Hosted Contact Center Subsector Growing Fast

The hosted contact center subsector is the fastest growing in the hosted CRM space, suggest new statistics compiled by Frost & Sullivan. It is increasing at a rate that is at least as fast as the rate of expansion seen in the hosted CRM industry during the early 2000s, Frost & Sullivan Program Leader Ashwin Iyer told CRM Buyer.

Hosted contact center providers in North America earned revenues of US$127 million in 2005, according to "North American Hosted Contact Center Market," a new study released by the firm, which projects this figure to reach $1.2 billion in 2012.

Growth in the space is expected to explode this year, compared with growth in 2005, based on Frost & Sullivan's projections. It is expected to reach 57 percent by the end of 2006 and to increase by an additional 38 percent by 2012.

Under the Limelight

As in the hosted CRM space five years ago, there are a handful of firms in the hosted contact center space that appear to be gaining over other entrants. These are Five9, Contactual and Echopass. "They all have good offerings, and they are all growing," Iyer said.

These companies, though, are hardly startups. They have all formed partnerships with the major hosted CRM providers, for instance, developing integration hooks to allow customers to merge the two applications with minimal fuss.

The reason this particular niche has not taken off yet, Iyer said, is because it has taken it this long to gain the confidence of companies and the market. "These companies have not been in the limelight much or received much attention, because -- until 2005 -- the market was relatively small," Iyer explained.

Growth Drivers

Last year was a tipping point for the hosted CRM industry in that many more companies, including enterprise-sized firms, became comfortable enough with the delivery model to make substantial investments in the technology. This confidence spilled over to related applications as well, Iyer said.

Indeed, many of the same drivers that spurred growth in the hosted CRM space are responsible for the growth projected in the contact center space. "Pay as you go" pricing, for instance, is very popular among users, Iyers said.

The hosted contact center market is also the beneficiary of favorable timing as many of the companies are replacing investments made during 1999 through 2000 and are opting for an easy deployment like the hosted model. In particular, hosted contact center applications are well suited to managing remote agents -- a growing trend in contact center operations.