The Fight for Dominance in the Speech Recognition Market
The Fight for Dominance in the Speech Recognition Market
By Donna Fluss
The contact center speech recognition market is still waiting to take off, but the good news is that it is experiencing a recent surge of activity.
This market is growing in port size, as Steve Cramoysan of Gartner Dataquest notes, “Preliminary analysis of the 2004 speech recognition market reveals an overall growth in port license shipments of 7.2 percent when compared with the figures of 2003.” (Source: Gartner, Feb. 15, 2005.) Now relatively mature technology, the speech market has undergone another round of consolidations, with more expected. There are many untapped sales opportunities for vendors and the leadership of the market is up for grabs, with a number of companies contending for market dominance.
Despite these positive developments, speech recognition technology is still not considered “hot.” Adoption of speech solutions is likely to continue at a measured pace, but a major surge in sales of speech offerings is unlikely in the foreseeable future, unless there is a major breakthrough in technology or a new competitor shakes up the market.
Speech recognition initiatives have a high and often rapid return on investment, but a large obstacle to widespread adoption of speech is the high cost of implementation, which can run to more than $250,000 for a custom application. Surprisingly, software is not the major cost component of a speech implementation, accounting for only 15% or less of a typical initiative. In fact, according to Cramoysan, the price of speech engines fell by 10 percent “from $850 per port in 2003 to $770 in 2004.” The cost of software licenses is not the problem. Rather, the major expense in a speech initiative is professional services. Companies that find ways to reduce implementation expenses for their customers will emerge the winners in this market.
One promising step in speeding up the adoption of speech applications is the development of speech standards, Voice XML and SALT. (For more detailed analysis of this subject, see Speech Standards Improve Service Quality, Customer Experience and Reduce Costs, by Donna Fluss, available at https://www.dmgconsult.com/publications/articles.asp?id=66. Speech standards have already made some progress, and work continues in this area, but there is a long way to go before users will see platform-independent packaged speech solutions. Success in standardizing speech applications would be just the type of breakthrough that the market needs to invigorate sales and set the stage for blockbuster growth.
There are four categories of vendors contending for market leadership. The first is speech specialists. This group, which sells speech software and speech engines, includes Scansoft/Nuance, Telisma (France), Loquendo (Italy), a number of emerging companies from China and other developing firms originating in universities.
The second category of speech vendor is middleware providers. Among these vendors are IBM and Microsoft, companies that embed speech capabilities in a larger business application platform. The third group is package application providers, vendors that build and sell standardized out-of-box speech solutions. This category includes Apptera, Datria, Fluency Voice Technology, Harborlight Technologies, Metaphore Solutions and TuVox.
The fourth category of vendors in the speech market is comprised of business process optimization (BPO) firms. These include hosting or outsourcing companies, such as Convergys, IBM Global Services, TellMe, Unisys, VoiceGenie and West. BPO firms also include network service providers, like AT&T, British Telecom and MCI, among others. Also represented in the BPO category are the emerging hosted contact center infrastructure vendors, such as Avaya, Cincom, Cisco, Contactual, CosmoCom, Telephony@Work and UCN; these vendors will likely add speech to their hosted solutions in the near future.
ScanSoft is currently the largest provider of speech engines in North American contact centers. In 2004, Scansoft (including Nuance) was responsible for 77% of the speech recognition ports shipped. Within the last year, ScanSoft solidified its market position by acquiring SpeechWorks in September 2004, and Nuance in May 2005. Although ScanSoft has achieved a solid position among its competitors, it is far from having a lock on market leadership. IBM and Microsoft could easily overtake ScanSoft. if they choose to begin promoting speech recognition products using their massive worldwide marketing networks. At the other extreme, ScanSoft could face a challenge from a smaller outsider, like Telisma or Loquendo, which could disrupt the market with a speech solution that is easy and/or inexpensive to deploy.
The greatest opportunity in speech recognition lies in exploiting the enormous, untapped portion of the market. DMG Consulting LLC estimates that speech recognition has penetrated less than 25% of the North American contact center market and an even smaller portion of the international market. Vendors that find ways to lower the cost of speech implementations and make them easy to install will be able to leverage this huge market opportunity on a large scale. Attracting the attention of the vast number of contact centers that have not yet purchased a speech solution is the key to success in this market. End users are eager to take advantage of the enormous value that speech recognition can offer. The potential is huge, and leadership will go to the vendors that can find innovative and dynamic ways to make speech recognition accessible and affordable.