New industries to open up for CRM outsourcing in 2011

Healthcare, government and utilities will emerge as the industries with the strongest growth for the CRM outsourcing market in 2011, according to Ovum.

In a new report*, the independent technology analyst claims it is these industries that will grow at the fastest rate for CRM outsourcers over the next 12 to 15 months.

Peter Ryan, author of the report and an Ovum lead analyst, said: “Healthcare, government and utilities are the industries most likely to grow their CRM outsourcing footprints in 2011. In fact their growth rate will be well in excess of the overall industry rate for the next few years.”

In the US, Ryan believes that the growth in healthcare will be driven by an increase in calls from members of the public keen to find out how President Obama’s reforms will affect them. He also believes that the burgeoning US Hispanic market, which is currently underserved with healthcare services, represents a significant opportunity for CRM outsourcers.

He said: “CRM outsourcers that can provide bi-lingual agents stand to prosper as they will be an attractive proposition to stretched agencies looking for a CRM partner.”

Ryan believes use of CRM outsourcing services will increase at all levels of government in 2011. He said: “This will be driven by the need to reduce operating costs in the face of an increase in the number of calls from the public seeking advice on schemes such as unemployment benefits. At a time of economic uncertainty, we believe that government decision makers will view outsourcing overhead heavy contact centres as a wise move.”

Meanwhile the utilities market holds significant promise, according to Ryan’s findings, as most companies are using antiquated and costly systems which are no longer viable in the face of budgetary constraints.

Ryan added: “With utility firms offering more products than ever, the only way to keep up is through the use of third parties to provide customer-facing services.”

-ENDS—

NOTES TO EDITORS

*Trends to Watch 2011 – CRM outsourcing

To arrange an interview or for further details regarding this release please contact Kelly Livesey in the Ovum press office on +44 0161 238 4081, or email klivesey@datamonitor.com

ABOUT OVUM

Ovum provides clients with independent and objective analysis that enables them to make better business and technology decisions. Our research draws upon over 400,000 interviews a year with business and technology, telecoms and sourcing decision-makers, giving Ovum and our clients unparalleled insight not only into business requirements but also the technology that organisations must support. Ovum is part of the Datamonitor group.

A new report* by the independent technology analyst states that banks have been saddled with multiple, often overlapping systems providing glimpses of insight into their customers. In addition, as research** by Ovum’s parent company Datamonitor has revealed, many consumers have lost trust in their banks and are more willing since the credit crunch to shop around for financial products.

Ovum believes banks must actively embrace service improvement activities; whether through improved targeting of the “right” customers, greater emphasis on providing a better integrated experience by synchronising contact channels, or recommending appropriate financial products without taking an obvious ‘hard sell’ approach.

“All these improvements aim at greater customer understanding which will ultimately translate into improved trust and maximised profits”, said Jaroslaw Knapik, senior analyst at Ovum and report co-author.

“Banks must attract new customers who will stay active not for a few months, but for years. Additionally, providers must reassess their approach to retaining existing customers; they must not simply retain but further monetise existing customers through gaining a better understanding how to more effectively cross-sell and up-sell their products and services.”

The Ovum report states that the growth of multichannel propositions presents banks with the opportunity to gain a more complete understanding of core customers. The challenge is to integrate all transaction information, web analytics and marketing data, so that data from various channels can be correctly analyzed and interpreted. To achieve this, banks must aggregate all customer data and event details from all systems in one place.

However, it is not just the bank that requires information. It should be a two way process that actively engages customers, allowing them to submit feedback, ask questions or request product information through these same channels.

“Banks should be confident that customer data is complete, accurate and up-to-date”, said Knapik. “Getting there requires banks to treat customer data as a strategic asset that is managed as a shared resource.”

Ovum sees Customer Intelligence (CI)*** as the next logical step in the development of the customer-centric bank, as it expands on the promise of Customer Relationship Management (CRM) by aggregating data beyond the customer interactions that are managed by most CRM implementations, providing deeper insight into the behaviour and experiences of a bank’s customer base.

Ovum expects spending by retail banks on multichannel integration and customer information systems (MI/CIS) to grow at a CAGR of 4.6% between 2009 and 2014, with the market size increasing from $4.9 billion globally to $6.1 billion over the period. Spend on MI/CIS is expected to grow at faster rates than most other business areas. Only technology spending on online banking (5.5% CAGR 2009/14) and management information systems (5.1%) is expected to grow at a faster rate.****

London – The current economic crisis is forcing outsourced contact center providers to revisit tried and trusted methods of providing their services to clients, asserts a new Datamonitor report, Managing outsourced contact center functions during the economic slowdown (Strategic Focus). With prospects and existing clients looking for more creativity than ever in how their products / services are represented, outsourcing vendors need to determine new ways of delivering customer service, marketing & sales, technical support and debt collection.

