What's the Big Deal about Hosting?

By Steve Michaels
June 2007

There's a new term floating around the call center industry called "hosting."  But what exactly is it?  Basically, it's like carpooling your accounts on someone else's system.  The hosting agent has a switch, a call processing platform, or some other large piece of equipment and wants to grow his or her business.  The call center owner, or hosting client, has a smaller system and also wants to grow their business through leading-edge technology but has limited resources. 

Betty Hendrix of Voice One Message Services in Memphis, Tennessee wanted to upgrade her equipment, but she was concerned about the financial burden, and she was also trying to form an eventual exit strategy for her business.  When Betty heard that her good friend Tom Camp of Answering Memphis had a Startel CMC, Betty approached him about hosting.  Now Betty's dedicated staff is answering calls from their homes, thus saving on rent and the expenses associated with a brick and mortar facility.  She also gave Tom the "first right of refusal" to purchase her accounts when she is ready to retire. 

Betty stated: "It's like going from a roadster to a rocket with Tom's new system; it is digital with enhanced clarity and speed, and my customers love it."  With a cutover date of January 2006, Betty had her accounts clustered into a section of Tom's CMC that allowed the system to send only her account traffic to her agents.  Should she or Tom's agents become bogged down with a traffic spike, sickness among the staff, or other such debilitating circumstances, they always have the option to overflow their calls to each other.  "I just reached a point where this was the way to go.  I save money on office expenses and let somebody else take care of the cost and maintenance of the equipment, which allows me to take care of my customers.  I wished I'd done this sooner."

There are also many benefits for the hosting agent.  As Allan Fromm of An*ser Services in Green Bay, WI stated, "There are a lot of small business people out there trying to figure out what they're going to do about equipment," says Allan.  "I host two clients--one located in Racine, WI and the other in Rochester, NY."

How it works: Allan explained that there are three components to be concerned with when hosting: How does the client's customer get their calls to the host?  How does the hosting client get their client information?  And how does the agent receive the audio for the call?

Allan's office or the client can program the client's accounts into the Infinity system.  The client purchases Microsoft Remote Desktop and a program called Terminal Services for their PC, which connects to Allan's Infinity in Green Bay.  The client then loads Amtelco Windows Operator onto their computers, which counts as a seat license.  This remote operator position accesses the data utilizing Terminal Services over VoIP. 

The client's customer's next step is to call forward their business phone to an 800 number, which is then pointed to a local number at Allan's location and then into the switch.  Depending on whether they have a footprint in the area, they can also use CommPartners, which provides local DID numbers.  If the client's customer doesn't have a local footprint, ComPartners will charge them accordingly.  These calls are on an unlimited basis. 

When using CommPartners, the call goes to a local CO where it is routed over the Internet and then into Green Bay.  An Internet gateway at Green Bay routes the call into the Infinity system.  The gateway equipment changes the Internet protocol (the 1s and 0s) into a T1 or PRI configuration which then plugs into the Infinity to generate the call. 

Ellie Hill, from Answerline Telemessaging in Seattle, was in the process of signing a new lease for office space when she was approached by Wayne Scaggs, her equipment vendor from Tascom.  He asked her if she knew about the new hosting opportunity that was available from Tascom, which uses VoIP.  She hadn't heard of it but wanted to listen since she had known and trusted Wayne for many years.  After weighing the pros and cons and talking with others about the idea, Ellie gave it a go and is very happy she did.

Ellie mentions that along with the savings, she personally likes the flexibility that hosting offers her.  Ellie now works from home and is more available for her young daughter.  She avoids rush hour traffic and no longer has to pick up her operators when there is inclement weather--one big headache now eliminated because of hosting. 

"Finding good agents is now a thing of the past," says Ellie.  "The major factor that sets us apart from other services advertising for agents is that we offer the ability to work from home, which is a big plus.  Also, agents who don't want to come in for a three-hour shift due to traffic or the commute are now a thing of the past."

Ellie has been hosting since April 2006, and she understands why some TAS owners may be leery of hosting at first because of the trust factor and giving one's account base over to another service or vendor.  After a year, Ellie states, "I have never doubted my decision and would highly recommend it to anyone who is contemplating that major step of equipment acquisition."

Tom Camp from Answering Memphis who has Betty Hendrix's accounts states, "There are many smaller companies using old technology.  They are either going to have to make an investment of $80K to $150K in new equipment, or they are going to have to sell their service.  How is a company billing $250k per year going to justify spending $150K or more for a new piece of equipment?  They cannot justify the costs.  I think hosting gives them a third alternative."

Tom mentioned that it takes a special breed of people to make it through the complexity and intricacy of installing and maintaining the likes of an Infinity or CMC.  "It is much different than the days of the old analog equipment where you program the account, turn the thing on, and start taking calls.  There is so much more tech work involved, from the telephone/PRI/T1 side of things to the data lines and programming of the accounts.  I feel the small mom-and-pop companies are going to have a difficult time making the transition of buying the equipment, getting it installed, and hiring the right people to run and maintain it.  It really is a big deal!"

An important point mentioned by Tom is that the marriage between the affiliate and client involves not just dipping your toes in the water, but a total body submersion.  "Hosting is a serious proposition.  The affiliate needs the right equipment, a back-up generator, an air-controlled environment, an IT person to maintain the equipment, and qualified staff to field additional questions.  Part of the contractual agreement between the two parties should include a Quality of Service clause.  Because of the high stakes, both individuals should share those risks equally.  I commonly ask my clients for a three-year commitment."  When asked why Tom chose to implement the hosting idea, he states that his objective was to simply lower the costs of his equipment.  Covering overhead cost is a net gain from hosting, and he says he would certainly love the ability to help other service owners.

The Economics of Hosting: If you are billing less than $500K per year, then you have a big decision to make.  You have to ask yourself the question: Should you host or buy new equipment?  If the equipment costs around $90,000 to $150,000, then your monthly payment can be $2,000 to $3000 per month, plus another $800 to $1200 for service fees.  Other items you might not realize that you need include peripheral equipment like an integrated firewall, a Cisco router, a Windows 2003 server so you can work your remotes, Windows SQL, Windows Server 2003, plus updates on all of your remotes.  Tom laughs when he states that you might even need a Microsoft Certified Engineer to make it all work!  So plan on at least $3000 per month or more to move to a new system.  Can a small business owner afford that kind of expense?  And can he afford to hire the talent it takes to run such a switch?

How much is it going to cost the client to do hosting?  They would need to sign a three-year commitment with Tom, but they would have to do that anyway with a leasing company.  The $5000 down payment needed to start is comparable to the up-front cost for a new piece of equipment, and there is also the monthly cost of approximately $200 per seat plus $.05 cents per minute.  On the other hand, there's no hassle, no techie, no office, and no worries about equipment failure--plus you have happy operators.

Some of the people I interviewed think that the down payment should be $5000 per seat versus per installation since that's what they most of their manufacturers charge them for licensing.  Others think that the client should sign at least a three-year lease with the affiliate because that's what IBM and most cellular companies are doing to insure that their up-front costs are covered.  One thing I do know is that there are many changes going on in the telephone answering service industry, and only time will tell how this thing called hosting will fare.  So is hosting for you?  You decide…

Steve Michaels is a hosting broker who can be reached through TAS Marketing at 800-369-6126.  You can also learn more about his hosting program by clicking on the banner on his home site at www.tasmarketing.com.