ISG Provider Lens™ Contact Center-Customer Experience Services - Intelligent Agent Experience - Global 2024

ISG research indicates that cost savings are the primary driver for outsourcing to a provider

State of the industry

Overall BPO growth, which includes customer experience and other back-office operations, remained flat at $5.6 billion in the first half of 2024 compared to 1H2023. Interestingly, the number of awards – 457 – was higher in 1H2024 than the 403 in 2023. This is a strong indicator that the demand in the market is intact. However, deal sizes have been reduced.

In the customer experience segment, the ACV of $1.2 billion in 1H223 was reduced to $0.8 billion in 1H24. However, similar to the overall BPO trend, although there was a decline in ACV, the number of awards was higher in 1H2024
compared to 1H2023.

Cost optimization is a key priority and a top driver for outsourcing. Companies are looking to optimize costs and increase process efficiencies by scaling their automation. These are some of the key factors influencing the size of the deals.

In 2022 and early 2023, the BPO industry experienced unprecedented growth across most service lines, including customer experience. However, with demand slowing and numbers returning to pre-pandemic levels, service  providers are now facing margin pressures. On one hand, clients are seeking greater cost optimization and to balance the top and bottom lines, providers are responding by significantly slowing down hiring and other discretionary spending.

Technological advancements driving a paradigm shift in CX engagements.

The nature of Customer Experience (CX) engagements has evolved significantly beyond traditional labor arbitrage and involves a high degree of technical infusion. On the enterprise side, it is no longer the business units that get involved, but there is vested interest and involvement from the CIO/ CTO to drive tech modernization. Modern CX engagements now encompass technical, people and process requirements, prompting service providers to invest heavily in developing proprietary intellectual property or expanding their partner ecosystems to meet diverse 
technological needs.

The technology stack has undergone substantial changes at every level, influencing the CX landscape. IT-BPO integration was spoken about earlier but is seeing a gradual uptake. This shift highlights a trend where service providers are leveraging advanced technologies and comprehensive solutions to meet the complex demands of contemporary CX engagements.

This evolution underscores the growing importance of integrated solutions that blend technology, workforce expertise and optimized processes. Providers are aggressively developing innovative intellectual property and forging strategic partnerships to gain a competitive edge and offer more holistic and effective CX solutions to their clients. Leading
developments in different categories are summarized below.

• Cloud: There is a surge in enterprises seeking to shift from on-premises to cloud, helping companies address their
omnichannel challenges and hybrid working.

Partners in play include cloud contact center (CCaaS) providers such as Genesys Cloud, NICE, Amazon Connect and others.

• Workforce management/workforce optimization (WFM/WFO): Clients are seeking an integrated and comprehensive workforce management tool that will help them with end-to-end workforce requirements such as optimization, management and other engagements.

Partners at play include Verint, CallMiner, NICE and others.

• AI: Implementations of CX tools or channels such as conversational AI, especially with the emergence of GenAI, conversational AI has gained significant traction.

The prominent partner in this space is Kore.ai.

• GenAI: The emergence of generative AI has also led service providers to expand their partnerships with the leading hyperscalers and other model hubs.

Prominent hyperscaler partners include AWS, Google, Microsoft and other partners such as OpenAI and Hugging Face.

• Analytics: As data becomes a critical lever for producing insights directly impacting CX and agent experience (AX), knowledge management, data engineering and data visualization tools take center stage.

Some of the prominent partners in this space are Tableau, Power BI, Pegasystems and others.

GenAI: A Catalyst for Enhanced Customer and Agent Experience (AX)

Nearly half of the organizations said the biggest priority in their AI strategy is to build use cases that improve customer experience, according to our 2024 AI Buyer Behavior Study. The contact center industry is marching forward for GenAI adoption and the numerous use cases being developed in this space are either in mature proof of concept stages or, in some cases, have been implemented. As mentioned in the previous section, service providers are expanding and investing in newer partnerships to build enterprise-grade GenAI solutions.

The image below illustrates the various identified use cases and their increasing significance. These are among the most popular GenAI applications, many of which directly enhance agent experience and outcomes. Key improvements include reduced training time, lower average handling time (AHT), higher first call resolution (FCR), decreased error rates and improved CSAT and employee satisfaction (ESAT).

On average, service providers are either in the PoC or implementation stage for approximately 12 percent to 15 percent of their total clients.

(Numbers are based on the responses received from more than 30 service providers. These are indicative and not actual representations of the market)

Essential Skills for CX Agents to Drive Customer-Centric Innovation

With each level of automation introduced into contact center processes, the role of the agent has evolved significantly. As these roles and related skill set requirements have shifted, providers are increasingly investing in advanced tools and technologies to deliver highly relevant and quality training to their employees, which aims to ensure that agents are well-equipped to handle complex issues. Adopting AI has been a pivotal development in the learning and development arena. Using AI, companies can now curate training content that not only aligns with industry standards but also caters to the specific needs of agents based on their transaction or call history. This personalized approach to training ensures that agents receive targeted learning experiences, which are crucial for addressing individual skill
gaps and enhancing overall performance.

Focusing on continuous learning and adaptation is crucial for maintaining competitive advantage and delivering exceptional customer experiences. With GenAI coming into play, the skill set requirements will further shift and the agent role will evolve toward specialization. Based on our research and provider conversations, the following are
some of the emerging skills in the contact center industry that will define the agent of the future.

AI and analytics are the topics that are most talked about and the growth and innovation in this space have been exponential. Today, companies leverage AI and analytics to have a positive impact, both within an organization and on the outside. With the advent of generative AI (GenAI), the opportunities to bring about advantages such as personalization, efficiencies, agent empowerment, contextual conversations and intelligent conversations have further expanded.

Using analytics, meanwhile, complements and accelerates an enterprise’s ability to acquire new customers, retain existing customers, increase loyalty and help deliver the highest CX.

Although technological advancements and related use cases are high in this industry, enterprises are struggling to stay ahead with the rapid changes. They are also struggling with the challenges of embarking on implementations or scaling them to experience the actual positive ROI.

To address enterprise needs, service providers in this space are upping their AI game with acquisitions or bolstering their solutions to cater to changing needs. They are focusing heavily on consulting, especially automationrelated, to determine a client’s maturity and appetite for new technologies. Providers in this report are assessed for their AI and analytics solutions, both proprietary and the ones offered through partnerships; implementations and value delivered; growth fostered; innovative and visionary capabilities; pace and scale of implementations; and their ability to help
enterprises achieve the actual value of a transformation.

Access to the full report requires a subscription to ISG Research. Please contact us for subscription inquiries.