Workforce Optimization Is Under Siege

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The workforce optimization (WFO) market is showing its age. Revenue is down and mergers and acquisitions are up, occurring at a rapid rate never before seen in this IT sector. Enterprises still need workforce optimization solutions, but given the maturity of the sector and the availability of so many offerings, they are unwilling to pay high prices for applications that they view as commodities, such as recording and, to some degree, quality assurance.

At the same time, many WFO company owners or their investors are weary and want to cash out, particularly now that there appear to be buyers that are willing to pay an acceptable price. The buyers are a diverse group; some are cloud-based contact center infrastructure vendors that want to broaden their suite’s functional capabilities by adding WFO capabilities. Others are investment firms that see a strong future for workforce optimization applications. Still others are software companies that want to purchase some of the underlying intellectual property found in WFO suites. The strong interest and prices have distracted many of the smaller vendors from innovation and investing in their future, leading them instead to package themselves for a sale.

PERFORMANCE OVERVIEW

WFO’s market performance in the first half of 2016 was not strong, but given the concerns about the state of the economy, which have made companies reticent to spend, it could have been a lot worse. Total company revenue for WFO vendors in the first half of calendar year 2016 was about 1.67 billion, down nearly $6 million from about 1.68 billion in the same period of 2015. (The 2015 numbers are a pro forma representation of WFO market activity during the first half of 2015, after removing revenue for the two security-related companies sold by NICE. These numbers are consistent with NICE’s restated published financials for 2015.) Two companies accounted for the majority of the WFO sector’s revenue decrease in the first half of 2016: Verint Systems and Aspect. Verint’s total company GAAP revenue dropped by $58.1 million between the first half of fiscal 2015 and and the first half of 2016, a reduction of 10.3 percent. Aspect’s WFO revenue is estimated to have decreased by $12.3 million, or 5.9 percent, between the first half of 2015 and the half of 2016.

A few other vendors, however, delivered either acceptable or strong performance. NICE, which announced the acquisition of WFO competitor VPI in March 2016 and speech analytics vendor Nexidia in January 2016, grew by 3.3 percent between the first half of 2015 and the first half of 2016. NICE’s $14.4 million increase in revenue, based on NICE’s restated public financial information for first-half 2015, is likely due to this inorganic growth. Interactive Intelligence, which was acquired by Genesys in August, also delivered a strong performance, as sales grew by 12 percent, or $22.3 million, between the first half of 2015 and the first half of 2016. inContact, a cloud-based contact center infrastructure vendor with WFO capabilities, which was acquired by NICE in May, delivered strong results, increasing its revenue by $21.8 million, or 20.9 percent. And Calabrio is estimated to have grown by 40.2 percent, an increase of $11.3 million, between the first half of 2015 and the first half of 2016. A review of the other vendors named in this year’s “Workforce Optimization Mid-Year Market Share Report” shows that the overall momentum of the sector was positive, with more companies showing gains than slowdowns in revenue.

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