Tag: CX

Defining Software Value: Precursor to Successful Investments and Budgeting Decisions

Measuring software value in a standardized way is not easy, but it’s critical to making good investment and budgeting decisions. While defining “value” might be a nebulous concept, our value benchmarking framework can help provide clarity. Learn how to value a software product in this blog.  

How to value a software product 

It has been said a software product’s real value is not defined by the needed functions or required user stories but rather by the performance improvement customers can get from using the product. Stated more simply, value is what the customer really wants and what they are happy to pay for. However, like beauty, value will always be “in the eye of the beholder,” and it tends to be subjective.

Still, finding a tangible way for all business and IT stakeholders to visualize software value to make meaningful investment decisions is imperative. To measure the value delivered by a software product in a standard way, enterprises need to gauge the incremental improvement in efficiency (effort reduction, quality improvement), stakeholder experience (customer, partner, employees), and trust (security, compliance, ethics).

Measuring software value in a standardized manner is an onerous task

Software development is only successful when the value delivered by the product goes beyond the overall investments and helps solve business needs. However, both revenue and investment effort/cost occur over time. While effort or cost is easier to track and forecast, enterprises are still not clear on how to effectively track and measure a software product’s value.

Enterprises face multiple challenges in defining and measuring the tangible value delivered by software products in a standardized manner. This is because of the disparity in multiple aspects like software type, the number of users, type of users (internal versus external), automation extent, the talent required, etc. It becomes increasingly difficult to formulate a framework that can be applied to all these software types while accounting for the different metrics/KPIs used to track value.

Software value and portfolio-level strategy

Though difficult, regularly tracking value is necessary to determine investments. The two most common metrics adopted are revenue impact (for direct value delivered) and incremental brand equity (for indirect value delivered). While revenue forecasting is somewhat difficult, brand equity calculations are even more complex, and enterprises typically use external marketing agencies to measure brand-equity impact.

Every software product also has a north star metric that defines its success and future investments. For example, the north star metric for Netflix is watch time. However, product budgeting decisions are not so simple.

Everest Group has developed a value benchmarking framework based on its work helping a leading enterprise client solve the software product value equation by assessing and building best practices for defining, measuring, and fine-tuning software value, resulting in more efficient investment decisions.

Let’s first understand how product portfolio decisions are made with the help of our value benchmarking framework.

At a portfolio level, products are categorized into core capability, aimed at bringing incremental revenue, and purpose-led products focused on building sustainable relationships. Objectives and Key Results (OKRs) are defined top-down and then product teams define the feature pipeline to meet those OKRs. Product differentiation, value chain (market) presence, and portfolio synergies are evaluated next to understand product value. Some advanced enterprises have started practicing value stream mapping to optimize the effort spent, eliminating non-value-added activities.

But how is the ideation done? Product ideas are derived from four key distinct sources:

  • Coming up with ideas internally and scaling team-level initiatives
  • Capturing trends through partners and market shifts
  • Aligning with the market and capturing CXO inputs
  • Resolving customer pain points

Product value framework

The below graphic can be used to visualize an approach to defining product value. Product viability is a direct measure of whether to invest or not and answers the basic question of Return on Investment (RoI.) If the incremental revenue and positive brand equity impact are tangibly greater than the effort needed, then going ahead with the investment makes sense.

The other dimension, product impact, is the outcome the product delivers in efficiency upliftment, experience improvement, and trust. However, it is worth noticing that impact parameters like efficiency, experience, and trust are used reversibly to make product viability calculations and vice-versa, as indicated in the below graphic by the green bidirectional arrow.

Value Framework Infographic 08 09 2022 Exhibit1 scaled

New-age operational KPIs such as agility index and Digital Maturity Index (DMI) are gaining traction among enterprises to help track efficiency. Experience is increasingly becoming more important in making product decisions, and enterprises leverage user surveys as leading indicators to understand future adoption levels. Tools like Adobe Experience Manager, Sitecore XM, etc., also are gaining popularity to capture experience across product lifecycles. Trust is seen more from a cost-avoidance angle and becomes the foundational design principle for technology companies like Microsoft, Google, Amazon, Salesforce, etc.

