Workforce Optimization Is Poised for Big Changes
By Donna Fluss
Last year was a transformative one for the contact center workforce optimization (WFO) market. Total market revenue contracted, and the contact center segment increased by a modest 3 percent. (Some of this sluggishness is attributable to the strength of the U.S. dollar.) After close to 20 years of rapid growth and expansion, the dynamic WFO suite market has aged and matured, seemingly overnight. But the numbers tell only a portion of the story as this market transitions to its next stage.
The Opportunity for WFO Market Leaders
The two market leaders, NICE and Verint, dominate every segment of the WFO suite market. These two vendors account for 50 to 90 percent of the revenue for every WFO market segment, including recording, quality assurance (QA)/quality management (QM), speech analytics, workforce management (WFM), etc. For years, these leaders have been so dominant that it was hard for other competitors to make inroads, except in areas where the leaders did not compete, like the small and midsize business segments, or when an enterprise decided it did not want to work with these two leaders. But this is starting to change.
During the past five years, a growing number of enterprises have shown a preference for purchasing WFO capabilities, particularly recording, from their contact center infrastructure vendor. This is because companies want voice recording to be fully integrated with their automatic call distributor (ACD) or dialer to ensure all calls are cleanly captured and to simplify their operating environment. Cloud-based contact center infrastructure vendors have taken this trend to the next level by making voice recording a standard capability in the vast majority of offerings.
Since recording is the core component of a contact center WFO suite, it’s logical to purchase complementary applications, like QA/QM, speech analytics, performance management, and so on, from the same vendor. This facilitates integration of related systems, because recordings provide the input for many of these other contact center WFO applications. Leading cloud-based contact center infrastructure vendors are adding WFO applications to satisfy the demands of their customers, who want to simplify their operating environments by dealing with as few vendors as possible. Another significant trend is the growing appeal of cloud-based solutions. On the revenue side, compared to the traditional licensed software model, the cloud model generates a lot less financial return for the vendors in the first year after implementation. However, this is usually more than compensated for by a steady and often growing revenue stream over time.
These two related trends—enterprises’ desire to purchase contact center recording and related WFO capabilities from their ACD/dialer vendor, and the growing adoption of cloud-based contact center infrastructure—are having a clear impact on the two market leaders. Neither NICE nor Verint has strongly embraced the cloud as a delivery and implementation model. Both of these vendors are engaged in a variety of cloud activities, but the revenue numbers show their reticence in adopting the cloud, which is going to play a very important role in the future of contact center applications. These vendors are fighting the inevitable, and it is going to hurt them in the long term, leaving them open to having their customers move to more nimble providers of WFO services in the cloud.
The Competitive Outlook for Contact Center WFO
DMG estimates there are 43 contact center WFM competitors in the market, down from 45 in 2015. Very importantly, no new stand-alone contact center WFO vendors have entered the market in the past couple of years, although cloud-based contact center infrastructure vendors are actively purchasing WFO companies to use as a foundation upon which to build their own solution set for their platforms.
To get a better sense of the vendors competing in the WFO market, DMG segmented the industry into four tiers of vendors.
- Market leaders. NICE and Verint.
- Emerging vendors. Competitors that are making investments and/or are picking up momentum; these include 8×8, Avaya, Calabrio, inContact [Editor’s note: Since the column’s submission, NICE has agreed to acquire inContact], Interactive Intelligence, and ZOOM International.
- Competitors. Vendors whose revenue has remained relatively consistent for many years; these include ASC, Cacti, ComputerTel, Coordinated Systems Inc., dvsAnalytics, HigherGround, Mitel, OnviSource, TantaComm, TelStrat, VPI (acquired by NICE in March 2016), and Xarios.
- Vendors in transition. Vendors that are positioning themselves for change; these include Aspect (which at press time was expected to come out of its prepacked bankruptcy in early summer 2016), Enghouse, Envision, Genesys, OpenText (which acquired HP WFO Software in May 2016), West Corporation (which recently acquired Magnetic North), and VirtualLogger.
One way to differentiate the vendors is to analyze their research and development (R&D) investments. Vendors that are aggressively pursuing the market are actively making enhancements, whether by building new capabilities or pursuing integrations and partnerships. Others are making investments only when necessary to win deals.
Analytics is the Future
The WFO market is in transition, and change is necessary for the sector to return to its glory days. The cloud is key; the two market leaders have to get on board and adopt this new mind-set, implementation, and revenue model. The WFO market will also need to deliver practical innovation in the form of analytics. The process has begun; speech, text, desktop, and customer journey analytics are all high-value solutions that have the potential to deliver great benefits to their users. The challenge is to get enterprise customers to adopt and use these applications. End users are showing interest in some of these capabilities but want vendors to deliver “fail-safe” applications, a need that can be better addressed in the cloud, where product fixes and new functionality can be delivered overnight.
We are in the midst of the Big Data revolution. The data is available and the WFO solutions are an important source of information. It is now a question of how to use this data to achieve top enterprise servicing goals, specifically to provide an outstanding customer experience, make it easy for customers to conduct business, and deliver personalized service cost-effectively. Vendors that figure out how to harness the vast amount of data and apply their solutions to address end-user needs will win. WFO vendors, which have access to mission-critical data, are positioned to come out on top, but they must evolve their solutions to meet the needs of their customers. Business dynamics are changing; enterprises no longer want to buy big WFO suites with the promise of potential benefits. Instead, they want to buy customized systems that give them the information they need to deliver a personalized and differentiated service experience
Enterprises need to improve the performance of their complex back-office and branch operating areas, but they don’t know how or what to change. Businesses are concentrating on reducing the cost of these areas, while their customers and prospects are telling them to improve the ease of doing business. (In fact, reducing complexity will decrease costs and improve service.) Customers/prospects care about the overall journey, not the specific department that provides the service. This means that enterprises are going to need to break down organizational silos that they have spent the past 20 to 30 years building. WFO solutions that are customized to the needs of back-office and branch operating areas should be in strong demand, but are not. This is because the current generation of back-office/branch WFO suites does not fully meet the unique needs of these highly complex businesses, and the vendors are not effective in selling these solutions. But the opportunity is great, as the addressable back-office/branch market is 2.5 times larger than the contact center WFO market, based on the number of employees.
The Future of WFO
The WFO market has a great opportunity to return to a high rate of growth, but it is expected to experience serious growing pains along the way. Leading and contending vendors have to migrate their portfolios to the cloud to allow them to accelerate the pace of innovation and adoption, although DMG expects many companies to continue to use on-premises WFO solutions in the near future. Analytics will play a major role in the future of the WFO market, as vendors deliver practical and actionable solutions that empower enterprises to engage their customers and employees.