Customer service in the recession means end-user retention at lower costs

A clear signal that the recession has impacted both outsourcers and their clients relates to a change in customer service delivery goals. No longer is increased revenue generation cited as a principal objective; rather, the need to ensure a maximum degree of end-user satisfaction is key. Datamonitor lead analyst for contact center outsourcing, Peter Ryan explains:

“In a recessionary period, outsourcing clients are more concerned with retaining as much of their client base as possible. Clients understand the opportunity to cross-sell and upsell will come with the recovery, but the immediate future means keeping customer churn to a minimum. If this can be achieved through lower-cost alternatives, such as automation or offshore / home-based customer service agent delivery, all the better for the client’s bottom line.”  

Marketing & sales – shifting from telemarketing to relationship management

Once the bastion of telemarketing related services, marketing & sales in the outsourced contact center has evolved in recent years. The growth of ‘do-not-call’ lists across both developed and developing economies has made outsourcers and their clients become more creative in how to use outbound functionality. Many have opted for warm-calling approaches in which customer service agents contact end-users with whom the outsourcer’s client has an established relationship, so as to ascertain their satisfaction with a recent purchase. Not only does this re-enforce the commercial relationship, it also affords insight into future buying, and can also lead to immediate cross-sell / upsell opportunities.  

Technical support is evolving in sophistication

The domain of technical support is no longer the commodity it once was, with more consumers globally using devices and solutions that are more complex than ever. However, according to Ryan, this is an area in which contact center outsourcers have the chance to win significant business in the coming years. “There exists significant opportunity for contact center vendors in the field of technical support. Clients selling any type of technology are tired of the headaches related to recruiting savvy customer service personnel who can address end-users using multiple channels and guaranteeing excellent levels of interactions. A savvy outsourcer, using a combination of offshoring and automation, can not only take on and improve the technical support end-user experience, but also do so at a reduced price. In the technology sector, where margins are constantly being squeezed, this is an important success factor.”  

Debt collection holds promise for outsourcers

Debt collection and accounts receivable management have been highlighted by many firms recently as a growth area within outsourcing. This is due to rising personal indebtedness in western markets, and the need for creditors to recoup these funds. However, there are a number of obstacles for outsourcing vendors looking to enter this space. Datamonitor has identified statutory compliance requirements and saturated markets as being among the most important. But, if an outsourcer is willing to invest the funds necessary to take on the right management team, or potentially buy a debt collection specialist, the long-term rewards could be significant.

London – Traditional contact center infrastructure vendors face few greenfield opportunities in the large enterprise market in mature geographies. This, according to independent market analyst Datamonitor, has caused them to change their sales and marketing strategies, focusing much less on the benefits of the transition from time division multiplexing (TDM) to internet protocol (IP) and much more on topics such as unified communications (UC) for the contact center and ways to connect the enterprise with the branch and the contact center. The report “Decision Matrix – Selecting an IP Contact Center Vendor,” which provides a comparative analysis of the top IP contact center vendors in the enterprise market, says that IP contact center vendors have begun to offer unified product lines, aiming for common administration and reporting, common user interfaces and functionality far beyond basic routing.

An IP contact center is any contact center that does not use traditional circuit switching; that is, all calls are voice-over-IP or are converted from TDM to IP. An IP contact center leverages the intrinsic benefits of IP communications, including the fact that either or both voice and data communications can be efficiently routed to any customer service agent with access to an IP connection. Through the use of SIP, IP contact centers can detect and route customer communications based on SIP-controlled presence management in place of the traditional automatic call director (ACD).

“In order to offset markedly slower growth in the their traditional stronghold of the large enterprise market, IPCC vendors that had traditionally sold technology for very large contact centers will continue to try to find ways to package and sell products for smaller customers,” says Ian Jacobs, senior analyst for customer interaction technologies at Datamonitor and the report’s author. “This means increased competition for companies that have already created small and mid-sized enterprise products. It also means increased competition for technologically and business process-savvy channel partners from which smaller companies typically buy such products.”

Very different market leaders

Taking these trends into account, Datamonitor created a three-pronged framework for evaluating IPCC vendors. In the Decision Matrix, Datamonitor provides a summary of IP contact center vendors’ capabilities based on a quantitative assessment of their market impact and end-user sentiment, as well as an extensive review of the technology features that they offer. Taken together, these three set of criteria serve as the basis for Datamonitor’s positioning of vendors as Shortlist, Consider, or Explore in the competitive landscape.