Sustainability is again more prominent than ever, and directly relates to positive brand-equity impact. Although these investments don’t bear any short-term direct revenue impact, they help create societal impact that opens up huge long-term revenue opportunities. Examples include Google’s Project Loon, aimed at increasing internet penetration in under-developed countries, and Salesforce’s Philanthropy Cloud, built to address employee engagement in a distributed agile set-up.

Investment strategy and budgeting approaches

The next thing to discuss is how to use forecasted value to identify and make investment decisions. Enterprises are increasingly adopting agile budgeting practices to drive the trifecta of value, collaboration, and risk management. Value streams are used as foundational units to allocate and prioritize funding, helping enterprises to make best-performing and strategic investments.

When making investment decisions, products are categorized based on horizons, as illustrated by the below graphic:

Value Framework Infographic 08 09 2022 Exhibit2 scaled

Participatory budgeting processes maintain a collaborative ecosystem and ensure the following:

  • Alignment across concerned stakeholders before formal budget sign off
  • Right-sized investments with a value-first ideology

Overall, enterprises need to adopt a venture capitalist mindset when funding agile projects. Investments should be staggered with the provision to reallocate funds to the best-performing areas, keeping aside around 10% of the budget for funding mid-year ideas.

The below graphic illustrates the typical annual budgeting cycle:

Value Framework Infographic 08 09 2022 Exhibit3 1 scaled

Following these best practices can help enterprises significantly improve RoI from their software product investments and help them better understand value.

To share your thoughts and discuss our research related to value benchmarking of global software products, please reach out to [email protected], [email protected], or [email protected].

Learn more about defining value in software in our webinar, Is Agile Working? Where Enterprises Are Going Wrong.

 

Composable Commerce: For Composing the Best-of-Breed Customer Experience

From monolithic to MACH architecture, the next evolution in digital experience is here – composable commerce. Similar to building with Lego Blocks, this modular approach allows enterprises to create unique models by selecting “best-of-breed” digital commerce components. Learn how composable commerce is optimizing all aspects of the online shopping experience and what tech providers are pioneering solutions in this rapidly rising area.

Digital commerce growth leads to composable commerce

Just as the COVID-19 pandemic has been a catalyst in accelerating digital platform adoption among enterprises, modern consumers’ purchasing habits have dramatically changed due to frequent lockdowns and increasing online purchasing convenience.

According to a United Nations Conference on Trade and Development (UNCTAD) report, the average share of internet users who made purchases online increased from 53% before the pandemic to 60% across 66 countries following its onset in 2020/21.

The shopping experience has evolved from brick and mortar stores to online and moved to unified commerce – an amalgamation of offline and online channels with an ever-evolving myriad of customer touch points such as social commerce, video commerce, and now metaverse, etc.

Emerging business models such as Digital to Commerce (D2C), new and interactive channels, and advancements in technology, especially Artificial Intelligence (AI) and Augmented Reality/Virtual Reality (AR/VR), have fueled digital commerce’s growth. In response, the underlying digital commerce architecture principles have also morphed to meet the pace of change in digital-native customer expectations.

What is composable commerce, and how will it unlock business value?

Up until a few years ago, monolithic architecture-based platforms were the de facto choice for any digital commerce storefront. These big and chunky solutions providing standard out-of-the-box features for all customers offered a “one-size-fits-all” approach. Enterprises had to be content with these standard features and were required to spend huge budget and time on customizations to meet their business requirements.

However, major issues with scalability, complexity, longer time to market, and budget made this implementation approach less useful for modern commerce businesses where staying abreast of technological advancements, customer centricity, and nimbleness are of utmost priority.

The next major evolution in digital commerce architecture is MACH (microservices-based, API-first, cloud-native, and headless) architecture enabled enterprises. This approach will overcome the shortcomings of monolithic architecture and responsively and dynamically adapt to customer expectations.

Exhibit 1 Characteristics of MACH Architecture

Taking a step forward from MACH architecture, the era of composable commerce has dawned. Composable commerce – a modular approach to implementing digital commerce – uses interchangeable building blocks, leveraging the MACH Architecture framework. It offers enterprises the choice to select “best-of-breed” digital commerce components such as Product Information Management (PIM), Customer Relationship Management (CRM), pricing, etc., and is similar to Lego Blocks where users can create unique models. These composable components are the specific solutions provided by third-party vendors.

