Exposing the Total Cost of Ownership: The Hidden Costs of Call Center Software

Here’s the issue: The up front price of call center software often disguises the total cost of ownership. Therefore buyers need to understand the hidden costs to look for before investing.

Choosing technology is among the most critical decisions for call centers. There are many options offering a variety of capabilities and carrying different price tags. While also balancing big call center operational costs like payroll, data, and compliance, it’s tempting to go for the lowest price when it comes to contact center software. But, here’s the question to ask: Is that low price the only cost you can expect?

Some providers give the impression that the cost of their technology is as simple as paying a flat fee and then moving to onboarding. However, the truth is, that’s rarely the case (especially where “free” open source options are concerned). No matter the call center size, without doing a thorough analysis of total cost of ownership (TCO) before purchase, you won’t have a grasp on your full investment.

Beyond the upfront price tag, providers can add additional fees before and after purchase – these can include everything from different setup and training fees, to usability and maintenance costs, and future upgrades. Together these factors play a role in how much you’ll actually spend over time.

Knowing your total cost of ownership is also part of determining your return on investment as you utilize the system. Cost is obviously money you pay for a product or service, but consider the cost of downtime and operational inefficiencies from technology that isn’t up to the task of meeting your campaign demands. Your new software might seem affordable at first, but if it can’t improve your contact rates you could be wasting your money.

As Sean Chapman, CTO of Medigap Life, told us, “The real question is, ‘What’s the ROI?’ not ‘How expensive is the cost?’”

By paying close attention to the areas discussed below on call center software TCO, you can avoid getting blindsided by hidden fees and stand in a stronger decision making position when choosing your technology partner. 

To better understand the total cost of ownership for your call center software, it’s important to consider all the potential expenses, both upfront and ongoing. Here’s a breakdown of the key factors that can impact your overall investment.

• Software licensing: Licensing costs can vary a lot depending on the model. They typically range between $25 to $300 per user per month, depending on the features included.

• Setup and installation: Initial setup costs can range from $200 to $25,000, depending on whether you choose a cloud-based or on-premise solution. Additional hardware setup and customizations for on-premise solutions will push this cost even higher.

• Maintenance and service fees: Ongoing maintenance and service fees usually amount to 18-20% of the initial licensing cost annually, which can range from a few hundred to several thousand dollars, depending on the scale of your operation.

• Hardware costs: For an on-premise setup, hardware costs can range from $25,000 to $550,000, depending on the size and complexity of your call center. This includes servers, computers, phones, and other necessary equipment.

• Customization and integration: Customization and integration costs can add anywhere from $1,000 to $5,000 or more, depending on your needs and how many third-party systems you use.

• Data storage: Expect to pay $30 to $100 per month for cloud storage, depending on the amount of data you need to store. On-premise solutions will have varying costs based on hardware and data management needs.

• Scalability costs: As your business grows, scaling your software can lead to additional costs. This could include higher-tier licensing, additional hardware, or expanded cloud services, which could add hundreds to thousands of dollars annually, depending on your growth rate.

• Training costs: Training costs can range from $0 to $1,500 per agent, depending on whether the provider includes basic training in the package or if you need more advanced, personalized instruction.

• Downtime and reliability: Downtime can cost you lost revenue and productivity. Some estimates suggest that even minor outages can result in losses ranging from $5,000 to $20,000 per hour, depending on the size of your call center and the nature of your operations, and Service Level Agreements can only assist in recouping some of this loss if they are structured properly.

• Call costs: Outbound call costs can add up quickly, averaging between $0.02 to $0.10 per minute. While inbound calls generally don’t incur direct fees from software providers, you may face related costs such as telephony charges, international call fees, or overage costs for data usage and storage.

Let’s talk about those “too good to be true” deals. Some software providers lure you in with a low starting price, but once you’re locked in, the real costs start to pile up. 

Hidden fees for add-ons and integrations, data usage and storage, additional licensing and even onboarding can quickly inflate your expenses, turning what seemed like a bargain into a budget-buster. 

Here’s how they do it.

Beyond the initial price tag, contact center providers often employ deceptive tactics to inflate costs and maximize profits. While the upfront price may seem attractive, hidden fees, surcharges, and limitations can significantly increase the total cost of ownership over time.

To avoid falling victim to deceptive pricing practices, it’s essential to be aware of common tactics used by contact center providers and to carefully scrutinize contracts and pricing structure when doing demos.

Limited customization options 

It’s common for software providers to offer a basic version of their product at a low price to draw you in. But don’t be fooled—this base price often has extremely limited functionality. 

Example: If you need critical tools like automatic call distribution (ACD), answering machine detection (AMD), and interactive voice response (IVR), you’ll likely find these critical features aren’t included in the base price or more mid-tier packages or bundles, and the costs to add them can stack up quickly. 

User licensing fees

User licensing costs can also be deceptive. Some providers enforce strict individual licensing rules, requiring each agent to have their own dedicated login. 

Example: Your call center might staff 40 call center agents in two separate half day shifts across 20 workstations. Rather than allowing you to share licenses, your contact center provider could charge you double. This can be cost-prohibitive for businesses with fluctuating agent needs.

Unbundling features

And watch out for specialized packages that “unbundle” essential features. You might think you’re getting a complete solution, only to discover that key tools are available only as costly add-ons.

Example: Your outbound sales call center might start with a basic plan costing $50 per user per month. However, when you realize you need SMS capabilities to increase contact rates, you find out it’s an additional $20 per user. For a team of 50 agents, that’s an unexpected $12,000 per year.

