• January 11, 2024
  • By Donna Fluss, president, DMG Consulting

Thanks to AI, the CCaaS Sector Comes on Strong

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The contact center-as-a-service (CCaaS) market continues to thrive despite challenging macroeconomic conditions. The factors driving rapid growth include the recent adoption of these solutions by cloud holdouts, including large financial services institutions; ongoing seat expansions from many existing customers; a strong replacement cycle of earlier-generation CCaaS solutions; and increased international deployments. DMG Consulting estimates that CCaaS accounted for 28.9 percent of contact center seats as of the end of December 2022, a figure expected to have grown to 34.7 percent by the end of calendar year 2023.

Although lingering economic uncertainty has led to slower purchasing decisions for contact center technology, frequently doubling the typical sales cycle to 12 to 18 months, companies are buying. Some deployments, particularly in large financial services organizations, are implemented on a trial basis and delayed by the need for customizations and integrations. However, once a CCaaS platform proves its ability to reliably meet expectations, these firms are expanding their use of these solutions. DMG expects to see this trend continue, particularly now that the inclusion of artificial intelligence (AI) is influencing many technology acquisitions. CCaaS vendors are investing heavily in these capabilities, whereas providers of on-premises contact center infrastructure are not.

Sales and technology partnerships have been key to the CCaaS market’s success, a trend that DMG expects to increase. Indirect sales channels reduce margins for CCaaS providers, but they also significantly expand the providers’ sales reach without requiring them to add new employees to their payroll. And when it comes to technology partnerships, given the rapid pace of innovation for AI, automation, and analytics, incorporating third-party systems and applications is a highly effective method to quickly bring new capabilities to market, giving customers additional flexibility in their solutions.
Platform security, reliability, scalability, and transparency have always been leading triggers for CCaaS users.

While there is still room for improvement, CCaaS providers are listening and responding to customer concerns. Several vendors now display real-time system status and historical availability on their websites, enabling customers and prospects to monitor the overall up-time performance of their cloud solutions. Many vendors also give clients the specific results for their own environment. CCaaS providers are using a combination of third-party data centers with built-in resiliency and redundancy and their own data centers to address sovereignty issues and meet the needs of their global public and private customers. As international regulatory compliance requirements become more complex, companies are turning to CCaaS vendors for assistance in addressing them.


AI, including generative AI, is speeding up innovation in the CCaaS market. Leveraging these technologies in highly
practical and useful ways delivers quantifiable benefits that improve productivity, self-service capabilities, and the customer and employee experience (CX/EX). Generative AI is jump-starting and reinvigorating many self-service initiatives, helping organizations automate tasks and activities that previously required live agents. AI is enabling companies to identify business functions that can be enhanced with automation, and generative AI is providing them with the methods to do so while vastly reducing implementation time and cost and increasing accuracy.

Generative AI boosts the ability of interaction (speech and text) analytics (IA) to identify customer trends and needs, positioning companies to be more responsive. These technologies are significantly improving the effectiveness and validity of analytics-enabled quality management (AQM) applications, paving the way for enterprises to migrate from manual quality management programs to the new age of automated QM. Generative AI is also relieving agents of post-interaction wrap-ups and summarizations, creating more accurate notations and follow-ups and doing so in less than half the time.

While still in its infancy, generative AI is already yielding measurable improvements for customers and employees. Along with other AI technologies, generative AI delivers agents better real-time guidance (RTG) functionality, enabling them to assist customers faster and more accurately. These capabilities are transformational for contact centers: They reduce transfers and the need to put customers on hold, two things consumers greatly dislike. Just as important, they improve the CX and productivity by speeding up resolutions.

AI’s contributions will continue to grow as these technologies mature and additional resources become available to assist enterprises in organization-wide initiatives, particularly in contact centers and service departments. DMG expects to see CCaaS vendors deliver verticalized large language models (LLMs) that speed up implementation time frames, increase
accuracy, and reduce risk so that companies can realize benefits more rapidly. These improvements will enable companies
to scale operations and become less reliant on human agents. However, it will be many years, if ever, before they remove the need for live representatives.


Contact center technology innovation is taking place in the cloud, although not all organizations will move in this direction. The CCaaS market is highly fragmented, complex, and competitive, with more than 200 vendors. CCaaS has traditionally been considered the foundational technology in a contact center and is typically the first one companies select. Most CCaaS platforms include a few workforce engagement management (WEM) applications, which are provided natively or via partnerships. CCaaS vendors also typically partner to deliver CRM solutions and provide out-of-the-box integrations to leading competitors, although some include CRM-lite capabilities. Vendors currently offer a mix of pricing schemes, from traditional per seat or per month fees to various consumption models.

What’s next for the CCaaS market? The answer is complex, as some vendors will continue down the current path, growing by expanding their base of contact center customers, while otherss will broaden their focus and sell outside the contact center to business functions that previously would have used a unified communication solution. These nontraditional seats will be less functionally rich (and less costly) than is needed in a contact center; support fewer channels; require limited WEM applications; and often leverage collaboration tools like Teams. While the price for nontraditional seats will be significantly less than contact center offerings, winning them greatly increases the total addressable market (TAM) for CCaaS vendors.

DMG expects the CCaaS market to begin consolidating, particularly as some vendors run out of money. CCaaS platforms and CRM solutions, which are heavily interdependent, will continue to converge, and the likelihood of mergers and acquisitions across the two sectors is high. Larger CCaaS competitors are expected to double down on their traditional offerings by building out native AI capabilities while also making it easy for customers to bring their own AI. The addition of AI-based capabilities will enable vendors to increase their price per seat and/or usage fees, which is generally a highly
lucrative approach. Additionally, DMG expects to see more activity from large tech companies—like Amazon, Google, and Salesforce—which will likely increase the pace of change in this segment.


The CCaaS market is executing well and is on track to continue its strong performance, despite today’s unique economic
environment. Leading (and some contending) vendors are expanding internationally and growing their network of sales
and technology partners. CCaaS providers are also demonstrating a willingness to customize their platforms to win business from the large financial services organizations that are slowly migrating to the cloud.

The pace of innovation, primarily driven by investments in AI and automation, is introducing new features and functionalities that are helping companies enhance the CX and EX and increase productivity. The CCaaS market is positioned to grow rapidly during the next five years. It’s already attracted vendors from many IT sectors, including a few big tech companies—Amazon, Google, and Salesforce—as well as notable players like Zendesk and Zoom. However, as the market matures and begins its next act, it will consolidate and transform, making it more important than ever for enterprises to select well-funded vendors that are investing heavily in the future.

Donna Fluss, founder and president of DMG Consulting, provides a unique and unparalleled understanding of the people, processes, and technology that drive the strategic direction of the dynamic and rapidly transforming contact center and back-office markets. Fluss can be reached at donna.fluss@dmgconsult.com

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