While the microservice approach breaks down the digital commerce modules into individual building blocks, composable commerce enables the linkage of these microservices to realize a specific business value. Composable commerce utilizes Packaged Business Capabilities (PBCs), a fully functional, independent component serving a defined business capability. These are used as building blocks for “composing” the unique platform. Each PBC can consist of several microservices. These PBCs can be individually replaced or modified without impacting the entire platform.

Exhibit 2 Central Tenets of Composable Commerce

Thus, composable commerce has shifted the focus toward business-centricity. Composable commerce is built for an organization’s unique operating models, strategic priorities, and customer focuses. Businesses can select essential functionalities for their requirements and “compose” them into a custom application built for their digital commerce platform. This allows enterprises to focus on the relevant PBCs for their business that are sometimes unavailable in the traditional and bulky monolithic platform’s “out-of-the-box” features.

Below are some benefits of composable commerce that enterprises can realize.

Exhibit 3 Benefits of Composable Commerce

The number of PBC vendors providing functionalities such as loyalty, promotions, search, reviews and ratings, analytics, etc., is rapidly growing. Enterprises have the flexibility to choose the best vendor for their platform, considering their individual business and technical requirements. They can manage multiple brands and varying business models, leveraging the same composable commerce stack to stay nimble in response to market changes. Complex business can be launched and managed more efficiently using composable commerce.

Technology providers are already pioneering composable commerce solutions

Technology providers have extensively started working on solutions to enable enterprises to get on board the composable commerce bandwagon. Below are some examples:

  • Spryker has launched the cloud-native “App Composition Platform,” which gives enterprises seamless access to third-party services and best-of-breed digital commerce vendors
  • Virto’s Atomic Architecture™ allows customers to get a composable, flexible, manageable, customized, and easily-updated digital commerce architecture that is fully adaptable to market challenges
  • Elastic Path’s Composable Commerce Hub is an open exchange of composable commerce solutions for digitally-driven brands that want to seamlessly create complete digital commerce experiences for their business
  • Fabric provides a configurable and composable commerce solution to rapidly deploy and scale unique brand experiences, product offerings, and services
  • Infosys Equinox is powering Nu Skin to compose unique and delightful digital journeys across ever-evolving channels
  • Avensia’s composable commerce solution Avensia Excite is built on commercetools. Avensia Excite uses Contentful for CMS, Inriver for PIM, and Apptus eSales for search engine

Composable commerce outlook

While MACH architecture had set a strong foundation for modern digital commerce architecture, composable commerce is the next logical iteration in the digital commerce business model to meet rapidly changing customer expectations and the growing number of touch points. Composable commerce adoption will continue to witness a rise as enterprises plan to move away from the traditional approach of implementing digital commerce solutions. More and more niche third-party vendors are emerging faster than before, providing ample choice for enterprises to craft and “compose” their digital commerce stack.

If you have questions about digital commerce, please reach out to Nisha Krishan ([email protected]) and Aakash Verma ([email protected]).

Stay tuned for insights on the digital commerce platform market from our recently launched inaugural Digital Commerce Platform PEAK Matrix® Assessment.

Strategic Role of Technical Support in Driving SaaS Adoption

To meet the complexities of the software as a service (SaaS) world, leading providers are revamping their outdated support models to help enterprises achieve success in Industry 4.0. Technical support teams now have expanded roles in customer success, relationship management, and delivering other value-added services for clients. Read on to learn how the next evolution in technical support is turbocharging SaaS adoption.

For more on our continuing coverage of how digitalization is changing technical support functions, also read The Evolution of the Technical Support Engineer Job Role.

Customer support has been the “issue to resolution” function for many decades. When a customer calls with a problem, the support team works to resolve it as quickly as possible. In traditional perpetual licensing models, technical support is focused on operational metrics such as “the time to close a ticket” instead of offering an enhanced customer experience to improve customer retention and lifetime value. Legacy customers are accustomed to opening tickets when they notice an incident and expect companies to react quickly.