Tiered pricing structures

Some providers may offer lower rates for a certain number of dials or data consumed per day, but significantly increase costs once these thresholds are exceeded, leading to unexpected expenses.

Example: Imagine a contact center provider sells you a CRM integration for $15 a seat with unlimited contact storage, but then charges an extra fee of $0.30 for all data consumed for call histories, call recording, notes,  lead scoring, and campaign data beyond a 100 GB threshold. This tiered pricing structure can quickly become expensive for businesses that generate large amounts of data.

Another area where costs can sneak up on you is in your contract’s fine print. Long-term contracts might seem like a good deal initially, but they often come with hefty penalties if you need to cancel early. These penalties can be a nasty surprise if your business needs change unexpectedly. 

Some providers automatically renew contracts at higher rates without clear notice, making it easy to overlook until you’re already committed to another term at a higher cost. Canceling these contracts can be a headache too—some providers make the process so confusing and cumbersome that it feels almost impossible to navigate without incurring extra charges or frustration.

Example: Let’s say you signed a three-year contract at a discounted rate. After a year, your sales strategy shifts, and you need a more flexible system. The early termination fee could cost you $7,500, wiping out any initial savings.

Those hidden fees can have a significant impact on your overall costs, which is why understanding and calculating ROI as part of your TCO calculation is so crucial. You might be able to afford a higher-end contact center software that’s 25-30% more expensive than a cheap run-of-the-mill dialer or a basic user tier if it brings in 3X more revenue.

Start with these key formulas to determine how your call center software investment will impact your bottom line. Looking at both TCO and ROI helps you see the full financial picture, ensuring smarter long-term decisions for your call center.

First, let’s calculate the TCO using the formula:

TCO = I + M – R

Where:

• I is the initial cost or purchase price

• M is the maintenance cost over time

• R is the residual value, or the expected value of the software after a set period

Example:

Let’s say you purchase call center software with an initial cost of $50,000 (I). Over five years, you spend $20,000 on maintenance (M). At the end of that period, the software still has a residual value of $5,000 (R). Plugging in these numbers:

TCO = 50,000 + 20,000 – 5,000

TCO = 65,000

So, the total cost of ownership over five years is $65,000.

Next, to calculate the ROI, use this formula:

ROI = (Net Profit / Total Cost of Ownership) × 100%

Where:

• Net Profit is the revenue generated minus the cost of goods sold, overhead and operational costs.

• TCO includes all the expenses associated with the software over its useful life

Example:

ROI = (100,000 net profit / 65,000 TCO) × 100%

ROI = ~153.8%

This means that for every dollar spent on the software, you see a return of about $1.54 in profit, making the investment worthwhile.

By applying these formulas with your own figures, you can better understand the financial impact your software investment will have over time. These calculations are key to making informed decisions that align with your long-term business goals.

It’s easy to focus on the initial costs when evaluating software, but the real value comes from understanding the full benefit of the service those expenses buy. 

For example, if you purchase a base license with another call center software provider and buy an answering machine detection add-on with poor accuracy, you’re not only out of pocket on the cost of the add-on but also the potential loss of ROI that could be associated with a better solution.

TruAlliant co-founder Michael Francik runs a 2000 agent BPO primarily focused on lead generation. He told us he knows that some people focus on the lowest cost as a determining factor in choosing call center software – and in the past, he did the same. But he has a different perspective now which provides a great example of why ROI and value matter so much when choosing your call center software.

“You might be saving on the front end with technology, but if you’re not processing your leads properly, you’re going to see that in your marketing expense and cost per acquisition, because your conversion rates are going to decrease. If you invest in the right technology, your [costs] are going to be lower and you’re going to be more efficient.”

Then he gave us an example of the real world difference of using a powerful contact center platform built for sales like Convoso:

“Instead of dialing a bunch of leads up to 500 times, and then converting the sale, you’re dialing leads 200 times before you get a sale. So now you’re making significantly fewer dials, you’re using less minutes, you’re safer on the compliance side, and you can invest in better quality leads because your system’s hitting it properly.”

Software quality may be difficult to judge up front – which is where customer case studies can shed some light. Issues like dropped calls, frequent voicemails, down time or technical glitches can seriously harm customer satisfaction and agent morale, while devastating the potential of your campaigns. 

Furthermore, to get the most value from the leads you purchase and your marketing spend, you need a unified system with a robust suite of tools that’s capable of handling fluctuations in volume, recycling leads to maximize their value, and delivering automation throughout your day without  having to deal with the management overhead associated with running multiple point systems. You need smart dialing strategies as well as technology from a provider that will be there with you every step of the way.

Keep in mind that while a “cheap” option might save money initially, if it results in increased inefficiencies, lower productivity, and fewer conversions, your ROI will suffer. Danny Greeson, Founder and CEO of eQuoto, learned this the hard way.

“I’ve tried to save money on other solutions that ended up being more costly in the long run…At the end of the day, the benefits [of using Convoso] outweigh the costs.”

Switching to Convoso was a smart move for eQuoto. Greeson found that Convoso’s comprehensive platform pays off by lowering long-term costs and boosting returns. “The juice is worth the squeeze,” he says, emphasizing that investing in reliable technology like Convoso pays off with a high ROI.

And a final reminder, when evaluating contact center software, value extends far beyond just the initial price tag. Choosing Convoso isn’t just about buying software. It’s a strategic decision to invest in a partner that is ready to help you achieve long-term success.

Ready to see how Convoso can transform your call center? Schedule a demo today and discover the long-term value of investing in the right software.

– Author Elizabeth Miller is Head of Product Marketing at Convoso.