VoiceXML Propels Global Investment in IVRs

Interactive voice response (IVR) systems are quickly becoming a must-have for businesses looking to add another dimension to their customer service offerings, and IVR ports based on the VoiceXML programming standard are leading the market's rise to prominence. According to a study released yesterday by Datamonitor, global investment in IVR licenses will increase from $475 million in 2006 to $845 million by 2012, in large part due to the adoption of VoiceXML.

The study, "Understanding the Changing Role of IVR in Evolving Infrastructures," also concludes that this year, for the first time, the share of shipped IVR ports that are based on VoiceXML will surpass that of traditional IVRs; by 2009, 69 percent of IVR shipments will be VoiceXML-based platforms. Saurabh Virmani, a customer interactions technology analyst at Datamonitor and the report's author, explains the flexible nature of VoiceXML is propelling its rapid adoption, and consequently, the overall IVR market's increasing influence. "The primary reason [for VoiceXML's adoption] is that VoiceXML allows for desegregation of different components that go into making an IVR system, such as voice user interface, application logic, and telephony interface," he says. "[VoiceXML] allows for improved overall processing power and gives better overall performance."

Another reason for what Virmani calls the "massive exodus" away from existing IVR standards has to do with depreciation. "A lot of traditional IVR systems were deployed in the late 1990s to cope with the Y2K problem," he recalls. "So [these systems] have come to the end of the lifecycle, and a lot of companies are looking to replace their older systems with new ones."

Dollars and cents aside, Virmani also notes that, in an increasingly competitive business environment, there is a growing emphasis on quality customer service as an essential differentiator. "Businesses, particularly subscription-based ones, are not seeing much growth in terms of subscribers and they are facing increasing competition," he says. "So what they have to do right now is retain their customers, and they're looking at customer service as the best way to [accomplish that]."

The study notes that while growth in the IVR market is global, some regions will experience more growth than others. The two markets of North America and EMEA (Europe, the Middle East, and Africa) are more mature, and are undergoing more replacement/upgrade activity. As a result, these two markets will see a compound annual growth rate (CAGR) of 6 percent and 9 percent, respectively, from 2007 to 2012. The greatest growth will occur in the emerging markets of Asia-Pacific and the Caribbean and Latin America, with CAGRs of 18 percent and 14 percent, respectively, over the same period.

Virmani says within these markets, China, India, and Russia will all see major growth. "China and India make up roughly 40 percent of the world's population, so there's great opportunity there," he explains. While these countries are in what Virmani calls a "rapid growth phase" and most companies aren't wholly focused on retaining customers just yet, firms eventually will have to focus on customer retention as these markets continue to saturate.

The projected mass adoption of IVR ports, particularly VoiceXML-based ones, is fostering an increased emphasis on providing flexible options for customers to gain whatever help they need—on their terms. Virmani believes this is becoming possible with the growth of Internet Protocol (IP) telephony in the enterprise. "Most businesses are moving to an IP-centric platform, so generally they would want IVR systems to also be IP-centric."