The Future Is Bright for the CCaaS Sector

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The contact center-as-a-service (CCaaS) sector remains one of the fastest-growing in the contact center technology market, a trend DMG Consulting expects to continue for the next few years. An influential driver of this sector’s growth is the expanding footprint of these platforms, which increasingly include many workforce engagement management (WEM) applications and intelligent virtual agent (IVA)/conversational artificial intelligence (AI) self-service capabilities. Enterprise customers continue to pressure CCaaS vendors to provide a broader offering of contact center applications to reduce the necessity of integrating disparate solutions. Expanded CCaaS platforms have altered the WEM competitive landscape, as the majority of this IT sector’s revenue now comes from CCaaS vendors.

The number of CCaaS seats and revenue per seat are both growing rapidly. Increased seat adoption is driven by many first-time customers, including larger on-premises contact centers that have finally begun their migration to the cloud. Growth is also impacted by companies adding seats, successfully demonstrating the effectiveness of the “land and expand” strategy used by many of the competitors in this market. And while it doesn’t contribute to seat growth, many companies are transitioning from one CCaaS vendor to another as they search for more reliable, secure, and feature-rich offerings.

Both traditional and generative AI technologies are influencing CCaaS adoption. Vendors are incorporating AI throughout their solutions, including in core routing and queuing components, to increase their value and “stickiness” to organizations. Adding AI to CCaaS enables previously unimaginable practical innovations that benefit customers, employees, and the companies making these investments. AI-enabled solutions such as IVAs, real-time guidance (RTG), and post-interaction summarization are empowering service and sales organizations to transform customer and employee experiences.

Consumers are making their expectations known, including their preference for self-service and digital channels. While some of the CCaaS vendors have been slow to support a wide range of digital channels, nothing is going to stop the demand from customers. Calls are not disappearing, but the fastest-growing CCaaS seat segments are omnichannel and digital. Furthermore, while more than half of today’s seats are voice-centric, the rapid demand for digital support is going to change that during the next five years as companies continue their digital transformations.

With more than 200 CCaaS competitors coming from many different IT segments, this crowded market is primed for consolidation. The vendors are not in a rush to purchase each other or be purchased, as they can be profitable with as few as 20,000 seats. But the CCaaS market is maturing, and the vendors are being stratified. The leaders are making themselves known, based on product differentiation and breadth, market share, the pace of innovation, and service quality. The second tier of CCaaS players are contenders that are investing in innovation, even if they do not yet have the full functionality and scale of the leaders. Then there are waves of smaller vendors that customers find compelling, if only because they are inexpensive.

In addition, over the past couple of years, some noteworthy technology companies, specifically Amazon, Google, Microsoft, Salesforce, Zendesk, and Zoom, have entered the CCaaS market, if only to protect their customer bases. Much of the impetus for this can be attributed to their ongoing fight for ownership of the employee desktop. Regardless of their reason for entering, they will impact the trajectory of the CCaaS market, as they can reach audiences who did not previously consider using these solutions.

The CCaaS market is fast-paced and exciting, but it’s not without its challenges. The unified-communications-as-a-service (UCaaS) vendors are causing confusion as they fight to retain their dominance over corporate and knowledge workers, who have not traditionally required advanced CCaaS capabilities. From a practical (and cost) perspective, corporate employees need only one communications tool. When CCaaS is sold on a consumption basis for low-volume users, it may be as cost-effective as a UCaaS offering, yet it can include functionality such as transcription, voice biometrics, recording, quality management, interaction analytics, surveying, workforce management, real-time guidance, and more.

Great progress has been made in improving CCaaS uptime, reliability, and security since many competitors rely on high-performing public data centers. Concerns regarding system outages, which most CCaaS vendors experience on occasion, still prevents some larger and public companies from transitioning their contact centers to the cloud. As more CCaaS vendors deliver a reliability level of 99.9 percent and commit to financially backed service level agreements, they are convincing the holdouts to migrate to the cloud. However, DMG expects about 20 percent of voice and omnichannel contact center seats to remain on-premises for the foreseeable future.

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. Fluss can be reached at donna.fluss@dmgconsult.com.

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