Workforce Optimization Enters the Analytics Era
The workforce optimization (WFO) market is experiencing growing pains as its products evolve from their traditional role of optimizing staff performance to a new one—enterprise analytics. Since the core WFO applications—recording and traditional quality assurance—have high market penetration, change is necessary for this market to continue to grow. Leading and contending vendors have been preparing for this development by introducing analytics solutions, but they have to persuade their customers to buy them, which is turning out to be a lot harder than they expected.
THE MARKET SLOWS DOWN
The first half of 2015 was tough for vendors of contact center WFO. Total company GAAP revenue for the 45 WFO competitors decreased by $8.6 million, or 0.5 percent, from $1.713 billion in the first half of 2014 to $1.705 billion in the first half of 2015. After many years of growth, the market contracted ever so slightly. While not a total surprise—the rate of organic growth for contact center WFO has been slowing down—the results are nonetheless disappointing. These numbers are also an indication of what to expect in the future unless the sector becomes more acquisitive, as it has been in the past, or adoption of the new analytics solutions picks up dramatically. The question is, what will vendors do, and what impact will it have on their customers?
CHANGING DYNAMICS
The primary challenge for the contact center WFO market is that there is little organic growth. Vendors are striving to keep their customers and are fighting over competitive replacements. But some unique market dynamics are having a negative impact on total market revenue while helping some of the smaller companies grow. The market leaders have some of the highest-priced solutions. They may lose an incumbent client to a smaller WFO contender for many reasons, including poor service, lack of flexibility, and the fact that the price of a new solution from the smaller contender is often significantly lower.
While the market potential for traditional WFO applications is small, the opposite is true for the newer analytics applications—speech and text analytics, desktop analytics, contact center performance management, and customer journey analytics. Emerging back-office and branch WFO suites also hold great potential, since adoption has so far been limited and the opportunity tremendous, as the sector is more than 2.5 times the size of the contact center segment. The challenge lies in opening up market opportunities for the new applications, with which both leaders and contenders have struggled.
THE WFO MARKET OUTLOOK
DMG expects the next couple of years to be challenging for WFO vendors as they struggle to sell their new portfolio of enterprise analytics solutions and back-office and branch WFO capabilities. These conditions are expected to lead to a new round of mergers and acquisitions, winnowing out the market and bringing new capabilities into the sector.
WFO vendors will continue to invest in the emerging area of customer journey analytics, a new functional area with great potential for the contact center and enterprise markets. But as the products are still being developed, demand is slow. And while back-office and branch WFO has great potential for WFO vendors, this segment has proven to be elusive and difficult to break open.
Despite the challenges, DMG expects WFO vendors to continue to introduce innovation to help users improve both productivity and the customer experience. The rate of growth is expected to slow down for the next couple of years as vendors strive to create demand for their new analytics products. But the need for solutions that help optimize and engage employees in front and back offices is not going away, nor is the need for enterprise applications that help enrich the customer journey. WFO vendors are doing a lot of the right things and are investing in their future, even if the numbers don't show it. The challenge for them is to combine traditional applications with innovative capabilities and come out with something better for everyone.
Donna Fluss (donnafluss@dmgconsult.com) is founder and principal of DMG Consulting, a provider of contact center and analytics research, marketing analysis, and consulting.