The ‘shortlist’ category features two very different vendors: Avaya, with a long communications equipment history, and Alcaltel-Lucent / Genesys, a parent company that merges two different enterprise and carrier communications vendors and a subsidiary that has been successful by upending the switch-dependent paradigm for contact centers.

“There is little space between these market leaders, an indicator of the intensely competitive nature of the contact center industry and of the wide-ranging, but differing, appeal of the two companies’ approaches,” says Jacobs. “Although both were selected as leaders, Alcatel-Lucent / Genesys and Avaya have very different priorities and roadmaps and will not necessarily always directly compete for the same client accounts.”

The recession has led to an increased focus on customer service and retention

The sluggish economy has led to a change in strategy in the contact center: the focus has shifted from customer acquisition to customer retention. Clients’ budgets are tightening and consumer confidence is in decline along with consumer spending. This is making it difficult for enterprises to gain new business, and they are concentrating on current customers, improving customer service and seeking out contract renewals and upgrade opportunities. Customer service quality and customer intimacy are becoming increasingly important to achieve good customer loyalty rates.

Core IP contact center features and functions are important and customers still consider functionality when making their purchasing decisions. “But, the difference between choosing vendor A and vendor B rarely comes down to which technology provider can implement specific-agent recall routing rules or which one has a scripting engine for canned email responses”, concludes Jacobs. “This is why it is crucial for enterprises to consider technology alongside other factors such as a vendor’s reputation among its own customers and its position in the market.”

London – Despite the fact that enterprises globally are planning on keeping their IT budgets flat and there will be no growth in 2009, a new report by independent market analyst firm Datamonitor reveals that in some countries, enterprises are much more confident about their future outlook with planned IT budget increases outstripping IT budget decreases. Titled ‘How Will IT Budgets Hold Up in 2009‘, the report also goes on to reveal that even in the industries worst affected by the downturn, there are opportunities for technology vendors.

“It is clear there has been a noticeable decline in enterprise confidence. However the findings are not as negative as might have been expected”, says Daniel Okubo, technology analyst with Datamonitor and the report’s author. “Despite the rise in the proportion of IT budgets which are remaining flat, there are still a sizable proportion of enterprises which are planning to increase IT expenditure. Technology vendors should be keenly aware that the economic conditions of a country directly impacts enterprise IT budgets.”

Rising number of IT budget decreases

Datamonitor surveyed 520 IT decision makers* towards the end of 2008 to gain an understanding of how enterprises are reacting to the global economic crisis, and to gauge their confidence levels.

Across all of the 14 countries surveyed in the second half of 2008, there was a rise in the proportion of planned IT budget decreases compared to a similar survey conducted in first half of 2008. The percentage of IT decision makers who plan to decrease their IT budget significantly in 2009 has risen to 8% from 3%, over the last 6 months.

(Table 1 below, compares the results of a survey conducted in H1 2008 with the results from the H2 2008 survey. If you are unable to read table 1 below, please contact the press office)

Confidence is lowest in the UK, France and Italy

In these three countries the proportion of respondents planning to decrease their IT budget outweighs those that are planning to increase their IT budget in 2009.

Noticeably, there are also a significant proportion of enterprises in the US and Spain that are planning IT budget decreases. Unsurprisingly all these economies are projected negative GDP growth in 2009.

(Table 2 below shows how enterprises expect their IT budget to change in 2009. If you are unable to read it, please contact the press office)

Enterprises in Benelux, Nordics and Australia are the most confident

Despite the bleak outlook for some countries, enterprises in Benelux, Nordics and Australia appear to be much more confident about their future outlook with planned IT budget increases outstripping IT budget decreases. These economies are expected to be less affected by the economic downturn, with the exception of Iceland, and this is reflected in Datamonitor’s findings.

Opportunities still exist in certain vertical markets

Even in the industries which have been the worst affected by the downturn such as manufacturing and retail banking, there are opportunities for vendors who understand enterprise requirements in a downturn.

In the manufacturing sector, software vendors are going to see demand fall in some areas, such as supply chain analytics, product lifecycle management and marketing customer relationship management (CRM) which are not viewed as core or essential processes. However, other areas like sales CRM, financials, procurement and manufacturing execution will continue to see healthy levels of investment and technology vendors should focus on these core areas.

Similarly in retail banking, investments will be made that: are essential from a regulatory standpoint; make a demonstrable improvement to a retail banks bottom line; and protect the institution from exposure to risk, be it lending fraud or operational failure. Investment into online channels will remain on the agenda, though banks have invested heavily in this area over the past few years.

These are just a couple of examples of where opportunities exist in vertical markets despite the forecasted global recession.

