Customer Service Moves to the Cloud

Back in the heyday of Guitar Hero, Activision received 85,000 calls during the holiday season to a customer service department that was equipped to handle only 24 calls at a time. Activision made a call of its own to inContact (Nasdaq: SAAS  ) , setting up an emergency mid-holiday upgrade to inContact's cloud-based, scalable-on-demand call center platform, and let thousands of customers quickly return to their Guitar Heroism.

Today, inContact is riding twin waves: Corporate America now views customer service as a competitive differentiator, and cloud computing has ever-increasing acceptance, according to inContact CEO Paul Jarman, who overcame a nasty-sounding cold to chat with me yesterday.

For decades, large companies would pull hundreds of customer service representatives into a large call center and pay for expensive equipment from companies such as Nortel, Aspect, and Genesys to handle the calls from its customers. Today, most of the world's largest companies still operate in that environment, but 25 or so of the Global 500 have made the jump to the cloud for their call center needs, with 21 going to inConnect, says Jarman. The company's tools allow clients to improve processes and performance by improving how customer service reps are scheduled, coached, and monitored, without the huge up-front investment in equipment.

Seeking success in the cloud
Jarman, a co-founder of inContact and the company's CEO since 2005, is charting a course for his company based on the success of cloud plays in other business functions.

"Our area has taken a little longer to get rolling – there's a greater requirement for redundancy than other areas of business – so we're one or two years behind areas like payroll and CRM," Jarman says. "But our bookings for the past three quarters have been our best ever, and that makes it pretty clear that we're on the verge of a large adoption curve."

Specifically, Jarman looks to salesforce.com (NYSE: CRM  ) , customer-support specialist LivePerson (Nasdaq: LPSN  ) , and Ultimate Software (Nasdaq: ULTI  ) , which handles HR, payroll and other functions, as models:

As those companies made clear, it's very important to claim a leadership position, especially when you're using new technology or a new approach. Once you can establish yourself, it's much harder for others to take market share from you, especially when there's such an emphasis on relationships. And as those companies have shown, if you have a recurring-revenue business model, you'll pretty quickly start to see exponential growth once you can increase your leverage over fixed costs.

Jarman has a challenge ahead as he tries to break large companies of their big equipment habits, but he thinks that the savings inContact can offer can help his company break off a growing chunk of this $8 billion market. He's also got his team going after smaller clients who suddenly can afford a customer service team and equipment.

"It was only a couple of years ago that companies started even considering the idea of putting their customer service in the cloud," Jarman says. "It's not newfangled or scary anymore, and we're starting to see this really take off."

Roger Friedman owns shares of none of the companies mentioned. Salesforce.com is a Motley Fool Big Short short-sale choice. Salesforce.com and LivePerson are Motley Fool Rule Breakers selections. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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