Workforce Optimization Is Poised for Big Changes

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.