As the WFO Market Evolves, Will Vendors Adapt?

Enterprises of all sizes need the applications sold by workforce optimization (WFO) vendors: recording, quality assurance (QA), speech/text analytics, voice of the customer (VoC), desktop analytics (DA), and so on. Companies use these applications to optimize performance and engage employees, and to capture and analyze customer insights. The question isn’t whether organizations need these solutions, but rather the manner in which they will acquire them in the future. This sounds a bit ominous, and it is, as change has proven to be difficult, particularly for WFO vendors that have been going about their business the same way for more than 20 years. But the market transformation represents a great opportunity for companies that can adapt to changing times.

WFO MARKET PERFORMANCE

The growth rate between 2015 and 2016 for the overall WFO market was 1.6 percent. This is a slow pace even for a mature market, but it is an improvement over the 5.7 percent market contraction between 2014 and 2015. Despite the overall weak performance, segments of the WFO market are performing well, as reflected by the 6 percent growth in contact center WFO, the 9.5 percent increase for workforce management (WFM), and the 10.7 percent improvement for the QA sector between 2015 and 2016. However, other WFO sectors, such as recording and security, are not performing well and experienced a decrease in revenue between 2015 and 2016.

Organic growth in the contact center WFO market has been slow for years, as the two largest sectors, recording and QA, are highly penetrated. This has driven the vendors to invest in building a portfolio of analytics-oriented products that are highly complementary to these two core WFO modules to drive replacements and expand relationships with their customers. Adoption of these solutions, including speech/text analytics, desktop analytics, performance management, has been slow, as is typically the case with new contact center solutions. But vendors that have made significant investments in these new solutions are finally starting to see a payback.

For the past 10 years, most of the growth in the WFO market was inorganic, coming from acquisitions that introduced incremental revenue streams to the sector. The inorganic growth started in 2005, when Witness Systems (which was acquired by Verint) bought WFM vendor Blue Pumpkin, and NICE acquired WFM solution IEX from Tekelec. With each acquisition, new revenue sources were brought into the sector, expanding the WFO suites and the size of the market. In 2015, there were no significant acquisitions in the WFO market; NICE sold two non-strategic business units, and DMG changed its method of accounting for Enghouse’s total company revenue, which are the primary reasons for the 5.7 percent decrease in total company revenue. In 2016, NICE made a number of significant acquisitions, the largest of which was the purchase in November of inContact, a cloud-based contact center infrastructure vendor, but that deal was too late in the year to make a substantial market contribution. This, along with the further contraction of the security sector, explains the small growth rate of 1.6 percent for the year.

There was some positive momentum for the contact center WFO market in 2016. Most notable was the performance of Calabrio, whose revenue is estimated to have increased by 40 percent between 2015 and 2016. KKR, a private equity firm, purchased Calabrio in August 2016, and while it didn’t contribute a new revenue source to the market, the infusion of cash is helping Calabrio expand more rapidly.

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