The Shifting Call Center Paradigm

What is it about customer service that drove three major CRM companies to make announcements about their service products within days of each other last week? Oracle and Salesforce.com each announced new or completed development of functionality, and RightNow said it bought HiveLive, a social networking solution provider. In fact, every company’s announcement had something to do with social media.

There are numerous reasons. For example, IDC and others estimate the customer service and support applications will be a US$4 billion market in the next few years. However, there is a lot behind that number which is largely not expressed; people in the know nod knowingly and others just pass it off as more analyst hype.

Here’s what I think is going on: We are at the confluence of two major trends that complement each other — old, installed call center systems are nearing the end of their useful lives, and customers are very interested in a new generation of applications that are less expensive to operate. But also, customers have been down steep learning curves in the last decade, which has translated into a public that is more sophisticated about the details of using technology and dealing with vendors. This latter point boils down to customers not needing the same level of personal support they once did, so automation solutions are more viable.

Figuring Things Out for Ourselves

Take the last point first. When product categories were new, none of us knew how to do much with our new products, so the natural inclination was to call the vendor even for simple issues. However, as time went on, we got our bearings. For instance, we learned how to use cellphones to do more than make calls. As experience took over, we relied on our own instincts or the knowledge of friends to figure things out. All this drove down the need to direct our how-to questions at call centers.

Add to this the emergence of social networking tools, and people more or less have a ready community of help sources. So an announcement like Salesforce’s Service Cloud comes at an opportune time when vendors can leverage crowd wisdom to support customers. Much the same can be said of RightNow’s strategy in buying HiveLive. Oracle’s approach to provide a multi-channel support system that transports case information from an automated interface to a live agent is a nice transitional solution that bridges old and new worlds.

Now, add to this situation the aging of existing call center systems and the emergence of good on-demand solutions. I suspect that today’s premise-based call center solutions might, at least in a couple more years, be over-configured for the kinds of customer issues routinely handled. That should mean a company has more investment tied up in the operation and administration of a call center system than it may need. The logical solution would therefore be to transition out of the old systems — which are fully amortized in many cases — and into new on-demand solutions.

There is another reason on-demand looks attractive, and that is because the user can literally be anywhere. If call center users can move some of their call center labor force out of the building, they will be able to realize a savings in office space. Beyond that, sending your call center agents home or at least to lower-cost space at satellite locations will be an important hedge against energy price volatility. That’s significant because the cost of commuting to work is a big deal for call center agents, whose pay scale is not the highest in the land, and when gas prices rise, they feel it.

Changing Systems

So there is no shortage of reasons to look at the call center, with new technology, as a new growth area, and on-demand vendors appear to be preparing well for what looks like a significant change about to take place in customer service.

Of course, many companies will still need to rely on their conventional call centers for services that go beyond support for how-to questions. Any question that cannot be resolved by the crowd, like warranty and account status issues, will still need to talk to agents. However, the net number of calls may actually go down, or at least the rate of increase may level out when social solutions are implemented.

All of these things — aging systems, more sophisticated customers, availability of lower-cost on-demand systems with social networking — point to an industry-wide movement to change systems. Vendors with exposure to the on-demand market seem to be early out of the gate, and that could spell an advantage down the road. The question now is whether established premise-only vendors will get on board with the new paradigm or wait until it’s too late.