Hosted and Managed Speech Services in North America Poised to Be $845 Million Business by 2009

North America's $458 million hosted and managed speech services market is tipped to exhibit an aggressive 15 percent year-over-year growth rate through the next four years.

This is according to a new report from independent analyst firm Datamonitor. The report, "Voice as a Service," says growth is being spurred by two key factors. From the vendor perspective, a saturated hosted/managed DTMF market is forcing hosted IVR providers in North America to sharpen their focus on speech services to arrest the precipitous slide of their revenues and create new revenue streams.

In tandem with this, smaller providers that specialize in hosted speech services are gaining greater momentum and credibility among enterprises and service providers. As a result, a number of businesses are choosing the hosted/managed services model over the premise-based model to leverage the benefits of speech without having to put forward the heavy upfront costs for a speech solution. In addition, enterprises and service providers are realizing the ROI and customer service improvement benefits that come from speech, which is helping drive investment in speech solutions.

Spending on hosted speech services will almost double to reach $845m in North America by 2009.
In 2004, North American businesses spent $419 million on hosted speech services. Datamonitor predicts this will grow to $845 million by 2009.

"Businesses are engaging in hosted/managed speech services over premised-based services to minimize cost, time and risk for speech application development, tuning, expansion and of course deployment," said Daniel Hong, voice business analyst at Datamonitor and author of the study.

The vertical markets that have traditionally outsourced customer care functions, financial services and communications, are also outsourcing IVR functions to hosted IVR providers. While these verticals will continue to account for more than 50 percent in terms of revenues and IVR port usage, healthcare, public sector and travel and tourism are also exhibiting a strong uptake in hosted IVR services.

Spending on hosted DTMF services will gradually decline to reach $1.4 billion by 2009 Basic, hosted proprietary DTMF applications provide effective routing and self-service capabilities to businesses. However, the North American market is saturated. This has meant increased competition and inevitably led to downward pricing pressure. Datamonitor expects this will result in a decrease in spending on hosted DTMF services by an estimated $100 million from 2004 to 2009.

"Hosted/managed speech will gain greater visibility in the market as more providers embrace these services to drive greater revenue," says Hong. "The next five years will certainly witness strong enterprise demand for the hosted/managed services model as speech has become a commercially viable cost reduction and customer service improvement mechanism. Hosted/managed speech services avert the heavy upfront cost which thus far has deterred many businesses from implementing premise-based speech solutions."

The report, "Voice as a Service," concentrates uniquely on the North American hosted speech and DTMF markets. It sizes the hosted speech and DTMF revenues and port capacity across traditional IVR, Voice-XML and SALT platforms.  Vertical markets and major competitors in the North American market are also analyzed and discussed. And finally, strategic recommendations are provided to help guide investors in where to best target market development investment, and how to beat the competition. 

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