A new report from Everest Group indicates that global contact center clients are looking for more than cost savings based on labor arbitrage. Instead, customers want to deepen their partnerships with service providers in order to find greater value in areas such as customer retention, analytics, and non-voice channels, particularly social media. “We are finding that the scope of services in a contract is expanding quite a bit to include more value add,” says Katrina Menzigian, vice president at Everest Group and the report’s author. “Along with performance management, customer retention, and analytics, clients are also looking for subject matter expertise.”
The Everest Group report – which was based on the research-firm’s database of hundreds of third-party contracts, as well as direct coverage of more than 20 service providers – concluded that the global market for Contact Center Organizations (CCO) grew between 7% and 8% in 2012, hitting $65-70 billion. This reflects a steady rise from the lows of 2009. “We are seeing renewed interest in drawing business value from the customer care operation, and we directly attribute this to the improving economic conditions since the crisis in 2009,” says Menzigian. “Things are shifting from an emphasis on cost takeout toward CCO being an area of strategic investment.”
Pricing Models Mature
Everest Group estimates global contact center spend to be in the $300-350 billion range, with about 20% of that represented by third-party outsourcing. But despite the steady move upward since 2009, Everest Group reports that the last few years have seen a reduction in deal sizes. This has been occurring along with demand for more flexible pricing models. “We have seen significant growth in pricing models that look beyond headcount,” says Menzigian. “These might include fixed fees for a value-added service, or they might be transaction-based.In this context, hybrid pricing is emergent.”
In fact, in the 2010-2012 period hybrid pricing accounted for 34% of the pricing structure in CCO contracts, up from 12% in the 2008-2010 period. By comparison, over the same period exclusively transaction-based dropped from 19% to 11%, and fixed fee only from 12% to 6%.
Building new capabilities
The challenge for some service providers is that many value-added areas, including analytics, social media, and industry-specific customer retention, are outside of their core competencies. Getting these capabilities in place will be crucial for those CCOs wanting to maintain – and build – a competitive edge. “Clients and providers are now engaged in more detailed conversations on business outcomes, and how to achieve them,” says Menzigian. “That is a different conversation than simple cost control in a particular product portfolio.”
To address the demand, Menzigian says that service providers are now working to develop and deepen their talent in high-demand areas. And they are doing this while keeping an eye on global industry trends. For example, although telecom and financial services are the main adopters of CCO, Everest Group is seeing high growth in industries such as travel, hospitality, and retail. And as customers demand more value, it is incumbent on providers to invest in technology.
“Service providers areproactively making investments in technology,” says Menzigian. “The technology has been developed in house, or it might have been acquired, or offered by a partner.”
There are many examples of companies making investments in analytics capabilities. Alorica developed a unique dashboard view for instant snapshots of key performance indicators (KPI). HP can go after big data – structured or unstructured – thanks to its 2011acquisitions of Vertica and Autonomy. NCO has developed a web-based software tool for pattern recognition. TCS, thanks to its Innovation Labs, has powerful proprietary software for real-time language analysis. WNS has its own speech and text analytics tool. And Xerox has predictive analytics technology that, it claims, can reduce call loads by 15%.
“At this point predictive analytics is a formative area,” says Menzigian. “Companies are fairly comfortable recording analytics, buteven that can be a challenge. And then to get from predictive to prescriptive analytics is quite a big step – it requires investment in pulling together various data sources so that there is enough input for a predictive model.”
The Voice of Change
Not surprisingly, the Everest Group report found that the CCO channel mix was dominated by voice, which accounted for approximately three quarters of revenue. Non-voice was mostly email, but social media is growing quickly as a source of data on consumer behavior. Providers know this, and have been making significant investments.
“Social media is very much a frontier,” says Menzigian. “All of the service providers are trying to identify where they should be playing in this space. They will often refer to social media, but from different angles. Their own clients are also trying to figure out what to do.”
The Everest Group report found that social media grew at 90% to represent 10% of the non-voice channel, but these numbers are still very small. In 2012, non-voice was only 14% of the total, with voice at 86%. This compares to 11% and 89%, respectively, in 2011.
“Service providers have the opportunity to be thought leaders in this area,” says Menzigian. “But, practically speaking, it requires creating a tree of linkages between data sources – you have to decide what to link, and what to consolidate. Then you have to do the work to allow for the analysis.”
The Everest Group also had some interesting findings on the language front. European languages represented 25% of the global total, and within that group Spanish was by far the largest, at 37%. As well, Latin America has 11% of the global market and is growing at 7%, with Everest Group expecting “robust growth” in the future.
“Spanish is spoken across such a large geography,” says Menzigian. “We expect to see growth in domestic markets in Latin America, as well as demand from the US and Europe.”
Next up for Everest Group is more detailed research in the technological capabilities of service providers. This most recent report found that among CCOs technology is the leading investment theme, followed by expansion in scale. No doubt, future research and analysis will shed light on how social media and other emerging technologies are being used to deliver competitive advantage.