Subscription growth will be key to CX vendor survival

The crowded and diverse landscape

We can all agree that there are probably about a dozen major CX players and about a dozen more minor vendors in the market today. Furthermore, a few are well-established hyperscalers (e.g. Microsoft, Amazon, Google); a couple of enterprise video companies (Cisco Webex and Zoom); and a few more really came from the CRM side of things (e.g. Zendesk, Salesforce, Zoho, HubSpot).

The 2024 Gartner Magic Quadrants for CCaaS included NICE, Genesys, AWS (Amazon Connect), Five9, Cisco, Talkdesk, Content Guru, 8x8, and Vonage.

IDC’s research, the 2024 MarketScape for CCaaS Software showed NICE, Genesys, Five9, Talkdesk, Cisco, Sprinklr, Twilio, Vonage, Dialpad, Content Guru, UJET, and TCN.

ISG Research came out with their Contact Center Advanced Buyers Guided 2024 which had a long list of vendors: NICE, Verint, Genesys, Content Guru, Salesforce, Sprinklr, Talkdesk, RingCentral, Five9, Emplifi, Zoho, Dialpad, Zoom, Zendesk, Avaya, Cisco, Nextiva, 8x8, IntelePeer, Twilio, AWS, Vonage, Mitel, Microsoft, Odigo, UJET, Enghouse Interactive, Alvaria, GoTo, Ozonetel, Evolve IP, TCN, USAN, and Aircall.

Forrester, another major research firm, offered a bunch of reports related to CX. The Forrester Wave for Customer Service Solutions (Pegasystems, Salesforce, Microsoft, ServiceNow, Oracle, Zendesk, SAP, Creatio, Freshworks, Verint, Zoho, SugarCRM); then there’s a Landscape Report which supposedly looked into a whopping 33 vendors; also, the Forrester Wave: Conversational AI for Customer Service; and the Forrester Wave for Digital Customer Interaction Solutions.

If you’re new to the CX world then the number of vendors may have opened your eyes. More than likely you’re already an existing customer of at least one of the above mentioned CX providers—and maybe now you’re thinking, “Should I explore some others?”

On the one hand, the crowded and diverse players demonstrate a healthy market which vendors compete and/or cooperate to win deals. However, the flip side means that there are tons of CX business problems to be solved, and it may even take a combination of engaging a few vendors to reach those goals.

Distinctions are fairly minimal

In the old days of CX when voice was the only interaction channel, and on-premise CapEx was the name of the game, choosing a vendor was no easy task. The selection process was often drawn-out beginning with RFPs and what’s essentially a vendors pageant.

And usually that turned out to be the easier part once the teams start discussing implementation. Of course, back then there were considerations about data centers, server hardware, software licenses, telephony designs, and all the necessities to make everything work together in harmony.

Aren’t we glad that cloud computing became mainstream and affordable? It brought about software-as-a-service (SaaS), microservices, containers, elastic resources, and many more modern computing innovations. It also fundamentally changed the ledgers of companies, from CapEx to OpEx financially.

CX vendors wasted no time to leap into the cloud, either through acquisitions or startup bootstrapping, to offer contact center-as-a-service (CCaaS) or CXaaS solutions. To customers on the ground it was a welcomed evolution—less worries about servers, shorter project timelines, pay only for desired features, and better focus on things that matter the most.

The cloud computing evolution also created hyperscalers Amazon, Google, and Microsoft. They probably power over 90% of cloud-based CX platforms and solutions. In fact, they’re likely the cloud providers of the customers as well.

The next and most recent jolt in the CX landscape came in the form of generative AI after OpenAI released ChatGPT to the public a few years ago. The advancement and adoption have been fast and furious, which wouldn’t have been possible without the cloud. The hyperscalers had the hardware and infrastructure in place so it was a no-brainer for them to quickly plant their genAI flags. And because running a scalable AI company requires tons of money to pay for expensive GPUs and energy needs, there are only a handful of “AI-scalers” today besides the existing hyperscalers, namely OpenAI, Anthropic, Meta, IBM, and Groq.

So from a macro point of view, just about every CX vendor has the same cloud foundation, and with every AI feature they announce with great fanfare, they’re all likely from the APIs of the handful of AI companies.

Again, that’s the macro view. Surely each vendor has its own CXaaS technical architecture and intellectual properties, its own constraints on technical and financial resources, its own varied product strategies, its own design philosophies, and so forth. That’s why there are still so many CX vendors out there.

But will it always remain crowded in the long run?

Sustained subscription growth will be key

The CX market is entering into a very dynamic and perhaps volatile phase as vendors battle for subscription and license revenues amid an overcrowded landscape full of comparable solutions.

Vendors with a sizable cash reserve and/or a solid stock price will eye acquisitions as a way to expand their customer base as well as to quickly offer additional products and services.

Smaller vendors will likely resort to picking fights with better odds of winning, perhaps focusing on specific verticals or market segments, to avoid clashing with the big players and to stretch their limited resources with maximum effect.

Many more “frenemy” arrangements will be formed, even across technologies and platforms, especially when CX now encompasses multiple channels and modals throughout the customer journey.

Any sign of contraction in subscription revenue will be seen as a red flag. If potential clients aren’t signing and existing clients aren’t renewing, then the vendor needs to take a long, hard look in the mirror because there’ll be five competitors vying for that business. This is especially perilous to CX vendors that operate on high debt and low cash. Without sustained growth in subscription revenue there’s the risk of getting squeezed out of the market very quickly.

Sustained being the keyword.