However, with the emergence of Industry 4.0 – characterized by technology-intensive transformation and the convergence of cyber and physical systems – enterprises have significantly shifted how they leverage technology-based solutions. In the experience-driven outcome economy, customers expect companies to monitor their solutions proactively to ensure outcomes are delivered as promised. This means companies should automate their monitoring, alerting, and self-healing capabilities to resolve most issues before customers notice them.

SaaS adoption is one of the key driving forces behind the emergence and success of Industry 4.0. Leading technology/SaaS vendors realize that traditional “break-fix” technical support models are outdated in the new environment and failing to evolve their existing technical support models is a major cause of dissatisfaction among SaaS customers. Hence, they are investing in revamping their technical support models. Let’s learn more about this interplay between SaaS adoption and technical support.

SaaS adoption and its impact on enterprise buying behavior

SaaS adoption is increasing exponentially across the globe. The global SaaS market is expected to grow at more than 100% CAGR through 2026, reaching a market size of US$300-400 billion. This increased adoption is driven by factors such as zero upfront/CapEx cost, reduced IT-related operating and maintenance costs, the ability to easily ramp up/down operations, adherence to best practices, and built-in functionalities providing users with ease of operations.

However, the increasing adoption of SaaS-based operating models has significantly influenced enterprises’ buying behavior, ultimately propelling SaaS providers to rethink their technical support strategies. Below are two key changes in buyer behavior and how they are impacting providers:

  • Shift from product to service mindset – No longer can you sell a technical solution with a perpetual license and consider your job finished. In a SaaS-based solution, revenue depends on the customer’s subscription and consumption of services. This is a dramatic shift in the treatment of SaaS-based solutions from a product to a service-based model with the quality of technical support determining the working relationship with the customer, affecting retention and lifetime value
  • Low client stickiness – With increased adoption of interoperability standards and heightened competition, the cost of changing from one SaaS provider to another has been drastically reduced versus on-premises solutions where switching costs previously locked clients into continuing with a specific service provider. This negligible switching cost has reduced client stickiness, making it essential for providers to help customers quickly realize value and deliver a differentiated experience to drive renewals and sales growth in a SaaS model

Evolving expectations from technical support

With negligible switching costs and a plethora of options available, technical support is becoming paramount to the SaaS solution’s success. A well-designed and well-implemented technical support model can help customers achieve desired objectives and increase revenue through differentiated technical support or even indirect lead generation by uncovering opportunities to cross-sell or upsell. Accordingly, the scope of technical support services has broadened beyond the break-fix solutions to involve the following dimensions:

  1. Value-added services

Additional value-add opportunities include:

  • Proactive and omnichannel support – Proactive customer service and omnichannel customer experiences are the new standards for supporting customers and can differentiate your product from the competition. Customers today demand self-service for addressing low-complexity queries, which reduces the number of inbound issues and support tickets. Addressing customers’ needs, challenges, and concerns before they occur shows customers you are invested in their success, promoting customer loyalty and retention. With the growth of digital channels, omnichannel support is necessary to offer customers a consistent, seamless, and integrated experience regardless of the channel to create a unified brand experience
  • Product usage and feedback analysis: While the support function has always had access to detailed customer data, the ability to correctly capture, read, and apply the insights learned from this data — both directly and from support automation tools — can transform a support organization into a marketplace pacesetter. Customers expect technical support providers to continuously analyze their usage patterns and then use that knowledge to augment products and services to fit their needs
  1. Act as customer success ambassadors

Technical support’s role has broadened beyond addressing customers’ queries and concerns to building customer loyalty and fostering long-term customer relationships. Now, technical support specialists also act as customer success ambassadors (also called Customer Success Managers (CSMs)), ensuring customers receive the needed tools and support to achieve their goals. CSMs strive to have an in-depth understanding of the customer’s needs and are responsible for communicating customer behavior/feedback to sales, marketing, and product teams. They help the organizations by:

  • Ramping up utilization: The technical support team acts as the SaaS provider’s brand face, ensuring customers quickly realize value and have a differentiated experience, which is vital to driving renewals and sales growth in a SaaS model. Keeping clients engaged is difficult if they don’t see the value in your products. They guide clients on product capabilities and use cases in which those capabilities can be leveraged
  • Cross-sell and upsell products/services: CSMs understand their customer requirements and can identify the best fit opportunities to upsell or cross-sell to their customers, as well as decide which features, functionality, or additional products would best suit each customer. When customers are ideal for an upgrade, CSMs can meet with them to explain why the additional purchase will be helpful

