2009 was a surprisingly good year for the WFO market. The quality management/liability recording (WFO) market continued to deliver compelling solutions and results, despite the tough economy. For the first time since the year 2000, the WFO market did not beat its prior year financial performance, yet it still outperformed most other contact center IT segments. Innovation and research and development investment were strong despite the recession.

A number of the WFO competitors had a great year in 2009. Price sensitivity drove some enterprises to consider smaller WFO solution providers, resulting in excellent sales for a couple of the newer competitors who were willing and able to respond with lower prices. But price alone is rarely enough to attract and retain customers. The winning formula for 2009 was a combination of low price and responsiveness to customers' needs. DMG expects the same two factors to be leading factors in solution selections for enterprises large and small in 2010.

Analytics is Driving Change

A Q3 2009 survey asked 107 enterprise, contact center and IT executives and decision-makers from around the globe to identify their top goals and priorities for 2010. Surprisingly voice self-service solutions (also known as interactive voice response systems or IVRs) are expected to play a key role in helping enterprises of all sizes achieve their 2010 objectives.

The top 2010 goal for enterprise and contact center executives is improving customer service. The second most important goal for enterprise executives is cutting operating costs; this is similar to the number two goal for contact center leaders, which is to improve productivity. See Figure 1. Companies where contact center VPs and leaders have aligned their top goals with those of the executive suite are much more likely to succeed in retaining and enhancing customer relationships.

Companies where contact center VPs and leaders have aligned their top goals with those of the executive suite are much more likely to succeed in retaining and enhancing customer relationships.

Congratulations. You've survived 2009, the most challenging year for business since the Great Depression. DMG expects 2010 to be a better year, and the economic indicators show that the recession has bottomed out, but we don't expect significant improvement for contact centers until Q4 2010. This is because, unfortunately, most contact centers are still cost centers and therefore less likely to benefit from quick budget relief and incremental investment dollars. The profit centers will come first, as they should.

When we consider the concept of innovation, we generally think about technology – new and beneficial systems or applications that are introduced into an operating environment. Contact center managers depend on vendors to deliver continuously improved technology, as it's an effective way to reduce their budget while improving the customer experience and service quality. Even with the recession, DMG expects to see many system enhancements find their way into contact centers in 2010, particularly emerging analytical solutions – speech and real-time analytics, customer experience analytics, desktop analytics and possibly even predictive analytics. Contact center managers all over the world are demanding solutions that are easy to implement and use, applications that are actionable and deliver rapid results; some of the vendors are actually listening and delivering.

Technology is an Enabler

Every once in a while a technology or application emerges that has the potential to “disrupt” the status quo. The Internet is a wonderfully disruptive technology that has changed and enhanced the lives of people and businesses everywhere. On the other hand, many customer relationship management (CRM) suites have been a disappointment. For many organizations CRM suites has proven to be more trouble than their worth. While the Internet has significantly improved communications for everyone, CRM suites are geared only to benefit enterprises and their customers.

Unified Communications Enters the World’s Business Stage

Unified Communications (UC) is a term that’s been around for more than 15 years. Now it’s being heralded as the next disruptive technology. UC is a technology framework that helps organizations provide a standardized user interface and user experience across multiple applications, devices and channels. It integrates real-time and non-real-time communications services. The real-time communications services include: Internet Protocol (IP) telephony, presence, call control, speech control, instant messaging (IM)/chat, and conferencing (voice and video). The non-real-time communications services include: voicemail, email, SMS and fax, also known as unified messaging.

The interactive voice response (IVR) market has come back to life, driven by the need to automate inquiries that do not require the assistance of live agents. Both for-profit and non-profit organizations appreciate the value of providing live assistance when necessary and possible, but when live agents are not practical or cost effective, a well-designed voice self-service application may be the next best option.

Few technology sectors regain their momentum, but the IVR market has. This sector is growing on the strength of new applications and product innovation from the highly competitive hosted/managed service providers.

IVRs are Mission-Critical

The ongoing recession has sped up the pace of adoption and has infused life into the hosted/managed service IVR market.

With so much attention being focused on the recession, we risk losing sight of important enterprise goals and what can be achieved even in challenging economic times. Times are tough and could very well be the worst they have been in the United States in the last fifty years—we'll leave it to the forensic economists to tell us just how bad this economy was, after we survive it. Managers can sit back and wait for the hard times to pass, as many are doing; or they can treat the economic challenges as an opportunity to advance the objectives of their company and, in doing so, build their own careers.

It's much easier to sell to someone who has already initiated contact with the organization.

This recession could be very good for contact centers, as was the case during the last US economic downturn in 2000. At that time, some of the more innovative managers in sales and marketing departments reached out to their peers in contact centers and asked for their help in the effort to meet revenue generation and customer retention goals. They reasoned that it's much easier to sell to someone who has already initiated contact with the organization (even if it's to ask an unrelated question) than to have to first contact someone before trying to sell to them.

A fundamental truth in the business world is that competitors are always looking to steal your customers, and many customers are on the lookout for a better deal. Customer attrition rates range from seven percent annually in some industries with high exit barriers, like banking and insurance, to nearly 40 percent in the mobile phone industry. Slowing the customer "churn" rate by as little as one percent can add millions of dollars to any sizable company's bottom line. As it's a great deal more expensive to acquire customers than to retain them, an effective customer retention strategy is crucial to a company's success.

...many mobile phone providers must now reinvent themselves in order to shift the focus of their corporate culture to providing an outstanding experience and retaining customers.

Mobile phone service is viewed as a commodity by customers all over the world. As is often the case for a new market, cell phone providers have concentrated on customer acquisition at the expense of service quality and retention. This has created a buyer's market where customers are motivated to get the best deal possible during the sign-up or contract phase of their relationship with a carrier. The majority of customers are open to changing carriers to reduce monthly fees, increase their number of minutes, or to receive a better phone.

A global Internet service provider had a major customer retention problem. The company had spent years looking for a process or system to reduce customer attrition, but no solution worked. The ISP still did not have a good handle on the reasons why its customers were closing accounts. And, therefore, the organization's leaders could not fix the problem.

In 2006, executives decided to conduct a three-month trial of speech analytics to see if they could find actionable insights that would help them curb attrition. The company analyzed a small portion of its call recordings: 25,000 hours of call-center audio—or 150,000 calls.

Managers were surprised by what they learned from the speech analytics application. For the first time, they were able to precisely identify the reasons why customers cancelled their accounts. While some of the reasons were expected, others were totally unanticipated.

Executives at the ISP learned that the company's technology platform and fundamental service issues were a large part of its problem. Once they began to address these issues, their retention rate increased for the first time in many years.

The QM/recording market is poised to have its best year ever in 2006, as vendors are putting a substantial portion of revenue toward research and development and users are buying at a brisk pace. Investment dollars are being used to extend the value of QM/recording solutions, as well as to add new features to existing suites. As a result, end-users have a lot of good choices when selecting an application, whether for the first time or as an upgrade.

A number of factors are driving the surge in QM/recording sales. Strong economies in the United States and abroad have contributed to market expansion. Investments in QM/recording suites have also increased because of companies' willingness to initiate or refresh these solutions to enhance the customer experience. A third trend driving the market's anticipated record sales is VoIP recording, sales of which more than doubled from 2004 to 2005; the market for these products is well on its way to exceeding these results in 2006.