Will WFO Vendors Keep up with Changing Times?
The workforce optimization (WFO) market is continuing to evolve. There have been many inflection points in the history of this market, which continues to be important because end users need the functional capabilities provided by the WFO vendors. These vendors have proven themselves to be highly flexible and resilient as they adapt and transform to meet the needs of their enterprise clients.
What’s Next for Contact Center WFO Vendors
DMG believes that the contact center WFO market, which has just experienced the most significant round of merger and acquisition (M&A) activity in its history, is on the cusp of an even bigger transformation. Front- and back-office WFO functionality is a necessity for companies and contact centers so that they can comply with government regulations and deliver an outstanding customer journey. However, there is no reason why end-user organizations need to purchase WFO functionality directly from a WFO suite vendor. Many WFO vendors have been so successful in building partnerships with contact center infrastructure vendors or other types of distributors and resellers that their prospects see little value in working directly with the technology provider. While there are support issues that arise due to these indirect relationships, as the technology provider and their distribution partner have to work out their processes and cost models, this is expected to become the primary distribution model for the WFO market. As a result, more WFO functionality will be absorbed by third-party vendors and distributors, leaving the technology providers looking for new sources of opportunity and revenue in order to remain in business. Margins on products that are perceived to be commodities, like recording, QA and coaching, are small and shrinking. As the implementation, professional services and maintenance revenue for these applications go to the distribution partners, there may not be enough left over for the technology providers.
The 4 primary options for WFO vendors are:
- Continue business as usual with decreasing revenue and margins (.30 probability) – WFO vendors who accept the declining margins will decrease their investments in research and development (R&D) and innovation, and they will be slower to introduce enhancements.
- Sell themselves to the highest bidder (.40 probability) – Many contact center WFO vendors are for sale and are looking for the right price and buyer.
- Go out of business (.20 probability) – Companies that do not find a buyer and cannot operate profitably may go out of business. This will happen with more finesse than it sounds, but at some point an enterprise may find that the company from whom they acquired their WFO solution is no longer available to support them, leaving them dependent on third-party support services.
- Transform the company (.10 probability) – A small number of WFO vendors will re-invent themselves and the sector.
The contact center WFO market is going to change dramatically in the next 5 years. The functionality will still be available, but the competitive landscape will be different. M&A will play an important role, but is only one of the expected changes.
The WFO market is at an inflection point and is confronting the most significant change in the history of this valuable and resilient technology sector. The only given is that it’s not going to be business as usual. DMG expects the cloud to become a major driver of transformation, the players to change, the offerings to adapt, improve and expand, and back offices and branches to get on board. The very practical WFO market will do what it has always done: respond to changing needs and times.
DMG Consulting LLC is a leading independent research, advisory and consulting firm specializing in unified communications, contact centers, back-office and real-time analytics. Learn more at www.dmgconsult.com.