October 1, 2009
By Donna Fluss, president, DMG Consulting

Voice Self-Service to the Rescue

For the rest of the October 2009 issue of CRM magazine please click here.

The interactive voice response (IVR) market has come back to life, driven by the need to automate inquiries that do not require the assistance of live agents. For-profit and nonprofit organizations appreciate the value of providing live assistance when necessary and possible. But, when live agents are not practical or cost-effective, a well-designed self-service voice application may be the next-best option.

Few technology sectors regain momentum, but the IVR market has. What makes it even more unique is that the core IVR technology — its ability to respond to, process, and route calls — is a commodity. The IVR sector is growing on the strength of new applications and product innovation from the highly competitive hosted/managed service providers, along with the standard and proven benefits of hosted/managed service solutions.

IVRs ARE MISSION CRITICAL
IVR systems have been considered mission-critical for contact centers ever since they were introduced in the 1980s. IVRs give callers the ability to help themselves. During the last few years, contact center managers have been under tremendous pressure to reduce their operating expenses, and the recession has only heightened this challenge. When used properly, IVRs can automate anywhere from 20 percent to 95 percent of incoming calls, dramatically reducing operating expenses while providing an outstanding or at least satisfactory customer experience.

While contact center managers have re-embraced IVRs, user interest has extended beyond the traditional market. Outbound IVR is altering market dynamics, changing the way that many types of organizations — enterprises, government, municipalities, higher education, nonprofits, etc. — interact with their customers/constituents. The evolution will continue as IVR capabilities are expanded to handle many of the newer channels, such as short message system (SMS), video, and much more.

The recession has sped up the pace of adoption and has infused life into the hosted/managed service IVR market. Many organizations in a variety of verticals have previously bypassed hosted/managed service IVR offerings because of security concerns or a desire to control their own destinies and technology platforms. Today, many of these organizations are not only considering these offerings, but making investments. And somewhat to their surprise, most are very pleased with the results.

VALUE PROPOSITION OF THE HOSTED/MANAGED SERVICE
Salesforce.com was instrumental in putting software-as-a-service (SaaS) on the technology map — but it’s a CRM solution used predominantly by sales organizations, not contact centers. Salesforce.com’s success helped popularize the concept of rented applications and proved the benefits of hosted/managed service solutions:

No need for capital investments.
Small or nonexistent start-up costs.
Limited need for internal technical resources.
Highly scalable (up and down).
Ease of handling multisite/remote agent deployments.
Ongoing investment protection.

Many companies with old IVR solutions installed prior to 2000 are finding hosted/managed service IVR offerings highly appealing. They often have traditional, on-premises IVRs that are not Internet Protocol– or Session Initiation Protocol–based, do not have Voice XML (vXML) development environments, and are becoming too expensive to maintain.

MARKET SIZE
Close to $2 billion worth of IVRs were sold in 2007, making it one of the largest components of the contact center market. The next year, more than half of all IVR revenue was generated by providers utilizing the hosted or managed service delivery model. Revenue growth is expected to continue at a healthy rate, with the majority being realized by hosted/managed service providers.

While almost everyone — users, vendors, financial analysts — agrees on the benefits of hosted and managed service offerings, there is no consensus on what to call this market. Even more confusing, most vendors have their own definitions of those services. These vendors need to understand that end users do not care about the terminology. They do care that a solution is highly dependable, can scale, is easy to manage, comes with good reports and analytics, and is highly cost-effective. Users and prospects are also concerned about the quality and effectiveness of the application (whether it achieves baseline containment rates); how long it takes to get into production; and the quality of the customer experience. Vendors adopting a standard definition for their offerings would eliminate a lot of unnecessary confusion.

EXPLODING MARKET
New vendors continue to enter the hosted/managed service IVR market from related sectors. The market can be divided into the following categories:

Automatic Call Distributor (ACD) Vendors — Traditional and hosted vendors that concentrate on selling ACDs and other related contact center applications, including IVR: Aastra, Alcatel-Lucent, Altitude Software, Aspect, Avaya, Cisco Systems, Dolphin Software, Genesys Telecommunications Labs (which acquired VoiceGenie in 2006), Interactive Intelligence, Mitel (which acquired Inter-Tel in 2007), and Nortel Networks.
Business Process Optimization Firms — Contact center outsourcers that also offer applications, including IVR: Accenture, ACS, Convergys/Intervoice, CSC, HP/EDS, IBM Global Business Services, Wipro, and others.
Carriers/Network Service Providers — Telecommunications service providers that have traditionally sold call minutes and other related equipment and are now adding IVR capabilities to extend deeper into organizations. These vendors include: AT&T, Bell Canada/BCE, BT, Deutsche Telekom, France Telecom, NTT, Qwest, SingTel, Telenor, Telfonica, Telstra, TELUS, Verizon, and others.
Dedicated IVR Vendors — Companies that concentrate on selling IVR: Aliza, Angel.com, APEX, Big Sky, Cable & Wireless, ComputerTalk, Contact Solutions, DAC Systems, DTMS Solutions, Eckoh, Envox Worldwide, Excelsis, First Data, Harborlight Technologies, Holly Connects, inContact (formerly UCN), IVR Technology Group, Jet Multimedia, LiveVox, Message Technologies (MTI), Metaphor Solutions, Nuance Communications, Plum Voice, Prairie Interactive, Pronexus, Prosodie, Pulse Voice, RightNow Technologies, Silverlink, Simplified Telephony Solutions, SNT Multiconnect, Sonat, SoundBite, Syntellect/Fluency, Tellme (a Microsoft subsidiary), T&S Software, TuVox, USAN, Vail, Varolii, VoltDelta, Voxeo, Voxify, West Interactive, XO Interactive, Ydilo, and Zeacom.
Speech Technology Specialists — Vendors that focus on developing and selling speech-related technology: Nuance.

GOOD NEWS FOR PROSPECTS
Because of increased competition in this market, vendors large and small are willing to negotiate most aspects of the relationship, including price and start-up costs. There are many strong and viable hosted/managed service offerings, but they are not all the same. To make sure that their full range of needs will be met, prospects need to carefully assess many factors, including each vendor’s technology, platform, scalability, integration capability, contingency/back-up capabilities, development environment and resources, reporting and analytics, functional capabilities, management tools, ongoing service and maintenance, optimization capabilities, customer references, responsiveness, financial strength, and planned research-and-development investments.

For more information about the hosted/managed service IVR market, see DMG Consulting’s 2009 Hosted/Managed Service IVR Market Report. Thoroughly addressing both inbound and outbound IVR sectors and related applications, the report examines the offerings of leading and contending vendors, including the underlying technology, functionality, pricing, benefits, return on investment, and market trends and projections.

Donna Fluss (donna.fluss@dmgconsult.com) is founder and president of DMG Consulting LLC, a leading provider of contact center and analytics research, market analysis, and consulting.

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