believed that economics was the primary driver—at least initially—of the on-demand movement.  But lurking just beneath the surface was the idea of risk.  When on-demand pioneers talked about lower costs of their services versus traditional systems, the sub-text was always focused on risk.  You didn’t need to be a Ph.D. candidate to know that spending a little on an on-demand solution was better than spending a lot on the behind-the-firewall variety, especially if the project went south.  On-demand made sense because it hurt your career less if you were wrong.

On-demand was not wrong for a lot of companies, in fact, it was very right, but the call center always seemed rooted in the traditional approach to licensing software.  I attribute that to several causes.  First, the call center is hardware intensive, more so than any other part of CRM.  It has taken some time for vendors to bring together the technology and a business model that enabled them to provide call centers as a service in the same manner as SFA, but they’ve finally gotten it.

Having the technology and the business model was not enough, however, especially in this market because once a company made the big call center investment, it had to make the investment work out and that meant following a depreciation schedule. 

Depreciation schedules have posed an interesting barrier to entry for on-demand call center operators.  Early adopter companies that bought their call centers were out of play while they wrote off their initial investments.

The good news for larger call centers is that their original investments are reaching maturity and there is a whole new generation of technology that many companies are deciding to rent via the on-demand model rather than buying as components age out.  Meanwhile, the on-demand call center industry cut its teeth on the smaller market made up of companies that could never afford to bring a call center in-house but who could definitely make good use of one.  Smaller companies were a perfect match to the supply of on-demand call centers, and many of them were either off shore or specialty groups. 

I know of operators that specialize in distributed call centers manned by agents who are all Native Americans or disabled American veterans, as well as other groups.  Of course, there are plenty of operators in other countries too—India always comes to mind but the Philippines is another great example.  Those operators are strapped for capital and on-demand solutions make perfect sense for them.

That brings us to the other driver, competition.  While many call centers here have been stuck with in-house systems but that has not stopped CFOs from trying to lower costs and that has partially driven the off-shoring drive.  Today off shoring is seen as a limited success and it looks like multi-sourcing is now the flavor of the month.  In multi-sourcing you keep your in-house call center but it doesn’t grow indefinitely, you augment it with remote workers in the same area or in different states and possibly different countries as part of a follow-the-sun strategy. 

As I see it the tipping point I mentioned above is being driven by, what else, economics.  Users of on-demand call center technologies are able to favorably compete against call centers that live behind the firewall so if the established centers are to survive, their best course is to reduce their overhead.  Agents that work remotely don’t take up valuable floor space which reduces real estate costs and that’s just one cost saving that comes with adopting on-demand technology.  Another cost cutter is reliance on IP telephony.  You don’t need to use on-demand call center infrastructure to use IP phone service, but it’s one of those things that simply comes along as a bonus with some on-demand call center vendors. Simply put, the easiest way to gain a lot of improvements is to swap technologies, hence the rise in on-demand’s popularity.

My last point is management.  Multi-sourcing gives you the flexibility to manage costs and to deliver different services through different routes but it also opens up a new challenge and that brings us to the down stream effects I mentioned earlier.  The most obvious challenge is how to manage all of those people working in spare rooms, on their kitchen tables, or in other time zones.  Traditional management solutions do a good job of recording customer interactions for later playback and analysis but even in traditional call centers, managers have a tough time doing the analysis and finding time to sit with agents.  The degree of difficulty rises exponentially when the agents are not simply down the hall or on the floor.

Automated solutions that analyze agent performance and proactively prescribe and schedule time to improve agent knowledge and performance are going to be in high demand if multi-sourcing is to flourish.  There are products on the market doing just those things and delivering them on-demand, a good match for the on-demand call center.  The trick here is that by being proactive and initiating corrective action where needed, automation plays a bigger part in management than simply tracking a call.  I suspect on-demand management solutions will begin to displace the variety of tools that live behind the firewall and simply alert a manager to a discrepancy.  To tell the truth that’s something every call center, regardless of its model, can use.

