The 2019 Customer Interaction Management Landscape Part 1: Market Shifts
Image credit: Shift in the playing field by Ranganath Krishnamani, rolling tire
Contact Center Week took place last week in Las Vegas. It is one of the largest events focused on customer service and customer experience and a perfect opportunity to refresh my industry landscape. A lot has happened since last year's update. Several trends have accelerated and are provoking significant market shifts.
Overall, the industry is enjoying a renaissance. The strategic role of customer service for defining the customer experience seems to be finally recognized. It is driving more investment. The heated market has attracted a hundred new companies, propelling the number of participants to an all-time high of 750. New fundings reached $3.3 billion, up from $2 billion in the previous 12-month period.
The Self-Service Front Door
I have been discussing the concept of self-service becoming the “front door” to customer service for many years. It is now a reality. Interactive Voice Response (IVR) systems front end 85% of voice calls. Bots and Assistants are increasingly front ending digital inquiries. The massive increase in the volume of interactions was the straw that broke the camel’s back: it can only be addressed by leveraging self-service and automation.
The number of Virtual Customer Assistant (VCA) providers is nearing 100. The influx of new entrants is further stimulated by technology giants, Amazon, Facebook, Google, IBM, and Microsoft making their AI technologies widely available. However, scaling conversational AI remains harder than most anticipated and few vendors can show references easily replicable.
Challenges with conversational AI spun out a group of vendors offering Answer Bots. Answer Bots use simpler unsupervised learning to find answers to questions in a knowledge base. They only attempt to respond if they have a high level of certainty. They don’t provide the natural language experience of VCAs but offer an effective solution for some use cases such as support. Knowledge, critical for both assistants or bots, keeps on being difficult to capture and maintain, and an issue sitting at the crossroads of people and technology.
Cloud It Is
Last year saw the market shifting in its acceptance of the cloud. There is now a broad consensus among companies of all sizes that they should move to the cloud. If packaged cloud applications are already preferred for new deployments in the lower-end segments, they are not yet the default for the upper end of the market. Large enterprises are looking for transition paths and more customizations.
The shift to the cloud has created a vendor gold rush. I am now listing 120 providers of contact center software, almost all offering a cloud solution. Two elements are contributing to the market shift. First, the historical leg up that incumbent providers had has been significantly dampened. Second, the industry, that used to comprise mostly contact center veterans having cut their teeth on telecom, has many more people coming from different horizons. It has shaken up established certainties and brought new approaches to the market.
Analysts estimate the cloud penetration to be still modest, between 10 and 15%. But the segment is growing rapidly at a 25% annual rate. With so much in play, investors have been flocking to fund new Contact Center as a Service (CCaaS) providers. Despite these ideal market conditions, few vendors are profitable. As the industry reaches higher levels of penetration, the growth will slow down and investors will start asking for a path to profitability that will be challenging for many.
The massive shift of interactions to automation and self-service has a side effect. It is disintermediating brands from their customers. Businesses are turning to proactive notification and engagement to offset it. Proactive Engagement is also a great way to improve the customer experience (CX). Eventually, notifications can be leveraged to avoid unnecessary inbound calls.
There are many intricacies and privacy regulations impacting outbound. It is also getting more difficult to reach out to customers. In a world plagued by robocalls, fewer are taking calls from numbers they do not recognize. The number of Proactive Engagement specialists has grown from 25 to over 40. Besides, we are seeing the emergence of authentication and security solutions to make calls more trustworthy.
Digital is blossoming
There is no shortage of point digital solution providers. Every digital channel has unique characteristics. Point solutions that make the most of them and simplify how businesses can activate and be present in a specific channel remain attractive for many organizations.
Over the years, several players have expanded their rosters of supported touchpoints to include all digital channels. These Digital Customer Service solutions are experiencing traction with small digital-first organizations and digital departments of larger ones, often separated from call centers. An increasing number are integrating with voice using CPaaS. These integrations let you deflect voice calls to digital channels to better “shape” the traffic mix. They also enable escalation of important or difficult interactions to live calls, allowing a “white glove” treatment of these high-value moments. The category is vibrant and becoming a solid contender to become the system of reference for digital businesses.
I am a firm believer that messaging will not only become a prominent channel but is also transformational. Applications such as Facebook Messenger, WhatsApp, or Apple Business Chat are starting to be supported. Both SMS, albeit old technology, and mobile in-app are growingly being leveraged to offer messaging experiences. The major shift is the reinvention of live chat. Several providers have made chat asynchronous, allowing a customer to pause and resume the conversation later. Combined with bots, these solutions are addressing the frustrations of long wait times and the difficulty of getting to a knowledgeable person that have plagued this channel.
CPaaS Continues to Rise
Communication Platform as a Service (CPaaS) is evolving in two ways. The historical use case of communication-enabling customer journeys and applications continues to be very appealing to organizations of all sizes. It is fueled by digital transformation projects. It is still the primary engine behind the hyper-growth of CPaaS providers. It propelled, in particular, Nexmo and Twilio revenue run rates to $250M and $750M respectively, making them key players of the space.
With Flex, Twilio introduced highly customizable components that can be put together to assemble a contact center. This approach has a lot in common with Amazon Connect. The cloud giant offers contact center as an extension of its cloud platform with native integrations to many cloud services such as Amazon Comprehend or Personalize for AI.
This assembly approach is attractive to companies that want rich integrations with other applications or are looking to get the most out of their cloud infrastructure, in particular for data manipulation and AI. Solutions can be customized without compromising on speed or agility. It is interesting that both companies often use the verb “build” for their solutions. They are poised to play a more important role for enterprises looking at transitioning their contact center to the cloud.
It is hard to summarize all these shifts in one article. Part 2 will cover analytics and how the stack is getting integrated with other enterprise applications and digital processes. Stay tuned...