Monitoring the Quality Monitors

The quality management/liability recording technology segment -- considered part of workforce optimization (WFO) -- continues to be one of the strongest performers in the contact center market. Even more impressive, innovative functionality from this market, such as speech analytics and workforce management, has slowly started to trickle out to the greater enterprise.

The Product
The core of a comprehensive quality management/liability recording (QM/LR) suite is expanding. (See Figure 1, below.)

End users now expect the following features:

• 100 percent recording -- time-division multiplexing (TDM) and Internet Protocol (IP) -- with advanced retrieval and playback features;
  
• support for both TDM and IP recording using a single interface and the ability to migrate between the two without replacing the rest of the application;
  
• ability to record voice and accompanying screens simultaneously;
  
• capacity to handle multichannel transactions -- voice, email, chat, and collaboration sessions;
  
• computer-telephony integration;
  
• software for identifying and analyzing agent performance and trends;
  
• reporting (standard and ad hoc);
  
• prepackaged capability for integration with many automatic call distributors as well as with interactive voice response and speech recognition applications;
  
• application programming interfaces and software development tool kits to facilitate integration with CRM, enterprise resource planning, and other business applications;
  
• a single standardized platform (technology stack) for the entire suite;
  
• one database maintaining one copy of recorded calls;
  
• a portal-based framework for delivering information to stakeholders;
  
• scorecards and dashboards; and
  
• a services-oriented architecture.

In addition to continuous improvements in QM/LR suite functionality during the past four years, new enhancements are already on the way. The leading suites are being upgraded on a semiannual or annual basis, and vendors continue to improve some of the older components. During 2007, a number of vendors came to market with releases that included substantial improvements to their quality management modules. One example of innovation seen in a number of applications was the improvement or total rewrite of the quality assurance development environment to make it much easier for end users to create agent evaluation templates. At this time, almost all of the vendors have released solutions with administration modules and quality assurance development environments that are either 100 percent Web-based or use "smart" technology.

Market Growth
Vendor and investor interest in QM/LR has driven strong and steady growth rates. During 2006, new entrants, new offerings, and organic growth significantly increased the size of the QM/LR segment, reaching more than $2.1 billion, a 106.1 percent increase from the prior year. (It's important to note that these numbers reflect total revenue for the companies in the QM/LR market, including dollars attributed to other market segments, such as contact center infrastructure.)

Although this market could not match its unprecedented growth rate of 2006, 2007 was another very strong year. We estimate that, by the end of 2007, the market grew by at least 10 percent to more than $2.3 billion. This growth was fueled by acquisitions that expanded the revenue base of market participants, new and enhanced offerings, and organic growth.

Sales to small and midsize businesses (SMBs) are expected to be a significant trend for the QM/LR vendors in 2008. SMBs clearly represent an underpenetrated sector: Many vendors, large and small, have shown interest in pursuing midmarket opportunities; all of the large vendors have reintroduced or enhanced their solutions and have created marketing collateral tailored to the midmarket; and newer contenders -- including CallCopy, KnoahSoft, OnviSource, Telrex, and Wygant/TDI -- are actively pursuing SMBs and contact centers.

Competitive Landscape
The competitive landscape for the QM/LR market continues to evolve, despite its overall maturity. The sector is unusual among technology segments: It is mature and consolidating, yet every year new vendors emerge, along with new ways to approach the market.

There are at least 45 vendors with a wide variety of offerings that are attracting a growing number of customers. The vast majority of these vendors claim to be profitable -- though, as almost all are privately held, there's no way to verify this. The newer contact center-oriented entrants -- CallCopy, KnoahSoft, and Telrex -- initially targeted SMB contact centers, but have started to win larger opportunities in centers with more than 150 agents. This indicates that some users are clearly displeased with the complexity and price of leading solutions and are looking for alternatives. As long as this need persists, new market entrants and offerings will continue to appear.

The QM/LR space had long been dominated by three vendors -- NICE Systems, Witness Systems, and Verint. In 2006, these three collectively owned 77.3 percent of the contact center WFO market, including workforce management. Verint and NICE made many acquisitions over the past 22 months for their respective enterprise and contact center businesses, altering their relative positioning, but having little impact on the rest of the market. In May 2007, though, Verint acquired Witness, leaving only two leaders atop the market. (See Figure 2, below.)

Market Leadership and Outlook
Market leadership is more than merely market share; it is the reflection of a company's size, scale, products, service, and investments in research and development (R&D), as well as its ability to execute. The top of the leadership chart in Figure 2 has changed in each of the past four years. As of November 2007, leadership was shared by Verint and NICE, dominating the WFO market with a combined 61.3 percent of revenue during the first half of 2007 on a reported basis, and 73.2 percent on a pro forma basis, incorporating Witness into Verint.

We expect to see a number of vendors make acquisitions during the next 12 months, particularly to extend and broaden their analytics portfolios. These acquisitions may again alter market leadership. However, while acquisitions add new customers, products, and revenue sources to the acquiring company, they require a great deal of management attention and R&D dollars to make them successful. Most of these deals will have a positive long-term impact on the acquiring QM/LR vendors, but the acquisitions may also temporarily disrupt their focus and divert management attention from delivering innovation.

In each of the past four years, we have invested over 2,500 hours in analyzing all aspects of the QM/LR market and vendors. Each year, we are pleasantly surprised to see more innovation and even better functionality capable of delivering quantifiable benefits. Leaders and contenders alike offer suites that end users find compelling -- and there is a great deal of new functionality already planned for the next series of releases. If your company has not purchased or upgraded to a new QM/LR system in the past three years, it's extremely likely that making an investment now will deliver quantifiable benefits. However, as there are so many choices, it's essential to carefully analyze and identify the right offering for your company. There are huge differences in functionality, ease of use, implementation, ongoing support, and price. For more information about this market, see DMG Consulting's 2007-2008 Quality Management/Liability Recording Product and Market Report.

Donna Fluss is founder and president of DMG Consulting LLC
(www.dmgconsult.com), the leading provider of contact center and analytics research, market analysis, and consulting. Contact her at donna.fluss@dmgconsult.com.

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