2023 was a very dynamic year in CX services with large-scale market consolidation, significant growth deceleration, and sizable investment in AI technology, especially GenAI.
In 2024, the role of agent augmentation technology will only increase, talent management will come to the forefront of vendor priorities, and clients will focus on delivery diversification, security, and revenue generation activities over digital channels.
The CX services market has slowed to its normal rate
At the end of 2022, the signs of slower market growth for 2023 were clearly visible, and the year proved quite challenging, with most vendors revising down their revenue forecasts to lower single digit growth. 2024 will follow similar growth rates, with NelsonHall forecasting the global CX services market to expand at ~5% CAGR year-over-year to $106bn (excluding collections).
The drivers for this softer market reflect the state of client industries, with weaker volumes in some of the largest sectors such as telecom, retail, and technology; while healthcare, pharmaceuticals, travel and hospitality, and financial services (except mortgages) are becoming the most resilient verticals. Healthcare, in particular, will continue to be a success story in 2024 (e.g., becoming the second largest vertical for TTEC at ~20% of the business).
Some of the more positive signs are the alleviation of clients' decision-making timelines, improved fundamentals in core industries (e.g., mobile phones resuming growth), and declining consumer inflation in the largest markets, boosting sales.
Among all the geographic and vertical variations, the most lasting positive trend is the uptick of first-time outsourcing brands from the mid-market, which, despite their smaller program sizes, are improving vendor client base diversification and risk exposure.
The CX services market reachesmaturity
2023 was the year of large consolidations with the Concentrix-Webhelp consolidation, Teleperformance's acquisition of Majorel, the formation of Altius Link in Japan, and the Konecta-Comdata merger. These deals show a maturing CX services market with fewer larger players managing a more significant share of a multinational market. These vendors have the technology capabilities, design expertise, and financial strength to support more complex client needs.
In 2024, investment funds could drive synergies by consolidating their CX services portfolio, such as Warburg Pincus controlling Arise and now Everise or Capital Square Partners in Movate and Startek. Another possible development is intensified M&A activity in the Middle East and Africa to support the growing interest in the continent for delivery and domestic clients. In Europe, the U.K. is the subject of renewed M&A interest, with potential shifts amongst leading vendors being mooted.
From multishore to cloud delivery
Both 2022 and 2023 continued the trend of moving onshore work to nearshore and offshore. The last twelve months also saw the stabilization of WAH, which is now considered an integral part of CX delivery. Countries such as South Africa, Egypt, Kenya, Indonesia, and Turkey will continue to attract new sites in 2024, with Rwanda, Ghana, and Guyana also picking up new investments.
However, A bigger change is the establishment of cloud delivery models that combine multishore physical sites, hybrid work models, and pure WAH with gig and freelance elements. This 'borderless' delivery plus on-demand workforce is the main answer to persistent volume volatility and flex ramp-up market needs.
If there is one contributing factor to making borderless multilingual delivery a reality, it is machine translation and AI voice. Vendors have made significant progress in 2023, refining the technology and integrating it into their stack, and for 2024 are ready to roll out realtime AI translation and accent neutralization at scale.
Agent augmentation with GenAI
For 2024, unlike any time before, CX services vendors have extensive AI development roadmaps (e.g., Tech Mahindra, Movate) focused on utilizing LLM, conversational AI, sentiment analytics, speech-to-text and text-to-speech, and the above-mentioned machine translation. Most of these solutions are not new, but their scale and adoption are unprecedented. Optimizations in contact center operations, knowledge management, QA, WFM, security, compliance, training, and smart routing are now leapfrogging because of the integration of ML/AI algorithms. In 2024, vendors will differentiate by their ability to effectively and, at lower cost, incorporate IP and third-party AI technology from their partner ecosystem.
This year will likely see the first permanent implementations of agent assist and co-pilots across service lines, digital channels, and languages. By their very nature, these agent assist bots are not another point solution similar to the first wave of RPA/RDA. A real agent augmentation co-pilot, for example, using GenAI to feed next-best-action is only possible in an omnichannel and knowledge-based CX environment. While the next 12 months are too early to showcase this development, the evolution path of contact center agents to knowledge experts is evident.
Talent management is the best inoculation strategy for CX players (again)
Yet, before getting to this GenAI utopia, the priority for vendors remains enhancing their people management. CX services will continue to be a people business in the medium term, where live agents support live customers, not CX bots answering virtual assistants.
2023 was evidence that vendors' expertise in end-to-end talent sourcing, onboarding, training, coaching, mental health support, and well-being is a USP versus captive operations in the global search for digitally skilled resources. The growing importance of ESG for talent attraction and retention is also converting into a new logo acquisition approach, with impact sourcing a stronger factor for clients' selection criteria in 2024.
As brands shift their focus to revenue generation activities, the market will demand upskilling CX employees to become effective in sales through services, social selling, proactive retention, and brand advocacy. Vendors that have the vision to enable this CX employee evolution through talent management frameworks and digital tools will lead the market and be better prepared to fend off any AI takeover of support interactions.
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