Over the past few years, much has been written and said about cloud computing. One thing is for certain: the segment of cloud known as Communications as a Service (CaaS) will have staying power in the market thanks to a company called Interactive Intelligence. From smartphones, to social media, to the cloud, there are epic forces coming together to propel an industry that has been slow to change over the past decade.
Although Interactive Intelligence had been selling hosted contact center services since 2005, Interactive Founder, President and CEO Dr. Don Brown had the vision to notice a shift in the market, which drove the company to re-architect and re-launch its cloud offering in early 2009. Today, the Indianapolis, Ind.-based company serves three markets with its core all-in-one IP communications software suite:
- Contact Center: Cloud-based or on-premises, a single-platform architecture that provides a wide range of multichannel contact center functionality;
- Unified Communications: A single-platform, all-software IP PBX (News - Alert) application suite that easily integrates with existing business applications;
- Business Process Automation: A process automation application that applies contact center technologies to capture, prioritize, route, escalate, track and manage work throughout the entire business process lifecycle.
But before cloud became such an integral part of its business, the company’s leaders had to establish key market drivers to determine its worth. As Dr. Brown and Interactive’s Chief Marketing Officer, Joe Staples explained in a recent interview with Cloud Computing, the company’s decisive vision more than five years ago has resulted in historic growth. Our full exchange is below:
CC: When did you begin your shift to the cloud?
DB: We had a small spin-off in the early 2000’s that offered some communications services called Interaction Portal, which was our precursor to the cloud. We did that for a few years but it wasn’t taking off so we brought it back in house. That constituted a small unit within Interactive Intelligence that provided hosted services, such as hosted IVR and call center services. We were limping along. It wasn’t making much money. In 2008, we sat down and asked ourselves: “Should we kill this or do something with it?” We looked at the market as it was developing and we decided we were going to double-down on it by totally re-architecting our hosted offering. Upon completion in 2009, we re-launched it as Interactive Intelligence Communications as a Service, or Interactive Intelligence CaaS. We initially expected to serve small organizations, so it was a surprise that one of our first CaaS customers was Philips (News - Alert) Healthcare. From there, it really started to take off for us.
JS: As Don mentions, we really dug into the hosted market with plans for our re-launch starting in 2008. As part of our market analysis, we also talked to customers about their perceived risks associated with migrating to the cloud. When we revamped our offering we made sure to address these issues by making three main changes. First, we increased scalability; second, we improved security and reliability; third, we developed additional deployment options. At the time we also looked at our sales model, which led to a new compensation plan that supported selling the right solution based on customer requirements regardless of the delivery model.
CC: What results have you seen following this shift in strategy?
DB: We’ve seen a dramatic increase in the percentage of business that comes from the cloud. Following our re-launch in 2009, 5 percent of our total order dollar volume was cloud-based. Five percent may not sound like a lot but it was to us, so we decided to expand on this by building our second data center in the U.S. The next year that figure increased to 11 percent and that really got our attention, so we decided we were going to expand internationally. We set up data centers in London and Frankfurt. By 2011, cloud made up 23 percent of our orders so we decided to expand even more – opening up data centers in Tokyo and Sydney. In 2012, cloud made up 35 percent of our business so we opened additional data centers in Japan and Australia to provide geographic redundancy. Last year we opened a data center in Brazil and we are now readying two data centers in Canada. We estimate that half our orders will come from the cloud in 2013, and so far we’re on target.
JS: Back in 2009, that 5 percent stat did mean a lot to us and I think that growth was fueled, in part, by the economic downturn. It was the spark for customers who were saying, “I need advanced contact center technology but I’m uncomfortable writing the big check.” The cloud enabled them to pay on an ongoing basis, thus avoiding that major initial capital expenditure. Since then, going from 5 percent to potentially crossing the half-way point in 2013 certainly points to the growth and success of our CaaS offering. Customers are now seeing benefits of the cloud that go beyond cost, such as faster deployment times and more flexible scalability.
CC: What was the motivation for your shift in strategy?
JS: At the time there was ambiguity about who the dominant cloud contact center provider was, so that left a vacancy. We wanted to fill that vacancy – as the leader – rather than waiting and then having to unseat a vendor to get it.
DB: In addition to what we saw as a market gap among contact center providers, we were also encouraged by the success of complimentary cloud vendors, such as Salesforce.com (News - Alert). Seeing the success of these cloud vendors within the broader enterprise software arena, along with our gut feel that consumption-based services would spread, left us feeling very confident that our shift in strategy was the right one.
CC: How dramatic is the market shift to the cloud?
DB: It’s clearly illustrated by our numbers – going from less than 1 percent to 50 percent – and by the market being ready. A lot of companies just want to get out of the IT business. It’s become so expensive and so complicated: the software, the servers, the patches, the systems, the crashes. By moving to the cloud, a customer is able to concentrate on its core business. The beauty of our offering is that we can provide all the reliability, security and functionality traditionally associated with premises-based software, but delivered via the cloud.
JS: The value of offloading IT requirements is a definite trend. At the same time, we recognize that the cloud is not going to be a fit for everyone. Unlike the shift from TDM to VoIP, with the latter today comprising about 90 percent of IT deployments, the shift to the cloud won’t be quite so dramatic. We do think that eventually the cloud will make up the majority of how businesses consume communications services – and our goal is to help companies get there.
