Workforce optimization (WFO) remains a stellar performer in the contact center market; it’s an IT sector that performs well in good economic times and outperforms most contact center segments in sluggish times. The reason: Most WFO applications have proven value and, when implemented properly, yield significant and quantifiable results for companies. This underscores one of the sector’s challenges, though: getting organizations to properly apply and use the applications that make up WFO suites. 

Last year was yet another good one for the WFO market; total company GAAP revenue for the WFO market reached a new all-time high of $3.7 billion, an increase of 12.5 percent from $3.3 billion in fiscal 2013. A large percentage of this growth, though, can be directly attributed to Verint Systems’ acquisition of KANA, a CRM and email response management vendor, in February 2014, at the beginning of its fiscal year. This acquisition contributed approximately $150 million to the top-line revenue of the WFO market—none of it directly attributable to WFO activities. The KANA acquisition ended up being the only notable purchase for WFO vendors during the year. NICE Systems did not respond with a similar acquisition, although there were other mergers and acquisitions, such as inContact’s purchase of stand-alone WFO vendor Uptivity in May 2014, and Mitel’s purchase of OAISYS. 

Organic growth in the WFO market in 2014, then, was relatively small. NICE and Verint both did reflect organic growth in their numbers. Since NICE made no acquisitions during the year, 100 percent of its growth between 2013 and 2014, $62.3 million, was organic. In Verint’s case, about $71.1 million of its growth was organic (derived by subtracting the $150 million estimated to have come from the KANA acquisition from its increase in annual revenue during the year). Organic growth is valuable because it is typically sustainable from year to year; acquisitions are one-time events. 

What’s in Store for the WFO Market

The WFO market has reached middle age—growth in its two core and very established sectors, contact center recording and quality assurance/quality management (QA/QM), has slowed. But WFO vendors are not sitting back and accepting the typical fate of maturity. Instead, these vendors are investing in their core solutions, both to improve them and deliver innovation to the market. With recording solutions, this means vastly enhanced recording capabilities with a significantly lower total cost of ownership and increased dependability. With QA/QM, it means the introduction of analytics-enabled QA solutions, which have the potential to revolutionize the world of QA if the vendors can convince companies to take the plunge and move away from their well-established and proven QA methods and systems. 

For the WFO market, investments in recording and QA/QM are just the beginning. The vendors continue to spend on new features and functionality to enhance the customer experience and overall customer journey. There are also growing investments to address the needs of back-office and branch operations. The opportunities are huge for vendors that can convince end users that investing in these areas is critical.

Outstanding Customer Experience Remains the Top Goal 

In a January 2015 worldwide benchmark study by DMG, enterprise executives and managers identified their top goal: the delivery of an outstanding customer experience. The question is whether companies will invest in their service organizations to achieve this goal, or if it’s just talk. Based on the first-quarter results from WFO and other contact center vendors, it appears as if executives are ready to make investments in service-related products and services—as long as they believe they’ll see a positive return on their investment. The challenge now for WFO and other contact center vendors is to do more than simply implement their solutions—they are under great pressure to implement quickly and cleanly while also helping customers prove the value and benefits of the solution to the rest of the enterprise. If the vendors and companies succeed, it will be a great win for the market, as enterprises will deliver better service and support, making their customers happier, which will in turn convince companies to make even greater investments.

Great Market Potential for Back‑Office and Branch Operations

DMG research has found that, based on an analysis of U.S. government numbers, back-office personnel are 2.6 times more numerous than front-office personnel. Although DMG has not found a good source for branch employee numbers, adding these workers to the mix increases the addressable opportunity for sales of back-office and branch WFO solutions. 

Front-office WFO vendors are actively pursuing back-office and branch opportunities, and after years of struggling to make any headway with these sectors, they’re finally seeing progress. Sales of back-office and branch workforce management (WFM) solutions grew by 16.1 percent, from $33 million in fiscal 2013 to $38.3 million in 2014. While these numbers are small compared to the $281.7 million that WFO suite providers earned from selling WFM solutions to contact centers during 2014, it’s still a notable improvement over previous years, and an indication that enterprise executives and operations managers are starting to adopt these essential and high-value applications. But if WFO and WFM vendors want to really open up the back-office and branch WFM markets, they need to significantly increase investment in these areas. DMG expects to see continued research and development investments in WFM and WFO solutions for back offices and branches during the next five years. 

What’s Happening with Analytics

Leading WFO vendors continue to push sales of their new analytics capabilities, yet the revenue numbers for these WFO sectors remain small. During 2014, sales of speech analytics, the most talked-about analytics solution on the market, were $147.2 million, up only 7.8 percent from the year before. Sales of contact center performance management solutions continued to be slow, accounting for $73.8 million in revenue in 2014, an increase of only 4.4 percent from 2013. Desktop analytics, one of the newer high-value analytics capabilities, posted revenues of only $44.6 million. The market potential for these applications remains high, but vendors are struggling to convince companies to buy them. 

The new push in the market is for customer journey analytics. It’s a great concept—helping organizations capture and evaluate data points throughout a customer’s life cycle. While there is a great deal of talk about such solutions, the products available thus far have limited capabilities—and usefulness. Most of the supposed customer journey analytics solutions can handle only one or two channels, which provides only a partial view into enterprise performance. But the vendors in this area are making substantial investments and are moving the market in the right direction. DMG expects to see ongoing investment and innovation in the area of customer journey analytics during the next few years, which should result in high-value, beneficial solutions that enterprises will want to use. 

What’s Next for WFO?

DMG expects the WFO market to continue to outperform most of the contact center sectors, just as it has for the past 15 years. The question is, how will this be accomplished? It remains to be seen whether NICE will respond to Verint’s acquisition of KANA in kind or move in a totally different direction. (It’s a given that NICE will respond to the KANA acquisition in some fashion by making one or more acquisitions, if only to realign its revenue with Verint’s.) Vendors will continue to push sales of their new analytical capabilities, and DMG hopes that vendors improve the integration among their solutions’ many modules to allow customers to realize the benefits of fully integrated suites. Sales of back-office and branch WFO and WFM, in particular, are going to pick up momentum, although the pace of adoption would be increased if the solutions were better targeted for their specific needs. And amid all this innovation, look for the WFO vendors to continue to make investments in their core recording capabilities, as this fundamental functionality is still the foundation of their suites.  

Donna Fluss (donnafluss@dmgconsult.com) is founder and principal of DMG Consulting, a provider of contact center and analytics research, marketing analysis, and consulting.