The shift in operating model for technical support

While the enhanced role of technical support is integral to the overall product experience and many factors are driving it, not all enterprises can deliver superlative technical support on their own. This can be due to multiple factors such as cost and geographic constraints, shortage of relevant in-house skills, inability to scale with product growth, failure to implement a true omnichannel experience, lack of accelerators to drive efficiency, etc.

Thus, enterprises are increasingly relying on both in-house and outsourced teams to offer technical support. A strategic third-party partner can bring technical domain skills, innovation, and customer success expertise to deliver an outstanding end-user experience and improved value realization for clients to supplement the capabilities of in-house employees.

As SaaS vendors explore the best fit from among the potential third-party technical support service providers, assessing providers’ potential strengths and shortcomings is important. For example, it may make sense for a SaaS vendor to partner with traditional contact center providers for high-volume low-complexity scenarios such as in a B2C environment. On the other hand, if the technical support required is characterized as low volume and high complexity such as in a B2B environment, then SaaS vendors may prefer to go for specialist technical support providers with strong domain experience and a highly-skilled talent pool.

Conclusion

As SaaS offerings become more ubiquitous, it will be critical for SaaS vendors to ensure  technical support teams progressively evolve. In a SaaS set-up, enterprise technical support includes a range of activities, such as complex platform support activities and analytics support for product enhancement, proactively addressing customer needs through self-service, as well as understanding customer needs and behavior for enhanced value realization of products.

Enterprises need to continuously invest in skill development of their in-house teams, which includes domain-specific learning, and experience with specific tools, as well as seek partnerships with third-party technical support providers to address customers’ heightened expectations for technical support. The technical support team – in-house or outsourced – should act as the brand face when engaging with the end client and reflect the technology solution providers’ values and brand promise.

If you have questions or would like to discuss the strategic role of technical support in driving SaaS adoption and how it is evolving, please reach out to David Rickard, [email protected], Rananjay Kumar, [email protected], or Divya Baweja, [email protected].

Watch our LinkedIn Live event, How Can Your Data Analytics Improve Your Customer Experience? for insights into how data and analytics can help businesses understand their customers at higher levels than ever before.

The Evolution of the Technical Support Engineer Job Role

Once viewed primarily as troubleshooters who solely fix computer issues, today’s technical support engineers are complex problem solvers delivering next-generation solutions who also are emphatic brand champions. This new breed of talent plays increasingly sophisticated roles in enhancing the customer product experience and realizing value for leading enterprises. The soft and technical skills needed for this integral position are morphing. To learn more about how the technical support engineer job role is rapidly evolving in the current era and where to find this expertise, read on.

For more on our continuing coverage of how digitalization is changing technical support functions, also see our blog on the Strategic Role of Technical Support in Driving SaaS Adoption.

What are technical support engineer roles and responsibilities?

Technical support engineers help clients fix technological issues related to specific products or overall technical infrastructure, either virtually or in person. They ensure products and systems function as desired and provide the technical skills needed to keep them working properly. These individuals also provide the required know-how to help customers understand the complete functionality of their products to maximize their value and proactively prevent issues. Activities performed by technical support engineers range from low-complexity queries such as account activation and troubleshooting known bugs to complex platform support activities and analytics support for product enhancement.

As companies heavily rely on technical support services to swiftly run their business, technical support engineers act as the face of the technology solution provider’s brand when engaging with the end-user and reflect their values and brand promise. Technical support engineers bring varied skill sets that are important for their job success.

