By Donna Fluss
Three years ago, DMG Consulting predicted that the U.S. economy would enter a recession in 2009. While we did not anticipate the massive failure of financial institutions, we were expecting a significant economic correction. The current situation is expected to drive many economies around the world into a serious recession. Recessions generally have a dramatic impact on the level of technology spending. DMG Consulting expects the next eighteen months to be very challenging for many technology companies, including contact center vendors.
During recessionary or challenging economic times, most enterprises freeze all but essential technology investments; any investment that can be postponed generally is. Depending upon the severity of the economic crisis, even investments that have been approved may be postponed if the money allocated for those projects has not yet been spent. While the full effect of this economic downturn is not yet known, given its worldwide scope, it is expected to likely last well into 2010.
Here is how a recession is going to impact sales of the three top contact center applications: contact center infrastructure (automatic call distributor, or ACD), interactive voice response (IVR), and workforce optimization suites and modules.
Hosted Contact Center Infrastructure: If economic patterns from the prior two recessions hold, investments in premise-based contact center infrastructure (ACD), which require a large up-front capital investment, will slow significantly. However, sales of hosted contact center infrastructure seats for routing and queuing are expected to grow at a compounded annual growth rate of 28 percent over the three-year period from 2009 to 2011. We believe that the recession is going to be very kind to the hosted contact center infrastructure market. It will drive enterprises large and small to consider hosting as a viable alternative in order to conserve cash and avoid making long-term commitments.
Interactive Voice Response: DMG expects the current economic conditions to temporarily slow IVR growth, as companies of all sizes delay all but critical expenditures. However, once companies lift their investment freezes, there will be an increased emphasis on self-service applications as a means of reducing operating expenses. The IVR market will benefit from the need to replace outdated and expensive-to-maintain systems with newer technology. There will also be a positive impact from the need to standardize technology in newly merged companies, particularly in the IVR-intensive financial services industry.
Workforce Optimization Solutions: While the next couple of years are not expected to be particularly strong for workforce optimization solutions, this technology segment is likely to perform better than many other contact center and IT sectors. This is because most QM/Recording solutions are considered productivity tools. Just as importantly, some of the individual modules that are part of the WFO suites are in a high-growth phase and may continue to perform better than most other technology sectors. Speech analytics, which is just gaining mainstream acceptance, can enhance productivity, improve customer retention, and increase revenue generation. Workforce management solutions have recently been enhanced and are considered leading productivity tools in contact centers. In addition, surveying/enterprise feedback management products are being used to give companies insights into the customer experience.
QM/Recording solutions and all of the individual modules found within the suites are now being offered on a hosted or Software-as-a-Service (SaaS) basis. This is a departure from the traditional, premise-based licensed product delivery model. A hosted/SaaS arrangement allows companies to implement new solutions without large up-front investments in license fees and installation. This gives cash-strapped contact center managers acquisition alternatives that they did not have during other recent recessions. Many of the WFO vendors outperformed the market during the last recession because their solutions helped companies achieve goals that were essential during tough times. Now, with an alternative method for enterprises to acquire these products, they are again expected to outperform the IT sector and to continue to grow, albeit at a slower pace. These projections take the recession into account.
Final Thoughts: Projects that contribute directly to an enterprise’s bottom line have a good chance of being approved if they exceed investment approval thresholds for payback, internal rate of return, and net present value. Chief financial officers are looking for quantifiable benefits that fall into one of the following categories: cost savings from reductions in operating and staff expenses, reduced network charges and maintenance from displaced systems, incremental revenue, or reduction in customer churn. Contact centers should continue to make strategic investments in projects and tools that give them a differentiator, particularly in challenging times.
Donna Fluss is the founder and president of DMG Consulting LLC, the leading provider of contact center and analytics research, market analysis, and consulting. She is the author of The Real-Time Contact Center, the 2008 Contact Center Executive, Management Briefing, and many other leading industry reports on contact center hosting, IVR, speech analytics, performance management, workforce management, surveying and analytics, and quality management/liability recording. Contact Donna at email@example.com.
[From the April/May 2009 issue of AnswerStat magazine]