The Recession's Impact on Contact Center Investments
Three years ago, DMG Consulting predicted the U.S. economy would enter a recession in 2009. While we did not anticipate the failure of the financial institutions, we expected a significant economic correction. The current situation is expected to drive many economies around the world into a serious recession. Recessions generally have a dramatic impact on the level of technology spending. DMG expects the next 18 months to be very challenging for many technology companies, including contact center vendors.
During recessionary or challenging economic times, most enterprises freeze all but essential technology investments; any investment that can be postponed generally is. Depending on the severity of the economic crisis, even investments that have already been approved could be postponed.
While the full impact of this economic downturn is not yet known, given its worldwide scope it is expected to be severe and likely to last well into 2010.
If economic patterns from the prior two recessions hold true, then investments in premises-based contact center infrastructure, which requires a large up-front capital investment, will slow significantly. However, sales of hosted contact center infrastructure for routing and queuing will grow at a compounded annual rate of 28 percent from 2009 to 2011.
The recession is going to be very kind to the hosted contact center infrastructure market. It will drive enterprises to consider hosting as a viable alternative to conserve cash and avoid making long-term commitments.
DMG also expects the current economic meltdown to temporarily slow IVR growth. But once companies lift their investment freezes, DMG predicts an increased emphasis on self-service applications to reduce operating expenses. The IVR market will benefit from the need to replace outdated and expensive-to-maintain systems with newer technology and the need to standardize technology in newly merged companies, particularly in the IVR-intensive financial services industry.
While the next couple of years are not expected to be particularly strong for workforce optimization (WFO) solutions, this technology segment is likely to perform better than many other contact center and IT sectors because most quality monitoring/recording solutions are considered productivity tools. As important, some of the individual modules that are part of WFO suites are in a high-growth phase and could continue to perform better than most other technology sectors. Speech analytics, which is just gaining mainstream acceptance, can enhance productivity, improve customer retention, and increase revenue generation. Workforce management solutions have recently been enhanced and are considered leading productivity tools in contact centers. And surveying/enterprise feedback management products are being used to give companies insight into the customer experience.
Quality monitoring/recording solutions and all of the individual modules found within the suites are now being offered on a hosted or software-as-a-service (SaaS) basis. This is a departure from the traditional premises-based, licensed product delivery model. A hosted/SaaS arrangement allows companies to implement new solutions without large up-front investments in licenses and installations. This gives cash-strapped contact center managers alternatives that they did not have during other recessions.
Many WFO vendors outperformed the market during the last recession because their solutions helped companies achieve goals that were essential during tough times. Now, with an alternative method for enterprises to acquire these products, they are again expected to outperform the IT sector and continue to grow, albeit at a slower pace.
Projects that contribute directly to an enterprise’s bottom line have a good chance of getting approved if they exceed investment approval thresholds for payback, internal rate of return, and net present value. Chief financial officers are always looking for quantifiable benefits in incremental revenue and cost savings from cuts in operating and staffing expenses, network charges, maintenance fees from displaced systems, or customer churn. Contact centers should, therefore, continue to make strategic investments in projects and tools that give them a differentiator, particularly during challenging times.
Donna Fluss is president and founder of DMG Consulting, a contact center and analytics research, market analysis, and consulting firm. She is the author of The Real-Time Contact Center
, “The 2008 Contact Center Executive and Management Briefing,” and many other industry reports on contact center hosting, IVR, speech analytics, performance management, workforce management, surveying and analytics, and quality management/liability recording. She can be reached at donna.fluss@dmgconsult.com.