Contact Center WFO Remains Healthy, Despite the Pandemic

January 20, 2021
By Donna Fluss

For most of the past 20 years, the workforce optimization (WFO) market has performed well—and typically better than most other contact center IT sectors—whether the economy was strong or weak. It did not disappoint amid the COVID-generated recession, despite this sector’s maturity. And some WFO applications, like interaction analytics and workforce management (WFM), have been instrumental to helping companies manage operations throughout the pandemic.

In the first half of 2020, as the pandemic closed down economies around the world, the WFO market earned $1.9 billion, an increase of 1.7 percent from $1.8 billion in the same period of 2019. In general, most of the WFO vendors held steady during these unprecedented and troubling times. The vendors that sell cloud-based contact center-as-a-service (CCaaS) solutions in addition to WFO suites outperformed their competitors (although Calabrio, a dedicated WFO vendor, is estimated to have delivered strong results during the pandemic).

The contact center segment of the WFO market performed strongly for a seasoned market. The revenue for the first six months of 2020 for contact center WFO applications was $1.03 billion, up $73 million from the $963.7 million earned in the same period one year earlier, a growth rate of 7.6 percent. Despite the maturity of the core products—voice recording and quality management—enterprises continue to invest in WFO suites and applications.

WFO VS. WEM: WHAT’S IN A NAME?

DMG Consulting refers to this sector by its traditional name, workforce optimization (WFO). This has never been an especially good name, as no one likes to be “optimized,” but it’s the most recognizable way of referring to this market. Other analyst firms now call this sector workforce engagement management (WEM), with the hope that changing its name will alter its perception and future. Workforce engagement is indeed a more compelling name than workforce optimization, but it doesn’t capture the essence of this sector, which is as dedicated to building and enhancing relationships with customers as it is to improving staff productivity through employee engagement. Whatever you call it, the sector remains vital; all 12 of the individual IT segments that comprise the full WFO/WEM suites continue to be purchased by contact centers around the world.

MARKET CONSOLIDATION

During the past couple of years, a couple of smaller WFO solutions and best-of-breed applications were acquired by CCaaS vendors as “tuck-ins” to enhance their offerings. For example, Virtual Observer, a contact center WFO provider, was acquired by Five9 in February 2019 (the transaction was completed this year); Calabrio purchased Teleopti, a contact center WFM vendor headquartered in Sweden, in June 2019. Such moves are helpful for CCaaS vendors, which are being asked by their enterprise clients to provide WFO capabilities natively and deliver them to users via a seamlessly integrated administration environment. (The CCaaS vendors typically have to re-develop the acquired capabilities to operate properly in the CCaaS provider’s infrastructure.) DMG Consulting expects to see more WFO suites or individual applications purchased within the next few years.

THE NEXT CHAPTER FOR WFO/WEM

The sun is not setting on the WFO/WEM IT sector, despite changes in the economy, digital transformation, and the maturity of various components of these suites. The secret to the success of this often economically counter-cyclical suite of contact center applications is its diverse capabilities. Some might say that WFO/WEM suites are a logical grouping of related contact center solutions. While logical integration points and data sharing exist for the wide-ranging set of applications (or modules) that comprise WFO/WEM suites, they are more a collection of capabilities sold by one vendor than a logically consolidated suite. (And the level of integration between them is much less than it seems.) Over the years, when one or two of the applications did not sell well—which was the case for WFM for many years, for example—other modules like interaction analytics picked up the slack. A WFO suite has been and remains a portfolio approach to selling contact center applications, and it has worked well for the vendors for a couple of decades.

It’s for this reason that contact center WFO vendors are having a very difficult time trying to sell WFO capabilities to back-office operating departments and branches. These operating functions need WFO applications to help improve the customer experience (CX) and employee engagement at least as much as their contact center counterparts. The challenge is that the WFO vendors have perfected the model of selling the value of these applications to contact centers and do not understand other departments or functions well enough to cater to them.

This was fine for the past 30 to 40 years, but for the WFO/WEM sector to pick up momentum, it must be transformed. In the next few years, DMG Consulting expects to see companies start to combine their front-office (contact center) and back-office operating environments into a single service organization. This will improve CX, reduce operating expenses by a minimum of 30 percent to 40 percent, and improve employee engagement, so it is expected to become a priority for companies. WFO/WEM vendors need to start making the changes required in their sales and marketing organizations to appropriately message for their new audiences, and they need to enhance their products to meet the needs of back-office and branch operating departments.

A second major challenge for the WFO/WEM sector is its suites’ technical orientation. Most of the current WFO/WEM suites were built around voice-centric contact centers. While it has taken the vendors a long time, they’re finally trying to figure out how to be more digitally oriented and omnichannel-capable, which is what consumers around the world want from their sales and service experiences. WFO/WEM vendors have started to retrofit their solutions to address the needs of the new digitally oriented contact center, but these solutions are suboptimal from this perspective, and there is a great deal more work that needs to be done. For WFO/WEM suites to fit properly into the digital world, they will need to be converted into open platforms where users can swap in and out (in other words, easily integrate) the functionality and modules they want. This presents WFO/WEM vendors with big decisions: Major architectural redesigns and product rewrites will be required. But don’t count these vendors out; they have demonstrated their resiliency many times, as is reflected in their ongoing success.

Based on the performance of WFO vendors in the first half of 2020, the outlook for these vendors remains healthy, despite the pandemic and the maturity of this sector. The WFO suite market is facing a variety of challenges, some of which are likely to alter the landscape, including who primarily sells these solutions, but the sector is expected to prove resilient because enterprises continue to need these applications.