Contact Center Vendor Consolidation: What It Means to You

The contact center and unified communications (UC) markets have undergone a major market consolidation, dramatically reducing the number of competitors, during the past 12 months. Vendors are responding to client demand for all-in-one suites that reduce the complexity of managing multiple vendors, performing system integrations, and administering applications. The vendors are making acquisitions to broaden their product portfolios and eliminate competitors. Other vendors of mostly premises-based systems have acquired other companies to gain cloud capabilities.

Enterprises are trying to figure out how the consolidations will impact them, and analysts are wondering if the acquisitions will drive market innovation or lead to a slowdown as the vendors reconcile their portfolios.

The Impact of Consolidation on End-User Organizations

DMG recommends that companies whose technology vendors are acquired should review contracts to determine if they are protected from having to change their systems/applications before they are ready. As a general rule, from the time a software company is acquired, users have two to three years before they should expect to be "motivated" by the acquiring company to change the products they own. As companies have purchased public branch exchanges (PBXs), automatic call distributors (ACDs), dialers, recording solutions, quality assurance applications, and more, with the expectation that they are going to keep these infrastructure solutions for at least five to eight years, there might be many unhappy companies in a few years, depending on how the acquiring companies proceed with product replacements. If end-user organizations view the enhanced offering as functionally and technically inferior to what they already have, they will not want to swap out their products. Or, if companies feel that they are being pressured to adopt a different acquisition model and do not see its benefits, they are more likely to look elsewhere than to stay with the company that is forcing their hands.

Vendors make acquisitions in the hope that the purchased companies will be accretive to their bottom lines. Typically, this means that the acquiring company is buying market share, technology (innovation), resources, or a combination of the three. However, reality is often different from the plan, and combining two companies has proven to be more difficult than anticipated, as the PBX/contact center market has seen in the recent past.

The Market Outlook and Potential

The contact center infrastructure market has been in transition since 2010, when it became clear that cloud-based contact center infrastructure (and PBX) solutions were here to stay. While the need for premises-based contact center solutions is not going away anytime soon, the future of contact centers is in the cloud. The introduction of many new cloud-based competitors has awakened the contact center infrastructure sector. This round of consolidations, which involves established and newer vendors, is a logical and necessary move for the contact center market.

If vendors execute effectively, the acquisitions will be very positive for the market, giving companies of all sizes new and better options, essentially delivering on the promise of all-in-one solutions from vendors that are agnostic with regard to the sales and implementation model: on-premises, cloud, or hybrid. But for this to happen, which is clearly the intent of most acquisitions, the acquiring companies are going to need to rethink their typical consolidation strategies and approaches and move boldly forward into the era of the cloud economy.

Donna Fluss is founder and president of DMG Consulting, a provider of contact center and analytics research and consulting.