AI Is Rerouting the Future of Cloud Contact Centers
The contact center-as-a-service (CCaaS) market continues to effectively execute, rapidly innovate, and deliver outstanding results, demonstrating resilience and robust growth. This is happening despite (or perhaps because of) economic uncertainty, intensifying competition, and a changing technology landscape.
This sector's success is tied to the primary mission of CCaaS providers, which is to manage and optimize the flow of customer inquiries/interactions in and out of organizations. At a foundational level, CCaaS solutions are the critical infrastructure that connects organizations with their customers, positioning contact centers as a key function in shaping, influencing, and elevating the brand experience.
However, due to these solutions'; central position in the customer journey, each of the more than 200 CCaaS vendors must define the role, value, and contributions they aim to deliver to both companies and end customers. Some CCaaS vendors concentrate on the core function of routing and queuing, ensuring each interaction reaches the most appropriate resource (human or automated). Others extend their platforms with complementary modules and applications to enrich and optimize every interaction. Regardless of approach, CCaaS solutions must be engineered to handle massive numbers of voice and digital interactions reliably. This requires a unique set of technical capabilities, including high availability, full redundancy, low-latency media processing, and advanced routing logic, that is difficult to replace with more generalized systems.
Cloud technology transformed the contact center market by making advanced and innovative solutions accessible to organizations of all sizes, removing the need for large upfront investments and complex onsite implementations. It simplified the deployment of contact center infrastructure solutions as well as the delivery of software enhancements and upgrades. Crucially, the cloud laid the foundation for artificial intelligence (AI) adoption by providing the massive processing required to support these intelligent, data-driven technologies.
While the market is still in the early stages of AI adoption, it's evident that these technologies will revolutionize nearly every aspect of the customer experience (CX) and fundamentally change how businesses and customers engage.
Future CCaaS solutions will be intelligent predictive routing and queuing engines that leverage the power of AI to enable organizations to deliver a personalized, outstanding, and cost-effective experience to all customers and prospects. The switch itself will be an agentic-enabled engine that determines the best way to handle each interaction. The debate regarding when and how to use conversational AI (CAI) self-service capabilities will be moot as the CCaaS engine will decide. DMG Consulting doesn't believe AI will eliminate the need for human agents, but we expect it to significantly change the role they play and the cost dynamics of contact centers while improving the customer and agent experience. As a result, we project the contact center market will reach an inflection point in December, after which the number of human agent seats will begin to slowly decline. DMG does not anticipate this shift will eliminate the need for CCaaS solutions; rather, it will alter enterprise buying priorities. Organizations are expected to increasingly prefer vendors who offer AI-enabled CCaaS, self-service, and other automation and analytics capabilities within a unified contact center infrastructure.
The CCaaS Competitive Landscape
AI is expected to recast the CCaaS competitive landscape. Organizations will gravitate toward vendors offering comprehensive platforms with fully open architectures, enabling them to seamlessly integrate with AI solutions, large language models (LLMs), small language models (SLMs), enterprise knowledge bases, and third-party systems across their businesses. As this shift takes place, CCaaS solutions will become a central and critical hub for CX data, enabling more intelligent, proactive, and personalized customer experiences throughout the entire customer journey.
While AI is the top driver of market change, it is far from the only one impacting the CCaaS competitive landscape. Although it seems logical for CCaaS vendors to merge, this is difficult because there's no easy way to integrate two CCaaS solutions and quickly come to market with a consolidated product. As a result, if one CCaaS vendor acquires a competitor, clients using one of the offerings will typically have to move to the other system. If this occurs, clients forced to transition to the other CCaaS solution are likely to review their options and are at risk of migrating to another provider altogether, greatly reducing the value of the acquisition. (While the numbers are not known, DMG estimates 40 percent to 50 percent of clients might choose this alternative.)
However, the CCaaS market will have to shift, as supporting more than 200 competitors is not sustainable long term. DMG expects to see mergers and acquisitions between CCaaS and other types of enterprise software vendors. This includes international acquisitions where a vendor in one geography, such as North America, purchases a CCaaS solution in Europe or Asia to quickly increase market share. While client attrition remains a risk, the market might allow more time to properly address the consolidation. Another strategy is for CCaaS or CAI providers to purchase each other to broaden their total addressable market (TAM). The point is that change will happen one way or another during the next two to three years. In many cases this will be because CCaaS vendors are running out of money, and the private equity or venture capital firms that are funding them will want to cash out of these investments.>
Expanding the Definition of CCaaS
The traditional description of CCaaS is a multi-tenant omnichannel contact center solution operating out of a CCaaS vendor's or third party's data center. Within this framework, there are four types of CCaaS seats: voice-only, omnichannel (voice and digital), digital-only, and basic (used outside of a formal contact center). As of the end of 2024, DMG estimates the adoption rate for these types of CCaaS seats is 31.8 percent. However, DMG suggests that it's time to re-examine this definition. While shared multi-tenancy offers clear advantages, there are tradeoffs that must be taken into consideration, particularly for companies in need of greater security, control, and customization. A large portion of the contact center infrastructure market has not migrated to the cloud, and even among existing adopters, some organizations are looking for private cloud deployment alternatives that include the benefits of cloud delivery, such as continuous innovation without onsite updates. Given these evolving preferences, DMG recommends expanding the CCaaS definition to include software-as-a-service and managed service implementations. These models allow companies to maintain dedicated environments, isolated from other tenants, while still benefitting from cloud scalability, agility, and innovation.
DMG remains bullish on the CCaaS market and projects strong growth between 2025 and 2029, particularly if this sector's definition is expanded slightly to include SaaS-based offerings, for which we expect to see increased demand. Some market pundits have begun to speculate about the CCaaS market's death within two years due to generative AI- and agentic AI-enabled CAI self-service offerings. However, this perspective overlooks the agility of CCaaS providers, the ongoing evolution of this large and still-growing IT sector, and the slow pace at which contact centers change, even in today's AI era. The demise of CCaaS is being tied to the end of live agent support, another concept DMG rejects for the foreseeable future as consumers will continue to require this level of interaction and personalization in certain circumstances, as well as the fact that live agent support provides many benefits for organizations. Rather than declining, CCaaS is transforming, driven by AI, shifting organizational priorities, and growing demand for more integrated, intelligent CX platforms. The CCaaS market is entering a new phase, one that will redefine what a modern contact center platform is, how it delivers value, and the strategic role it plays in the broader CX ecosystem.
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. As the foremost analyst and visionary dedicated to the contact center and back-office markets, Fluss has provided expert guidance for more than 30 years to technology leaders as well as disruptive newcomers, investors, and enterprises that want to build next-generation AI-enabled contact centers. She can be reached at Donna.Fluss@dmgconsult.com