Cloud Solutions Are Rising in the Contact Center
By Donna Fluss
The future of contact center applications is in the cloud, as chief information officers (CIOs) and business leaders are in agreement and on board with the benefits of adopting this model for contact center infrastructure and other contact center systems. While on-premises applications are not going away, the benefits of the cloud-based delivery model are so compelling that a company needs a good reason to justify keeping its contact center solutions in-house.
2016: A Breakthrough Year for Cloud-Based Solutions
The number of cloud-based contact center infrastructure seats increased by 20.9 percent in 2016. This growth came from companies of all sizes, most of which replaced an existing premises-based contact center solution. Adoption of cloud-based contact center infrastructure has expanded beyond small and midsize organizations, although the market is not yet seeing wholesale replacements of on-premises solutions in very large environments. Instead, it is seeing strategic insertions at these sites, a trend that is expected to continue.
Financial services organizations, among the last holdouts, are joining many other industries in adopting cloud-based contact center infrastructure. The increased reliability, flexibility, and security of some of the offerings are convincing IT and business leaders in financial services to give them a try, particularly now that cloud-based vendors are driving market innovation. The adoption rate of cloud-based contact center infrastructure is still slow in the larger financial services organizations, but acceptance has begun.
Globalization and the need for worldwide contact center and carrier services are also important trends that are driving the adoption of cloud-based contact center infrastructure. The cloud-based vendors are adept at handling the complexities of multinational carrier services and routing, making these solutions an obvious choice for enterprises that conduct business in many countries.
Replacements are Going to the Cloud
The vast majority of contact center infrastructure seats sold in the past two years have been replacements of premises-based solutions. The contact center infrastructure market is in the midst of a major technology refresh, as companies are being forced to replace their 18- to 20-year-old premises-based solutions, which are either obsolete or at the end of vendor support. Ten or more years ago, a large percentage of companies stayed with their incumbent solutions, but in this era of customer engagement, enterprises need solutions that give them an ongoing flow of new features and functionality. The cloud-based vendors are introducing innovation to the market much faster than their premises-based counterparts. Agile development methodologies enable the vendors to release new functionality daily or weekly, so it’s readily available when an enterprise client requires it.
Vendors are delivering enhancements to improve system usability, ease of integration, agent productivity, and the customer experience. In the past 12 to 18 months, a number of the cloud-based contact center infrastructure vendors have released new user interfaces and user experiences for their customers, and some are already planning further improvements. The readiness of these vendors to listen and respond to the needs of customers is a significant advantage; similarly, their willingness to customize solutions is helping to attract larger contact centers.
The M&A Story
In a market with more than 150 competitors, mergers and acquisitions are inevitable. It’s been a busy M&A season for the cloud-based contact center infrastructure market, and DMG expects to see more of this activity in the near future. Notable deals include NICE’s acquisition of inContact and Genesys’s purchase of Interactive Intelligence. NICE is a workforce optimization company that plans to operate inContact as a separate business unit. NICE works with many of the major banks worldwide, which have large and very large contact centers; these relationships will likely open up opportunities for inContact.
Genesys’s acquisition of Interactive Intelligence has a similar dynamic—the acquiring company works with many large contact centers around the world. Interactive Intelligence has recently gone through growing pains while building its new PureCloud cloud-based contact center infrastructure from the ground up, but the company previously experienced many years of strong growth and success. Genesys has announced that it plans to use Interactive Intelligence to target the midsize sector of the market and to use the legacy Genesys solutions at the high end.
It remains to be seen how well these acquiring companies execute their mergers, as there is risk for all parties—the acquiring companies, the acquired companies, and the customers of the acquired companies. But one thing is certain: A great deal more M&A activity lies ahead for this sector.
Service Providers are Developing Cloud-Based Solutions
Service providers around the world, particularly carriers and business process outsourcers (BPOs), are actively building cloud-based contact center infrastructure offerings and services, as it is convenient for many companies to buy such functionality from their carrier and pay for it either per minute or per seat. The challenge, though, is that many carriers are struggling to learn this business. There is a major round of investments happening as carriers and BPOs are actively seeking the right technology and partners to help them succeed in this increasingly competitive market. In some cases, service providers are buying only the underlying technology; in other cases, they are also purchasing many of the services the cloud vendors offer to give them the platform, technology, resources, and expertise needed to succeed. During the past 12 to 18 months, selling (and reselling, as an OEM) to service providers and other third parties has become one of the fastest-growing opportunities in the market.
Cloud-Based PBX Vendors Take On the Contact Center
A growing number of companies worldwide want to buy public branch exchange (PBX) and contact center functionality from the same cloud vendor. This is one reason why carriers are striving to enhance and build out their cloud-based contact center infrastructure capabilities. For years, a number of cloud-based PBX vendors offered basic contact center capabilities, and these features were adequate for many of their customers. But given the availability of more advanced contact center features, as well as the growing importance of delivering a customer experience that’s both outstanding and cost-effective, companies with as few as two contact center seats are asking for more advanced capabilities, such as voice and screen capture, skills-based routing, workforce management, speech analytics, and a lot more.
The cloud-based PBX vendors are responding by offering three-tiered services: PBX services remain their primary business, but they also offer rudimentary contact center offerings for companies that just need the basics, and a full-featured contact center offering via an OEM or white-label version of an advanced cloud-based contact center infrastructure solutions on the market. Many of the cloud-based PBX vendors still have to learn how to sell contact center solutions, but they are well positioned to succeed in this market as they already have relationships with decision makers in the IT groups of end-user companies.
The Cloud Market Potential is Sky-High
The cloud delivery model is highly compelling for enterprises. The vendors still have work to do—they need to get better at integrations, professional services, managed services, reporting, and personalizing their offerings—but they have come a long way in a short time. The cloud-based model allows end users to acquire capabilities they may not have been able to afford previously, such as automatic call distributors, dialers, CRM systems, workforce management, analytics, and hiring solutions. The cloud’s shared-resource concept is a game-changer that can benefit companies of all sizes.
This doesn’t mean that all companies on the same cloud-based contact center platform will deliver the same service experience—far from it, as the quality of the service experience depends on the resources and expertise available within each organization. It does mean that companies can dedicate their resources to developing highly differentiated service strategies and then have a platform from which to deliver them.