IVR Market Expected to Continue Growing Through 2011

According to research by DMG Consulting, the overall interactive voice rsponse (IVR) market will grow to $2.7 billion by 2011, with renewed interest applied to hosted/managed service vendors with both inbound and outbound applications that have “reinvigorated the IVR sector with innovation, quick deployments, and cost-effective solutions with a high value proposition and rapid [return on investment].”

Among the highly competitive hosted/managed service providers driving the trend are Contact Solutions, Nuance Communications, Prairie Interactive Messaging, Tellme Networks, TuVox, Voxify, and West Interactive, according to DMG’s report.

Overall, the firm projects a four-year compound annual growth rate of 13.4 percent for the hosted/managed-inbound IVR sector and 18.7 percent for the outbound IVR segment.

At the same time, though, sales of premises-based IVR solutions are expected to decline. Organizations of all types—companies large and small, governments, higher education, non-profits, and others—that previously bypassed hosted/managed service IVR offerings are not only considering these offerings, but making commitments, the report states.

“Self-service IVR solutions are important for enterprises in good times, and become critical when budgets are tight because they are highly effective in automating interactions that do not require the cognitive capabilities of live agents,” says Donna Fluss, president of DMG Consulting. “Many of the hosted/managed service IVR providers have come to market with inbound and outbound offerings that are highly responsive to the economic and technical challenges of their customers, and this is speeding up the pace of adoption.”

The projections that the IVR market will continue to attract a lot of attention and investment dollars come as good news for the entire industry, which has seen years of relative quiet. During the first half of 2008, for example, the North American market for IVR and voice portal systems grew at about 10 percent, according to Research & Markets. And even as economies started to slow, sales of speech applications for IVR and voice portal systems were still being built and deployed in large numbers.

By midyear, though, the economic slowdown started adversely affecting sales, especially in the bellwether financial services and insurance industries. However, the demand for next-generation voice portal systems with advanced speech recognition interfaces, as well as the traditional IVR systems designs with dual tone multifrequency (DTMF) interfaces, continued to be high in 2008. Self-service applications running on these systems continued to drive their purchase and use.

“Management of operational costs to handle inbound customer contacts has been and will continue to be the most significant business driver for the creation of self-service applications as well as the sale of IVR and voice portal systems they run on,” the Research & Markets report concluded. “Proactive customer contact applications are rapidly emerging as the IVR and voice portal system’s next big growth engine. Despite over 25 years of applying technology and process improvements, live customer service agents continue to represent the majority of most contact centers’ costs.”

But while the future is bright for the IVR market, the Voice over Internet Protocol (VoIP) market hasn’t fared as well, and that is not projected to change in the short term as budget constraints apply additional downward pressure on the market.

“For 2009, we anticipate a degree of vendor volatility that will cause many customers to stay on the sidelines for a longer period of time than we would expect if downward pressure was coming only from the weakened economy,” Alan Weckel, director of the Dell’Oro Group, predicted in another report. “In the current environment, some customers will hold on to existing analog and digital lines for a longer period of time.”

Notwithstanding, VoIP penetration will continue to grow, albeit at a slower pace compared to previous years, Weckel anticipates. According to the report, Cisco Systems, Avaya, and Nortel Networks had the most IP line shipments in the quarter, but IP line shipments in general for the eight largest vendors in the market—namely Aastra, Alcatel-Lucent, Avaya, Cisco, Mitel, NEC, Nortel, and Siemens—averaged only 49 percent of total line shipments in the quarter. That leaves plenty of room for other vendors to get their feet in the door.