Generative AI has dominated the headlines in 2023, but at the core of all contact experience operations remains the contact center platform. The contact center platform market has been undergoing a transition from dedicated platforms that are owned and operated by businesses themselves to multi-tenant (also known as contact center as a service (CCaaS)), or dedicated cloud-based services.
CCaaS holds the promise for revenue growth as organizations migrate to the cloud. However, a measurable number of companies will stay with their on-premises platforms for the foreseeable future. Both cloud and on-premises platforms have their advantages, depending on the customer’s goals and existing infrastructure. Some companies simply use a hybrid approach and have adopted a secondary architecture (i.e., on-premises at the headquarters, and cloud for remote or home workers).
In Metrigy’s Customer Experience MetriCast 2023 market forecast study of roughly 1,700 business worldwide, 32% of businesses utilizing a contact center platform are doing so with CCaaS, 42% with platforms owned and managed by business residing either on-premises or in the cloud, and another 21% using custom built platforms that are hosted and managed by third parties. This matches up with the counts from vendors on installed base of agent seats between CCaaS and company-owned platforms.
Pricing models have evolved over time, with vendors offering subscription-based models versus the traditional capex, one-time payment. However, one-time payment with annual maintenance contracts is still the most commonly used option. Forty-seven percent of businesses using contact center platforms use a capex model, purchasing systems and perpetual licenses and then paying annual maintenance contracts. This is in-line with 42% of businesses that utilize dedicated third-party platforms on-premises or in a cloud environment. Maintenance and support cost is typically 15-20% of the original purchase price, paid annually. Maintenance costs for older platforms have gone up as parts become harder to obtain.
There are a significant number of CCaaS providers, global and regional, with varying levels of capabilities, all vying for the opportunity to flip the installed base of company-owned platforms. On a regional basis, CCaaS has its largest installed base in North America with 37% of businesses with contact centers but growing in usage in other major regions. Privacy concerns and restrictions around public cloud services has dampened CCaaS uptake outside of the U.S.
There is also significant upside potential for CCaaS providers to migrate roughly 8 million seats to their services. Companies spent $5.6 billion worldwide on CCaaS solutions in 2022, up 30% YoY and projected to grow to $9.7 billion by 2027.
Based on 2022 CCaaS revenue, NICE is the market share leader, followed by Genesys and Five 9. Other top providers include 8x8, AWS, Cisco, Content Guru, Dialpad, Sprinklr, RingCentral (with NICE), Talkdesk, Twilio, UUJET, Vonage, and Zendesk; and then there are emerging providers including Microsoft and Zoom (which we wouldn’t discount). We expect the top three providers to continue to lead the market in 2023 but with pressure from those right below toughing it out competitively to win new deals.
Metrigy’s study found that for companies evaluating CCaaS providers, the number one driver is cost savings, followed by a lack of AI capabilities with a current platform. The demand for new, enhanced capabilities around AI, workforce optimization, workflow and marketing automation, and other areas will continue to drive businesses to CCaaS for the ability to have the latest capabilities without having to undergo large scale upgrades. Additionally, with all “as-a-service” platforms, the flexibility to scale agent seats up and down to meet customer service demands and tying that to an expense model is a big draw for CCaaS.
CCaaS solutions are used by a variety of companies but have proven popular with smaller businesses as these services have opened access to tools that have historically been out of reach. CCaas is the perfect solution for smaller businesses to have a contact center platform without large upfront costs.
For larger businesses that have invested heavily in their own managed platforms, it can be difficult justifying scrapping a system, in the near-term. However, larger businesses that are making the transition, typically have older platforms that may no longer be supported by the original vendor and/or don’t have the ability to easily bolt on new and enhanced capabilities such as conversational AI, workforce automation, and visual engagement. With larger contact center operations moving to CCaaS the timeframe from RFP to full deployment can stretch out in years. Looking out over the next 5 years there is only growth potential for CCaaS with the large installed base of agent seats still sitting on dedicated, on-premises contact center platforms, even if larger deployments take years to deploy.
