A new report from market research firm T3i Group provides further evidence of the increasing popularity of hosted or software-as-a-service-based contact center software – as well as the impact the global recession is having on on-premises contact center equipment makers.

According to the firm's "InfoTrack for Converged Applications First Half 2009 Global Contact Center Report," the market for CPE-based agent positions fell more than 30 percent in 1H09, compared with 1H08, with steep declines in every region.

The report measures the number of contact center seats served by on-premises equipment – a logical approach considering many contact centers use a blend of on-premises and hosted technologies.

"As we stated in our previous comments associated with our 2008 report, 2009 will be even worse and will show who has real marketing and sales power,” said Ken Dolsky, senior program director for the InfoTrack for Converged Applications (ICA) program at T3i Group, in a release. “In fact, 2009 has turned out to be a competition to see who could lose the least.”

 

Dolsky added that while not a single equipment manufacturer had positive growth globally, “a few strong companies like Alcatel-Lucent and Siemens (News - Alert) had some regional growth, especially in EMEA. Interactive Intelligence had the smallest global decline but Avaya was the clear ‘winner,’ with increases in market share around the globe.”

 

According to the report, the APAC region witnessed the greatest decline in CPE-based agent positions – more than 40 percent – after strong growth of 33 percent in 2008. This decline is attributed to two main factors: the slowing of local economies and a deceleration of outsourcing from other regions.

Canada experienced the next largest decline of 34 percent, following its 17 percent growth in 2008 -- which the firm claims was partly due to Cisco's (News - Alert) one-time success in selling solutions to Canadian service providers. The EMEA region experienced an approximate 30 percent downturn, while the U.S. and the CALA region reported smaller shipment declines in the mid-20 percent range.

While the report attributes these declines mostly to the impact of the recession, Dolsky said the increasing popularity of hosted or SaaS (News - Alert)-based contact center software is also a major contributor.

“Going forward, it’s hard to see the CPE-based industry recovering to 1H08 shipment levels in the near future,” he said. “Trends such as hosted and self-service have gained momentum and will continue to be viable even after global economies recover.”

He added that “a portion of 1H09 shipments were still driven by consolidation and flattening which, while generating revenue for manufacturers, does not grow the overall market and will decline over time.”

 

Despite the impact from the rising popularity of hosted contact center software, equipment makers participating in the report cited the downturn in the economy as the main reason for declining sales. Factors causing enterprises, service providers and outsourcing firms to reduce their investment in contact center solutions included:

 

--Budget spends at the end of 2008 were accelerated, thus diminishing the need for spend in 2009
--1H09 planned purchase decisions were delayed
--The economics of hosted contact center solutions gained traction
--Increasing percentages of budgets were spent on self-service capabilities and
--Lack of available financing

“Although Avaya’s (News - Alert) shipments were down from 1H08, it increased its lead in every global region because its decline was significantly less than the industry average,” the report states. “Cisco and Nortel (News - Alert) followed Avaya, respectively, in global market share. Not surprisingly, Nortel experienced the largest decrease among the market leaders.”

Of the CPE that was shipped in the first half 2009, about 79 percent was IP-based, up from 70 percent of shipments in 1H08. This, the firm says, demonstrates the ongoing penetration of IP-based technology in spite of the downturn in overall shipments.