WFO/WEM Solutions Prove Their Worth in a Pandemic Economy
The world is on a rollercoaster ride as the novel coronavirus continues to whiplash economies. Just when it seems reasonable for people to leave the safety of their homes, new variants appear that threaten many of the hard-won gains. While everyone hopes we are nearing the end of the pandemic, no one knows what the future will bring, and this is driving both confusion and opportunity in many markets.
The economy has struggled greatly and inconsistently around the world. During the first six months of the pandemic in 2020, companies closed their doors to their employees and the public in an attempt to keep people safe. The virtual economy was energized, and growth accelerated for companies that could move their activities and operations online. While a large number of enterprises reported record earnings in 2020 (and indications are very positive for strong results in 2021), others either closed their doors or were kept afloat by government support and subsidies. Eighteen-plus months into the pandemic, the world looks very different; many of the changes are positive and are here to stay.
Work-from-Home Drives Migration to the Cloud
When the pandemic hit, companies sent their employees home to work. Departments that had previously taken a negative view of remote work, including contact centers, found out by necessity that this was a viable option for them. Ongoing studies of the impact of work-from-home (WFH) on the productivity of contact center employees generally show positive results, where agents are at least as effective as they were when working in the office. One reason for this is that contact centers have many applications and tools at their disposal to oversee and manage the performance of their agents. A number of these solutions, which are provided by contact center infrastructure and workforce optimization (WFO)/workforce engagement management (WEM) vendors, have proven to be invaluable, particularly when delivered via the cloud.
As a result, contact-center-as-a-service (CCaaS) providers and WFO vendors have not suffered the same economic damage created by the pandemic as many other IT sectors. And for some vendors, COVID-19 has sped up the delivery of cloud-based WFO capabilities to their customers and the transition from selling on-premises-based licensed software to a cloud-based annual recurring revenue (ARR) recognition model. This financial transition typically takes two years, during which vendors experience a short-term dip in earnings, because revenue from a sale is spread over a three- to five-year period instead of being largely front-loaded in year one.
WFO/WEM Vendors Rise to the Occasion
While the WFO/WEM market has been transitioning to the cloud for many years; the rate of migration has been picking up in the past few years, and the vendors are in various stages of this process. DMG expects more than 50 percent of contact center WFO/WEM revenue (and innovation, for that matter) to come from cloud-based or hybrid implementations by the end of calendar and fiscal year 2022. Because of the phased manner in which many WFO/WEM vendors have undertaken this transition and the strong financial performance of many of the WFO/WEM providers, the impact has been spread over years, minimizing its effect on the market. As of the end of the first half of 2021, total revenue for vendors that offer contact center WFO suites was $1,895.9 million, a year-over-year increase of 2 percent from $1,859.3 million during the same period in 2020. This $36.6 million increase is small but significant because it shows that the market is growing even though it was impacted by the Verint spin-off of their cyber intelligence business unit, which accounted for $206.5 million in revenue in the first half of 2020, and the ongoing transition of vendors to the ARR model. If revenue from Verint’s cyber intelligence business unit were excluded for first-half 2020, the growth rate of the WFO market would be 14.7 percent in the first half of 2021.
That revenue total of nearly 1.9 billion in the first half of 2021 for WFO suite vendors includes sales of related products and services, including contact center infrastructure (on-premises and cloud-based automatic call distributors and dialers), intelligent virtual agents, outsourcing, and more. Around $1.1 billion of this revenue is attributed to contact center WFO suite products and services in the first half of 2021. This is an increase of $84.4 million, a healthy 8.1 percent more than the revenue earned in this segment during the same period of 2020. Given the maturity of this IT sector, the downward pressure on revenue due to the shift toward an ARR model, and the increased sales by CCaaS vendors that are not WFO suite providers, this is a very strong first half of the year.
What’s Next for the WFO/WEM Suite Market
The contact center WFO/WEM market has demonstrated its resiliency for decades. This market has been around since the 1980s and, in general, has performed well in both strong and weak economies. The reason for this enduring success is that these suites are designed to enhance the customer experience (CX), improve employee engagement, and increase productivity, goals that are important in good times and more essential when times are tough.
The pandemic showcased the value and benefits of WFO/WEM applications to enterprise executives, who are striving to figure out how to deliver an outstanding CX at every step and touchpoint of the customer journey. There is a great opportunity to use many of the WFO/WEM applications in departments throughout the enterprise—for starters in back-office functions—to improve quality, employee engagement, and productivity. Companies that want to deliver a consistently outstanding CX, which will, in turn, improve productivity and profitability, need tools to figure out the cause of system bottlenecks and performance issues. (DMG estimates that only 20 percent of customer inquiries in enterprises are handled by the contact center.) The WFO/WEM applications can provide the necessary oversight, analytics, automation, and intelligence for enterprises to deliver the service experience their customers expect, cost-effectively. It’s time for many of these WFO/WEM capabilities to be rolled out throughout enterprises and to become standard employee productivity tools.
WFO/WEM suites (which can be comprised of 12 to 16 applications) are essential and, in some cases, mission-critical, for companies. There is no question that these solutions are needed—the pandemic removed any doubts. The current debate is from whom enterprises prefer to purchase WFO/WEM capabilities—the WFO/WEM suite vendors, CCaaS providers, or best-of-breed competitors.
Donna Fluss, president of DMG Consulting, is highly regarded as one of the foremost experts on contact centers and the back office and specializes in digital transformation, artificial intelligence, and automation. With 30 years of experience helping organizations build highly effective operating environments and assisting vendors in delivering competitive solutions, Fluss created DMG Consulting to deliver unparalleled and unbiased research, analysis, and consulting services. Fluss is a renowned speaker, author, and source for industry and business publications. She can be reached at Donna.Fluss@dmgconsult.com.
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