Why Do Contact Centers Still Prefer On-Prem?

I’ve always noted a disconnect between what’s presented at conferences or written in blogs — and what customer experience (CX) leaders tell me as we advise them or as they participate in research interviews about contact center architecture.

In the public square: “Companies are lining up to move their contact centers to the cloud!”

In the corporate war room, among some CX leaders: “Moving to the cloud makes no sense for us!”

Which one is right?

Both, but we don’t hear or read much about the latter. Most vendors have transformed their sales models to recurring, SaaS-based revenue. That was no small feat, so they want to publicize the value of that move.

Indeed, many companies have successfully moved their contact centers to the cloud. Our latest study shows that 29.5% of companies globally have moved to Contact Center as a Service (CCaaS, defined as public-cloud, multi-tenant platform). Another 21% have moved to a hosted/managed platform (defined as dedicated-instance, single-server platform owned and managed by a third party), according to Metrigy’s upcoming Customer Experience MetriCast global study of 1,531 companies.

If you’re doing the math, you’re probably already thinking, “Wait, those figures show that cloud contact centers make up slightly more than half of companies in the study.” Yep. And more than you may realize, remain on-premises: 21.5% own and operate their contact centers from their physical locations; 20.8% own and operate their on-premises contact center platforms with the dedicated-instance servers physically located at a third-party data center.

Even more interesting, 48.2% of companies now using cloud-based platforms (either CCaaS or hosted/managed cloud dedicated servers) are changing, planning to change, or evaluating a shift in providers by 2024. Among those, 14.1% are doing so because they are returning to on-premises platforms.

Architectural Drivers

We’ve all heard plenty about the value of cloud in various applications ranging from contact center to collaboration to CRM to artificial intelligence. You can spin up an out-of-the-box app very quickly, scale up and down based on business spikes and slowdowns, shift focus from keeping the lights on to strategically using the services, etc.

So, what’s causing companies to stay on-premises — or return to on-premises after riding the cloud wave, only to sink underwater? We asked these questions in our Customer Engagement Transformation 2022-23 global research study of 724 companies.

Let’s start with why CX leaders who are on-premises are staying there — either fully or partially. Sometimes, we see organizations adding cloud contact center licenses for remote workers but keeping the core on-premises platform. In other cases, they are adding cloud-based apps over-the-top of their on-premises platform. When research participants were asked why they were staying on-premises, the driving reasons were reliability (45.9%) and security (41.4%).

Others (34.2%) say they want to retain control of their technology in terms of the timeframe of new features and/or the ability to create customized apps. Large, complex contact centers routinely add custom-developed apps and workflows. They also have teams of experts with considerable knowledge about the contact center technologies in place — and the business use cases for what else is needed. That is a driving force behind 22.5% of organizations with too much customization to move to the cloud, and 21.6% say they know their business better than the cloud providers.

Cost also plays a role in the decision to stay on-premises for 28.8% of our research participants, who say it’s less expensive. Much of the technology investments are sunk costs in on-premises platforms. Moving to the cloud without reducing the staff typically increases the total cost.

Brush up on contact center basics >

Why Return to On-Premises?

The reasons for returning from cloud to on-premises are similar, but keep in mind that this is among a smaller subset of organizations. Like those staying on-premises, the cost is an issue for 13.6% of research participants (not as many as among those who haven’t tried the cloud world).

Cloud platform providers have issues with security and reliability in their experience. A whopping 54.5% of those planning to return to on-premises cite better security. Using both platforms, they found fewer contact center fraud and security breaches when they ran their security portfolio. Reliability was a concern among 40.9% of research participants, who said there were too many outages in the cloud.

They also believe they can simply serve their customers better from an on-premises platform: 40.9% said they could customize apps better, while 18.2% say cloud provider innovation is too slow. Overall, these concerns get to a loss of control in the cloud, an issue shared by 22.7% of organizations.

Bottom Line

Though much of the public-square narrative around contact centers suggests cloud is the way to go, our research shows that companies are staying with full on-premises platforms, adopting hybrid cloud/on-premises approaches, or, to a lesser extent, returning from cloud to on-premises environments. CX leaders must evaluate the following:

Opportunities

What problems or opportunities are you trying to address from your contact center? How can you deliver most efficiently and competitively?

Cost

How does your cost structure look on-premises, with a hybrid architecture, or in the cloud? Factor staffing, technology, managed services, and all other related costs.

Disruption

How much would switching architectures disrupt customer service and satisfaction, and over what timeframe? For large, complex contact centers, rip-and-replace may not be an option.

Provider Innovation

Will staying in the cloud put you at a competitive disadvantage? Is your provider investing in on-premises platforms?

Competitiveness

Are you able to stay competitive in terms of customer interaction capabilities and agent efficiency on-premises? Does it make sense to innovate over-the-top with cloud-based applications?

Check out Mitel's contact center software options >