The 2015 State of the Speech Technology Industry: Contact Center Outsourcing
While the majority (77 percent) of contact center operations are still being performed in-house, outsourcing of those services has been gaining momentum in the past few years, according to research firm Information Services Group (ISG).
That growth was topped in 2013, when the global contact center outsourcing market grew 7 percent to reach nearly $75 billion, according to additional research from the Everest Group.
Everest Group's research highlights several growth factors, including some companies doubling their annual contract value, which it attributes in large part to the value-added services being written into new contracts. The inclusion of value-added services, Everest Group said in its 2014 annual contact center outsourcing report, has almost doubled in six years, from 48 percent in 2008 to its current level of 81 percent.
As another sign of how much the industry has grown, Sitel, a contact center outsourcing provider with more than 56,000 employees in 23 countries, was on pace to hire more than 11,000 new agents in 2014. Convergys, which employs 125,000 agents in 31 countries, is also in the midst of a major growth spurt. The company added 15 large clients and expanded business with 16 of its top 20 clients in the third quarter of 2014 alone. Paris-based Teleperformance, by far the largest contact center outsourcing provider, with more than 175,000 employees in 62 countries, was expecting revenue increases of more than 9 percent in 2014. West, which employs more than 25,000 agents in the United States, Mexico, Jamaica, and the Philippines, was expecting about 7 percent revenue growth.
New Business Booming
And the good news for the industry doesn't end there. Nearly one-third of tech firms had budgeted for new or additional contact center outsourcing projects in 2014, or are planning to do so this year, according to research from the Technology Services Industry Association (TSIA).
That, says John Ragsdale, vice president of technology and social research at TSIA, "is a good proof point that companies are doing a better job of understanding core versus context and identifying new opportunities for strategic partners."
As the ink on those contracts dries, though, the nature of many of the contracts themselves has changed in many ways. For one, businesses are eschewing the large, bundled service agreements of the past in favor of smaller, shorter engagements with more specialized service providers, ISG reports.
Clients are also becoming more open to new outsourcing models, including onshore/offshore ratios, and to different pricing structures, especially those that offer elasticity, the firm found.
Contact center outsourcers are also now in a better position to capture more business. "With so many business budgets for contact center applications still shrinking or staying flat, contact center outsourcers are now able to come out and say, 'We can do your front-line work for you and provide strategic data about it, and do the things you are not able to do in-house,'" says Peter Ryan, principal analyst for the IT services market at Ovum.
And while, as of last year, there were roughly 4,000 contact center outsourcers in North America, industry consolidation seems almost inevitable, according to many experts.
This year will see a lot of "targeted acquisitions to boost presence in specific vertical markets and geographies and to add capabilities," Ryan predicts.
Convergys' acquisition of Stream Global Services in January 2014 for $820 million "set the tone for everybody else," Ryan says.
The acquisitions spree has already started. A week into 2015, Alorica acquired several of West's agent services businesses for $275 million. In 2014, these businesses represented approximately $580 million in revenue.
The acquisition broadens Alorica's product offerings and market reach and enhances its delivery capabilities. Alorica projects $1.2
In our first State of the Speech Technology Industry issue, we reveal the latest trends and developments in eight market categories.