Okubo concludes:

“Datamonitor’s survey reveals IT budgets have been hit the worst in developed economies which are falling into a recession.  Although there is a noticeable correlation between an economies’ future outlook and projected growth in enterprise IT expenditure, there are opportunities in every vertical market if vendors understand enterprise requirements. Enterprises are more interested in raising efficiency than cutting costs. Technology vendors should tailor their sales and marketing to address the specific needs of the enterprises they are targeting, while taking into account the economic conditions they are operating in.”

London – Amounting to over $100 billion worldwide*, overall retail shrink from theft, crime and waste is having a hugely damaging impact on retailers profit margins. Over half the losses can be attributed to Point of sale (POS) shrink – loss incurred through cashier error, theft and fraudulent POS transactions. In a new report, ‘Using Business Intelligence and CCTV to Reduce Shrink in Retail (Strategic Focus)‘, independent market analyst Datamonitor predicts global retail shrinkage will climb to almost $115 billion by the end of 2009. With global retail sales growth in the tough economic climate expected to be small or even non-existent, technology such as data mining used in conjunction with CCTV is one of the key solutions being tipped when it comes to retailers investing in technology to combat shrink and improve the bottom line. Moreover their dual-use beyond loss prevention means they can also be utilized for marketing and merchandising purposes.

“Retailers have long focused their attention on customer merchandise theft. Efforts and big budgets have been spent on expensive closed circuit television (CCTV), digital recording, electronic security tagging, and alarms to prevent and monitor customer theft, says Christine Bardwell, retail technology analyst at Datamonitor and the report’s author. “But attentions are shifting. Over half of shrink can be attributed to internal loss, and general employee- and cashier-caused shrink, whether intentional or not, is a now a massive concern in most retail organizations.”

Process error and ‘sweethearting’ are the biggest causes of loss from internal shrink

The three biggest causes of loss at POS are cash theft, fraud and process error.

‘Sweethearting’, a form of theft involving collusion between an employee and customer, (usually a friend or family member), falls under all three categories, because it can involve cash theft and/or fraud and is very difficult to distinguish from process error. Retailers agree that process error and sweethearting combined, form the biggest part of loss incurred at the POS.

Technology can help identify many of the contributing factors of POS shrink

There are two technologies at the forefront of the fight against the major causes of shrink at the POS. Data mining is used to identify patterns that identify cash theft, fraud, and process errors, while CCTV provides visual evidence to separate actual shrink from false positives.

A data mining application is relatively inexpensive. It quickly highlights weaknesses and fraud in the system and has a huge deterrent effect: as stealing employees are caught, it will discourage others. It is also useful for picking up external crime scams such as organized refund fraud and credit card fraud, as data mining will quickly establish if a card has been cloned and is refunded at stores all over country.

A major advantage for using data mining rather than a simple exception reporting or business intelligence (BI) application is that retailers can monitor multiple aspects, such as the cashier, location, product, and credit card details. Using train of thought analysis, the system can re-write queries.

The benefits of these technologies can also be used for marketing and merchandising

Data mining and CCTV have uses that extend beyond loss prevention. Retailers can also benefit by using them for marketing and merchandising. Data mining can assist in providing data for overall performance and, more specifically, basket analysis and customer loyalty. Video analytics can aid marketing and merchandising. Staff training could benefit from CCTV footage. Internet protocol (IP) networks could help retailers realize further cost savings across the business.

British clothing brand Jaeger rolled out a loss prevention program with a view to cut fraud by a fifth. Shoplifting was only 30% of the problem: analysis estimated that internal theft accounted for 42% of losses, and process errors for 21%. In August 2008, Jaeger completed the implementation of a data mining system. Data from the POS and other sources such as the supply chain, product development and design are merged to allow Jaeger to identify sources of loss. The system enables the retailer to spot process errors and potential fraud, and is also being used for basket analysis. Jaeger expects to improve its bottom line by 2%.

Virgin Megastores in the US provides a good case study for the overall benefits of IP. The retailer has networked ‘Digital Listening Stations’ which allow customers to play album samples and search through the inventory in stock at that location. In addition, the IP WAN is connected to IP phones, servers, kiosks and POS registers. If there is a problem with any device, an alert is triggered.

Technology vendors will need to prove to retailers that the investment will deliver a quick return through a trial or working case studies before a retailer will part with their money.

Bardwell concludes:

“Retailers need to be efficient in dealing with shrink. Loss prevention (LP) will be a high priority in the coming years because of the hard business climate so there will be growing pressure on retailers to invest. Using technology to uncover internal fraud quickly will enable them to discipline or retrain the staff responsible without further damage to the bottom line.”