Traditional skills and expectations from technical support engineers include:

  • Technical and product knowledge: A technical support engineer must be technically sound to troubleshoot, solve client problems, and initiate the work. They also need an in-depth understanding of technology solution providers’ products to quickly troubleshoot and solve problems
  • Problem solving: To turn things around swiftly, critical thinking ability and solving complex problems are musts for technical support engineers. This is especially relevant when supporting more complex and time-sensitive queries for enterprises
  • Interpersonal skills: Starting from actively listening, understanding, and explaining the resolution to the user, a technical support engineer is expected to possess excellent interpersonal skills
  • Client systems and platform knowledge: Clients often leverage multiple platforms and technologies that are interconnected and interdependent, making it critical for the technical support engineer to have an overarching knowledge of the client’s technology landscape

Changes to the technical support engineer job role

With companies around the world digitalizing rapidly and embedding technology in every business aspect, the adoption of as-a-service business models is bringing the importance of technical support to the forefront.

Along with increasing cloud adoption, the shift towards a SaaS-based model, and continuously evolving data governance regulations, the technical support engineer function has also been expanding. Technical support engineer roles and responsibilities have gone from traditional technical support work focused on “break-fix” hardware and software support elements to being customer success champions.

Modern technical support engineers play an important part in driving brand loyalty, increasing product and service consumption, and providing analytics-driven product enhancement insights. They offer proactive support capabilities and a differentiated client experience that maximize the end client’s value realization.

Let’s look at seven new competencies needed for this vital role:

Soft skills:

  • Innovative mindset: The growing number of technologies, products, and tools demand technical support engineers to think out-of-the-box and provide innovative solutions to solve both simple and complex problems for clients
  • Management capabilities: With more complex queries and increased interlinkage between products and platforms from multiple technology vendors, the technical support engineer job has progressed from being purely technical to having managerial aspects of coordinating between different stakeholders to arrive at quick and effective solutions
  • Empathy: Leading companies realize the importance of technical support in reinforcing and mirroring the brand promise and values. Technical support engineers need to be empathetic to user problems and deliver an optimal experience

Technical skills:

  • Data analytics: As support services become more dynamic and data-backed decision-making is more infused in businesses, analyzing data and proactively finding issues is an integral part of the role
  • Handling complex problems: With low complexity queries now increasingly solved by self-service and chatbots, technical support engineers are expected to handle more complicated queries
  • Adapting to next-generation solutions: The adoption of modern technologies and solutions such as cloud-based solutions, automation, and Artificial Intelligence (AI)-based solutions has demanded that individuals in these roles adapt to these new requirements
  • Understanding cyber security: Because cyber security is of paramount importance today, technical support engineers need to keep up with the evolving threats and proactively make users aware of the possible security risks

Evolving profiles of technical support engineers

With the evolving skill profile required from technical support engineers, service providers are increasingly looking to leverage new avenues for differentiated talent. Here are some of the key demographics actively being tapped:

Tech-savvy millennials: The global workforce has been shifting towards an increasingly large segment of tech-savvy millennials who have greater comfort with new-age products and technologies. This demographic stays up-to-date with the changing technology landscape and is better geared to handle complexities associated with the platforms and systems used by clients and technology solution providers

Industry expertise: Job candidates who have industry expertise are better suited for technical support roles, especially in energy, automotive, and manufacturing segments where industry-specific knowledge is difficult and time-consuming to attain. Employing technical support engineers who have first-hand experience with the problems they are solving is advantageous

Enterprise-specific experience: Individuals who have been associated with the brand and understand its technologies, work environment, and internal processes are better equipped to support it. Technical support engineers with previous experience working with the same or similar clients are desirable

With the changing technological landscape and evolving business models, the role of technical support engineer is expanding further to handle increasing customer expectations, product complexities, and changing dynamics. The need for technical skills in security, cloud infrastructure, analytics, and application development will further define the future role of technical support engineers. Emerging client demographics also are carving out new roles with differentiated skills that will be important going forward.

If you have questions or would like to discuss the technical support engineer job role and how it is evolving, please reach out to David Rickard, [email protected], or Chhandak Biswas, [email protected].

Explore our webinar, Building Successful Digital Product Engineering Businesses, to learn about investments in next-generation technologies and talent are now crucial in successfully building digital product engineering businesses.

CXM Market’s Dream Run – What’s Driving It and Will It Last? | Blog

During a global pandemic with a dire economic outlook, one surprising segment experienced its fastest growth in recent years – Customer Experience Management (CXM) services. Driven by increased demand for digital and other factors, this market seems to have long enough legs to extend into the coming years. But what’s behind this unexpected growth in CXM in an otherwise subdued economy, and will it last? For more on our analysis of this promising area, read on.

