The Contact Center WFO Market Is Transforming
August 5, 2021
The contact center workforce optimization (WFO) suite market, also known as the customer engagement management (CEM) segment, has a 20-year history of executing well in both good and weak economies. The market performed as expected during the COVID-19 health crisis in calendar year 2020. Total revenue for all companies that sell WFO suites on a generally accepted accounting principles (GAAP) basis in 2020 was $3.94 billion, up 2.7 percent from $3.84 billion in 2019. While the increase between 2019 and 2020 was relatively modest, given the pandemic, maturity of this sector, and migration from a predominantly on-premises sales model to a cloud annual recurring revenue (ARR) model, this performance is good.
The primary revenue category to evaluate in this market is the one that tracks the sales of WFO solutions to contact centers. In 2020, total contact center WFO revenue was $2.08 billion, up by a slight 0.4 percent from $2.07 billion in 2019. While revenue was up on a year-over-year basis, it is the smallest increase this segment has experienced in many years and is likely a better reflection of what is to come for the WFO suite market.
Changing Buyer Expectations
The story of this market is explained not by the pandemic but by the digital transformation and migration of contact center solutions to the cloud, both of which were accelerated by COVID-19. Cloud/hosted/software-as-a-service (SaaS) revenue increased by an impressive 64.6 percent, from $492.2 million in 2019 to $810.0 million in 2020. This increase of $317.8 million occurred while license/software revenue decreased by $221.7 million, 29.6 percent, on a year-over-year basis, between 2019 and 2020. It’s not a one-to-one swap as revenue shifts from a traditional up-front, on-premises recognition model to the cloud ARR approach, where sales are realized throughout the life of the contract for any IT sector. However, the pace at which contact center WFO suites are being adopted in the cloud is exceeding the rate at which on-premises revenue is decreasing. This reflects the new opportunities being opened up by the cloud’s more flexible implementation and financing model.
The market is also undergoing a shift in terms of the vendors from whom companies are buying their contact center WFO suite functionality. For most of the past four decades, WFO suite vendors were the primary source for these capabilities. During the past five years, enterprise buyers of both on-premises and cloud-based contact center infrastructure solutions (automatic call distributors and dialers) have been increasingly asking their vendors to function as “general contractors” and provide fully integrated WFO suite capabilities. Five years ago, most of the contact-center-as-a-service (CCaaS) competitors partnered with WFO vendors to deliver these capabilities to their clients. In the past two years, the contact center market has undergone a wave of acquisitions of WFO solutions by CCaaS vendors, and other CCaaS providers have expressed an interest in adding WFO suite capabilities to their portfolios. While there is still an active opportunity in the WFO suite market for independent providers of these capabilities, and there will be for years to come, it is narrowing as more companies migrate to CCaaS solutions and depend on them to address all of their contact center technology needs.
The Impact of the Pandemic on WFO Suites
Contact centers around the world demonstrated amazing agility and grace during the early days of the pandemic. These departments successfully transitioned anywhere from a few to thousands of employees from the office to their homes to work, in a matter of days to weeks, with minimal disruption in service. And contact center agents in general have executed well, in large part thanks to WFO capabilities, despite voice-quality-of-service issues due to bandwidth limitations at agents’ homes. Workforce optimization solutions have been major contributors to the success of contact centers because they give managers oversight capabilities, regardless of where their agents are based—although having cloud-based offerings made the remote workforce challenge much easier than it was for companies that had less flexible premises-based solutions. Applications that have played key roles in agent oversight are recording, real-time monitoring, quality management (QM), analytics-enabled quality management (AQM), historical and real-time speech analytics, and WFM. WFO suites have also been instrumental in helping to keep agents engaged. Many of the same solutions contributed to this goal, as did gamification and internal chat tools.
The Next Act for Contact Center WFO
Enterprises need WFO solutions. The question is from whom they will procure them. As reflected above, there is growing interest in acquiring most, if not all, contact center systems and applications from one vendor. Some believe that this will be the CCaaS vendor; others think that the customer relationship management (CRM) providers will fill this role. DMG expects the market to continue to consolidate and for both CCaaS and CRM vendors to expand their offerings to include WFO capabilities. This doesn’t mean, however, that there won’t be a role for a few independent WFO suite providers to fill the gap with feature-rich offerings when CCaaS and CRM vendors cannot address a prospect’s needs, or when a company does not want to depend on one solution.