This is a great example of how one niche opens and follow-on niches are created.  It’s one reason I like watching this space.

I'd like to buy a word...

Google made its presence felt in the front office market in a big way this week when both Salesforce.com and NetSuite announced within hours of each other their embrace of Google Ad Words as an integral part of their marketing solutions.  To be sure, Ad Words by themselves will not solve the lead generation challenge faced by most marketers but this approach does at least recognize the need to close a loop when a customer expresses a need and it offers a helpful solution.

Many companies, most notably Salesforce.com, have been hawking the concept of what Marc Benioff frequently refers to as “mash-ups” for a while now.  If you aren’t sure what a mash-up is, it is simply the amalgamation of two disparate on-demand applications that produces something new and useful, sort of like a peanut butter cup, but not as tasty. 

The common example of a mash-up takes street addresses from a database application and places them on a map or satellite image to provide a visual rendering of what was once merely a two dimensional list.  Real estate agents, for example, find this kind of mash-up useful when planning to show a few homes to prospective buyers and the potential uses for mash-ups are as numerous as your imagination.  Making Google Ad Words work with Salesforce.com and NetSuite is more than a typical mash-up, and most of the work is done on the database side to register the words, track them, and make the buy. 

At the same time it’s clear why each company chose Google, or vice versa.  Google owns about 80 percent of the ad word market which is estimated to be worth more than $10 billion this year and growing at a rapid clip.  Marketing has always been the weak link in many CRM systems for many reasons.  Companies have not invested as much in marketing as they have in sales or service and unlike those other departments, organizations keep marketing on a shorter leash—and no one is ever satisfied with the results gained for the amounts spent.  Marketing done right is an expensive proposition and companies are forever looking for ways to cut costs, often with predictable results, and that’s why this combination may hold a lot of promise.

The capabilities this kind of combination provides include a lot of lead harvesting for sales people as well as accounting that helps organizations manage their marketing spend.  Most importantly, this kind of application makes obsolete the notion that marketers know that half of their budgets are wasted—they just don’t know which half.  These announcements ensure that marketers will know which words get traction and which don’t and it will enable them to make adjustments accordingly.

Nevertheless, the thing that interests me the most about these announcements is that they happened virtually together and the fact that Google’s fingerprints are all over everything.  I am not saying this is a bad thing by any means but it does signal some changes for the CRM industry and beyond.  For example, Google has been the proverbial eight hundred pound gorilla in the market place for a long time and a paradigm of a new economy company that charts its own course and that is inventing an important part of future infrastructure in the process.  The question needs to be asked “Now what?” 

There has been a lot of talk about what happens to the software industry in general if applications can be delivered on-demand and if they can be supported by ad revenues, free to the user.  You can already see examples of on-demand word processors and spreadsheets that mimic the functions of Microsoft’s PC based applications.  In fact some of the companies developing these products are headed by ex-Microsoft product managers. 

Those applications could erode market share for Microsoft and so far Microsoft is responding in the same way it originally did to the emergence of the Internet.  Perhaps NetSuite and Salesforce sense this and, since they already march to a different drummer, they are taking a strategy of “if you can’t beat them, join them.”

The last point I want to make about this scenario is the power of the platform.  Salesforce.com announced on Tuesday that it bought Kieden to be its point application in this new endeavor.  Spending money like that is a clear sign of how important Salesforce thinks this direction is, but most interesting to me is the fact that Kieden is an AppExchange application, built on the Salesforce platform by an independent company and operated there as well. 

A couple of years ago I wrote that, for many reasons, this platform-based approach would be the way the software world worked in the on-demand future.  At the time I thought no company would want or be able to build or buy software solutions for every contingency and a federation of vendors would coalesce around a limited number of platform vendors.  So far, it looks like we’re on track.

Taking a break

I was on vacation last week and did not write anything.  I'll have some new ideas to post shortly.  Looks like the next two weeks will be busy with announcements.