COVID-19 impact

As most major economies were shut down partially or almost completely in the first half of the year to contain the spread of the COVID-19 pandemic, businesses across the globe were adversely impacted in 2020. And while some industries such as high-tech or Fast Growth Tech (FGT) fared comparatively better than others like travel and hospitality, overall, the economy looked grim.

With such a dire economic outlook, it was largely assumed that the same would hold for the Customer Experience Management (CXM) services market, given the segment’s dependence on overall economic health for its growth. Gauged by the slow first half of the year, the downcast business outlook, and the huge challenge facing CXM service providers to shift to a Work from Home (WFH) model to continue running their businesses, Everest Group projected the market would shrink by 4-5 percent in 2020 compared to 2019.

Market stunner

However, in a complete reversal of early trends, the CXM market managed to grow at one of the highest paces in recent years, recording 3-5 percent growth in 2020 to stand at around US$90 billion. And it doesn’t look like growth is coming to an end for this sector, as the numbers reported by some of the largest publicly-listed CXM service providers in 2021 look robust and point towards an optimistic future for this market.

Picture1 3

This begs the question: Why hasn’t the CXM market been impacted as severely as was widely expected during the early phase of the pandemic spread? We see several underlying factors that have been at work. In our upcoming CXM State of the Market Report slated for release later this year, these factors will be explored in greater depth. Below we discuss some of the factors that contributed to the segment’s growth and raise questions that need to be addressed further.

The following factors are playing a role in CXM services growth:

  1. Increasing demand for digital: It is no secret that businesses have come to terms with the importance of digital Customer Experience (CX) after the events of 2020. They understand the need for digital CX, not only to create superior customer experience but also to ensure continuity of services in adverse times when traditional methods no longer work. Additionally, customers are increasingly leveraging digital channels to communicate with brands, further fueling the pace of change. Enterprises are exhibiting a new wave of urgency to adopt digital technologies such as automation, analytics, self-service technologies, and digital channels to better prepare for the future and reduce dependence on a human workforce. This new demand is helping the digital segment of the CXM market to post an annual growth of over 40 percent
    Picture2 2
  2. Exceptional performance by certain sectors of the market: While most traditional businesses were severely hit as businesses moved to an online model, those that were already strong in this space did well. Industries such as high-tech and FGT fared exceptionally, and their success also translated into more demand for CXM services from this industry
  3. Demand due to COVID-19 response: Even mature markets such as North America and Western Europe saw good growth in 2020 driven by demand for government support in these regions. The massive push to contain the spread of COVID-19 and to vaccinate the masses fueled demand for CXM services. Programs such as contact tracing and vaccination support are expected to drive new growth for CXM service providers. However, these demand drivers are expected to wind down once the pandemic is controlled and the vaccination programs cover a large portion of the population

 

Here are some of the issues we see that need further exploration:

  1. Is market consolidation hiding within the growth numbers? Given the challenges that 2020 posed around the changing business model, not everyone could thrive and survive in this market. The CXM services market has a very long tail with thousands, if not a magnitude more, of small service providers catering to enterprises globally. It is highly possible that a lot of these small (typically under 50 seats) providers were not prepared to handle the challenges thrown by the pandemic and saw their clients migrate to larger, more organized service providers. Given that a lot of these small players go untracked, a large part of this growth could well be just moving business from one player to another, which, in true essence, wouldn’t be actual growth. That said, it does not mean that the market did not see new growth at all. Based on our research, several providers have been successful in bringing new business to the table. While it may be difficult to determine full impact of the consolidation of smaller service providers on the overall market, our view is that the market is still experiencing net growth
  2. Is CXM growth being driven by new demand or a shift from in-house to outsourcing? With major economies globally under pressure, a lot of new demand for CXM services seems unlikely, barring, of course, certain sectors that were highlighted above.  A lot of the work that was previously being done internally through in-house centers could have moved to an outsourced model, given enterprises’ inability and inflexibility to adapt to new working models. Our research pegged the size of the total CXM services market (including in-house and outsourced) to be around US$350 billion at the end of 2019, with outsourcing accounting for ~25 percent of that spend. While a strong possibility exists that the overall CXM services spend declined in 2020 due to the challenging economic conditions, we believe the share of outsourcing is increasing, thus, resulting in net growth for the outsourced portion of the market

