• August 29, 2023
  • By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

Conversational AI Spending in Contact Centers to Rise

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Businesses are likely to spend $18.6 billion on contact center conversational artificial intelligence and digital assistants in 2023, up 16.2 percent from last year, and in 2024, that growth is expected to jump an additional 24 percent, reaching nearly $23.2 billion, according to new research from Gartner. The same growth in 2022 was 17.6 percent, with spending that reached just a little more than $16 billion.

At the same time, Gartner observed that the number of customer service interactions touched by AI has continued to increase. Currently, about 3 percent of customer interactions are handled by AI, and the firm said that figure should grow to 14 percent by 2027.

“Near-term investment growth rates for contact centers and contact center conversational AI and virtual assistants are expected to dip as business volatility creates a lengthening of decision cycles,” said Megan Marek Fernandez, director analyst at Gartner. “Longer-term, generative AI and growing maturity of conversational AI will accelerate contact center platform replacement as customer experience (CX) leaders look to simultaneously improve the efficiency of customer service operations and the overall customer experience.”

The global conversational AI and virtual assistant market represents the fastest-growing contact center segment, helping to spur 24 percent growth in 2024.

Gartner said that general economic and geopolitical uncertainty is likely to create some budget restrictions in 2023, resulting in a slowdown of premises-based contact center replacements and upgrade projects. But customer-facing projects might be viewed as an important part of revenue retention and generation strategies.

“This means that while many IT investment areas will be weakened as budgets tighten, customer service and support initiatives that have the potential to differentiate the customer experience or streamline customer service operations could receive easier investment buy-in,” Marek Fernandez said. “These factors will help contact center-as-a-service (CCaaS) projects receive funding associated with broader corporate digital transformation budgets.”

Gartner expects CCaaS investment growth to accelerate as decision makers implement cloud-based contact center capabilities to modernize their customer service operations. This includes adoption among contact centers with many thousands of agents, which have been slow to adopt CCaaS. As part of modernization projects, CCaaS solutions will be implemented to support a broader mix of communications channels and will feature more significant uptake of advanced dashboards, analytics, routing, workforce optimization (WFO), knowledge and insight, and conversational AI capabilities.

Mike Myer, CEO of conversational AI platform provider Quiq, said Gartner’s research provides further proof of the disruptive impact AI will have on service.

“This is a trend that matches our experience and our future expectations, but we anticipated the numbers from Gartner’s report to be even higher,” Myer said.

Companies, he added, “are beginning to understand how much more powerful the latest AI is and how it can improve their CX departments. They are turning their attention to the implementation of an AI-based customer service solution in the next few years.”

New capabilities provided by large-language-model AI are making contact center staff more productive, offer better service to customers, and also cut costs, he observed further, noting that today’s AI “far surpasses the frustrating chatbots of days past.”

The new chatbots, or virtual assistants, “actually understand the questions customers are asking and can generate a concise and personalized response. This is a revolutionary development for the contact center, since a great deal of customer service interactions can be solved satisfactorily by AI, as Gartner’s research confirms,” Myer concluded.

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