CC: Is the cloud here to stay or is cloud a passing fad that has received too much hype?
DB: The cloud is here to stay. I’ll share an analogy. In the beginning of the 20th century when electricity rolled out, every company had its own generator and was supplying its own electricity. There was no common utility and it became more and more strategic to companies. Eventually it became clear to everybody that centralized utilities could operate much more efficiently. So today we have common outlets that we plug into for our electricity needs and nobody questions that. This is what has happened with software and the Internet. It’s more and more reliable so it becomes more and more plausible to use the Internet. The economies of scale that a service provider can offer result in far greater efficiencies than what single companies could realize by operating their own IT departments.
JS: Nice, applicable analogy. Agreed that the cloud is absolutely here to stay. Interestingly though, I think a lot of vendors are hoping it’s a passing fad. Part of the reason for that is that they simply have not been able to make the transition financially or technically. Many are sitting there hoping that this shift was fueled by the economic downturn and everyone will go back to premises-based software. That’s not going to happen given that, today, the cloud’s momentum is driven by far more than cost savings.
CC: What are the main benefits customers get from your cloud offering?
JS: The cloud market has seen a lot of new entrants from vendors saying, “Here’s a hot market, let’s get in on this.” Conversely, we offer the benefit of experience. Customers get from us 19 years of experience backed by more than 5,000 customers. This experience also includes extensive investment in cloud security and infrastructure. The larger the customer, the more in-depth our conversations are about security. We offer industry-certified security at the corporate, cloud services, and data center levels. We also offer a deployment option that enables customers to keep all their data within their firewall, plus we have a state-of-the-art Network Operations Center (NOC (News - Alert)), which provides 24x7 CaaS support and services. Finally, we offer easy migration to a premises-based deployment should business needs change, which is not something cloud-only vendors can do.
DB: Definitely, our experience has been a key benefit. That has really resonated with customers. The whole idea of trust – that they know we’re a stable company with a reliable track-record, that we understand their security needs, and that we give them flexible deployment options that best meet their unique business requirements. This trust has not only helped fuel the rapid growth of net new cloud customers, but it’s also led to some of our large premises-based customers moving to the cloud. Kohl’s is one example, and to-date, it represents the largest cloud migration deal in our company’s history.
CC: What have customer’s reactions been to your cloud value proposition?
JS: Our value proposition has been an evolution. If you re-wound to four years ago, we were the ones bringing up the cloud and talking to customers about it. In many cases, they hadn’t really even considered a cloud option. Now, many customers are coming to us already convinced that the benefits of the cloud warrant a shift. The conversation is more, “I’m moving to the cloud. Now tell me why your cloud offering is better than that of your competitors.” The ongoing growth of our cloud order volume demonstrates that we’ve continued to offer a value proposition that fulfills customer requirements, regardless of where we meet them in their selection process.
DB: Absolutely, the landscape has changed and many customers now come to us further along in their decision-making process. I would say that our role today extends even beyond effectively comparing and contrasting our cloud solution with competitors. Our value proposition now is to move beyond the role of technology provider to one of expert advisor. So this would encompass an assessment of a customer’s people, processes, and technology, and then provide guidance for best practices across all three elements.
JS: Great point Don. Our value model is so much more than just technology. We can help companies do all the things required to deliver those great customer experiences that will differentiate their business.
CC: Is the cloud a good fit for all customers?
DB: As Joe mentioned earlier, the cloud isn't right for all customers. Some want to own that piece of their IT infrastructure and have the staff to manage it. However, such cases become less frequent with each passing year. I really think people underestimate how far cloud solutions have come – that the right one can alleviate so many IT headaches without sacrificing anything.
JS: As Don says, the fit is going to depend on the customer. I would say that while the cloud might not be the best choice for everyone, it should at least be considered in every case. We encourage all customers to conduct a thorough assessment with us of both premises-based and cloud deployments, including an ROI evaluation. That’s the best way to make an informed decision that considers long-term factors.
CC: Competition is heating up in the cloud space, what are your differentiators?
DB: Today, customers want the same functionality from a cloud solution that they’ve come to enjoy from a premises-based solution. And they demand this sophisticated functionality from a cloud vendor that has secure and reliable data centers. We meet both these critical requirements. To further accelerate our differentiation, we’ll aggressively build out more global data centers, expand on our partnerships with complimentary cloud providers, and as mentioned earlier, become the expert advisor to ensure that the value of our technology is maximized across the business.
JS: Agreed that our uniqueness comes from our ability to offer the same reliability and functionality via the cloud that customers have come to expect from premises-based solutions. Our ability to differentiate has been made a little easier too by the fact that the household names associated with contact center software have been very slow to bring to market cloud solutions. We, on the other hand, got into the cloud market aggressively with a disruptive solution backed by 19 years of experience, global reach, and stability – nearly $240 million in total revenues, consistent ownership, and no debt. We’ll continue to establish competitive differentiation by making available via the cloud the latest features, such as real-time speech analytics and mobile customer service. And as Don emphasizes, we’ll add to that our expertise as not just a technology innovator, but that of a trusted advisor: one that helps businesses create and manage the kind of customer service environment that makes it a competitive differentiator.
Edited by Alisen Downey