Positive outlook

Despite these factors, the long-term prospects for the CXM services market look favorable, especially with a heightened awareness around the need for superior CX to build differentiation in the market. This change will be hinged around digital CX, where most enterprises lack enough experience and require third-party support to execute the vision they have for their business. Along with green shoots of economic recovery emerging in several regions after a difficult year, service providers who possess CX capabilities have plenty of opportunities to look forward to.

Sharang Sharma, Practice Director: [email protected]

David Rickard, Vice President: [email protected]

Shirley Hung, Vice President: [email protected]

Everest Group Reports Demand for IVA Technology Grew 42% in 2019, Projects 70% Growth Through 2022 After Momentary Dip Due to COVID-19 Pandemic | Press Release

IVA market growth will accelerate post-pandemic as enterprises strive to overcome recession with focus on automation, customer experience

The global Intelligent Virtual Agent (IVA) market stood at US$300 million-US$350 million in 2019, exhibiting about 42% growth year on year, according to Everest Group. The firm projects a dip in demand in 2020 due to the COVID-19 pandemic but expects the IVA market to post strong growth going forward, achieving as much as a 70% compound annual growth rate (CAGR) through 2022. In fact, Everest Group has boosted this estimate by 13-22%, anticipating that enterprises will place greater emphasis on cost reduction and improving business continuity in the post-pandemic period.

IVA solutions are a key enabler of automation in the front office, currently being used primarily for customer support as well as IT and help desk functions due to their large volumes of repetitive queries. These functions account for more than 80% of the IVA market today. Banking, insurance, and telecom industries account for the highest adoption of IVA and continue to exhibit impressive growth, particularly given the maturity of contact centers within these industries.

Increasing sophistication and collaboration with complimentary artificial intelligence (AI) based technologies are driving IVA popularity in the market. Enterprises across industries and geographies are leveraging or plan to leverage IVA solutions for different use cases to reduce human involvement and improve customer experience (CX).

“IVA is still in the realm of early adoption today, but that is rapidly changing as enterprises realize what a tremendous opportunity they have to leverage this technology,” said Anil Vijayan, vice president of Everest Group. “IVA technology is continuously advancing and growing in sophistication well beyond rule-based chatbots. Today we see a higher level of maturity in intelligent IVA applications, which are being used for a variety of use cases including payment services account resolutions and employee onboarding, for instance. We’re also beginning to see IVA playing a key role in conversational AI ecosystems, where a collaborative set of tools—including IVA, AI, robotic process automation, learning and listening engines, analytics and more—is used to seamlessly integrate front and back office systems. Here, IVA supports more advanced use cases such as cross-selling and upselling, customer retention, and making personalized recommendations. We expect this evolution to continue, leading to reliable and delightful customer experiences while reducing human effort through automation.”

These findings are discussed in more detail in Everest Group’s recently published report “Conversing with AI – Intelligent Virtual Agents (IVA) State of the Market Report 2020.”  The report includes a detailed analysis of the IVA market, including a market overview and adoption trends, solution characteristics, vendor landscape, barriers to IVA adoption and best practices, and the outlook for 2020-2021.

Evolution of the IVA Market

  • The IVA market is witnessing a significant shift from rule-based solutions to AI-driven IVA solutions, propelled or aided by the following:
    • Increase in consumer demand for self-service
    • Integration of IVA solutions with critical enterprise back-end systems
    • Innovation of voice-based conversational capabilities
    • Shift from multi-channel to omnichannel delivery by software vendors
  • In order to meet the evolving CX needs, next-generation intelligent automation technologies are expected to witness high growth as they play a key role in transforming service delivery.
  • The conversational AI ecosystem in contact centers will enable seamless collaboration between front and back office and empower faster, more reliable, and lower cost operations.

*** Download a complimentary abstract of the report ***

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global enterprises, service providers, and investors. Through our research-informed insights and deep experience, we guide clients in their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com/.

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