Denis

CRM's Wireless Frontier

Last week I discussed one of the emerging hot spots in front office software, partner relationship management or PRM.  This week I thought it would be interesting to take a look at another perennially emerging area, wireless.

I got the idea sitting next to a wireless expert, on a flight to Atlanta a couple of weeks ago.  He told me that more than 58% of people don’t even know the brand of cell phone they use and it made me wonder what else we don’t know about wireless.  More important, is that a good or a bad thing?  I usually loath splitting the difference but the answer turns out to be a little of both.

According to this expert who works for one of the biggies hence his request to be nameless, most users just know the basics about how to make a call.  When asked about the top things we should all learn about our phones, his immediate answer was to “Learn how to text,” as in sending a text message.

This expert’s suggestion is a good one because, as he points out, in an emergency when the voice spectrum may be saturated, another portion of the spectrum reserved for text messaging may be your only alternative.  The obvious and painful example was September 11 when voice circuits were jammed and those with agile thumbs were in the best position to communicate that they were safe.

Nevertheless, as things relate to CRM, wireless is not close to the state of the art.  CRM vendors and device suppliers are trying their best to convince us all that handheld devices and the applications that run on them—most still waiting to be developed—represent the next big growth opportunity in CRM.  But even a cursory survey of use shows that the “killer app” is still e-mail.

In an world that sometimes takes years for a technology to reach its full potential, wireless has followed a reasonably consistent trajectory.  Ever since the year 2000 we have been hearing about wireless CRM applications but adoption still looks rather spotty, though with some bright spots.  Some of the reasons for slow adoption include coverage—the ability to link to the mother ship and stay linked no matter what—robustness of devices, and a withering array of different operating systems and standards for application providers. 

Coverage, especially in metropolitan areas, has improved quite a bit in recent years to the point that you can usually get service for your phone and even high speed Internet connection for your laptop on the interstate.  Devices have also picked up steam and robust handheld devices with large screens are available to anyone with a little cash and the inclination.  The big issue now may well be compatibility.

According to my new friend, there are no less than five operating system standards currently competing for the hearts and minds of wireless warriors.  Each commands a portion of the market and that makes it difficult for developers, who have limited resources, to design and develop solutions that will address more than a portion of the available market.  It reminds me of the 1980’s when you were either an IBM shop or a DEC shop or, to a lesser degree, Wang or DG.  If you were a department in a larger organization there were big walls between you and the rest of the enterprise and often it was a double wall built by both sides.

There were converters, translators, and various workarounds if you wanted to integrate or share data but they were expensive and slow.  I think the term ‘sneaker net’ has its origins in that murky past.  As we know, computing really took off when standards gradually edged out proprietary operating systems ushering in an age of interoperability. 

Thinking back to the expert’s observation that most people don’t know the brand of their cell phones, it might be a good thing to be that ignorant.  What it signifies is that cell phones have become so standardized that it doesn’t matter.  A product category reaches Main Street when users can be that blissfully ignorant and standardization equates with ubiquity.

A half-step between competing standards and bliss is probably the write once and generate to multiple standards that we see many vendors using today.  One of the reasons why I think Salesforce.com bought Sendia earlier this year was Sendia’s multi-generation capability.  Other vendors are also offering their own versions of multi-generation capability and that will probably do for now, but the real prize, and I don’t see it on the horizon, may well be a standard operating system for handheld wireless devices. 

No doubt, proprietary vendors like Microsoft, Palm, RIM, and others all hope that their products will become defacto standards in the industry and I am sure one of them will for a time, but the end game has to be some kind of Unix or Linux for the small screen.  As we have seen over the last twenty or so years though, that kind of commoditization and standardization only comes about after many generations and many dollars have been thrown at solving the problem.  In a free market there is simply too much money to be made, even for the eventual losers, for any vendor at this point to suggest collaboration on a true standard.

So, for now, here’s to wireless standards, all of them.