During turbulent times, CEOs of CX companies often reassure investors, customers and the media by reminding them that their products are “mission-critical”. After all, a business will always need to provide customer support, no matter the economic climate.
However, this bullishness appears to have taken a hit in recent months, as more and more CX giants realize that they might be heading for a global economic slowdown, just like everyone else.
Salesforce, HubSpot, and Twilio all reported hits to their business in recent weeks. And industry leader Avaya has suffered a 21 percent decline in revenue during the last quarter, amid a top leadership reshuffle and a late shift to the cloud.
HubSpot CEO Yamini Rangan recently admitted that HubSpot had experienced a “lengthening of deal cycles and more decision-makers getting involved”, as companies increase scrutiny of tech vendors in a bid to contain costs, amid a worsening economic backdrop.
Marc Benioff, Salesforce’s co-CEO, added to that sentiment, by telling analysts:
“Nearly everyone I’ve talked to is taking a more measured approach to their business.”
Minimizing Costs by Relying on AI and the Cloud
The worsening macroeconomic backdrop means that enterprise buyers have become laser focused on trimming their tech stacks. Top leadership across the CX industry have said that clients want tools that offer the flexibility to adapt to changing demand, while minimizing operational costs by leveraging more AI-driven automation.
Some companies have already reacted to these market conditions, with Vonage recently launching a conversational AI “studio” that companies can use to test and deploy omnichannel bots faster.
But a move to the cloud isn’t a guarantee of savings. Indeed, some cloud operators, like Amazon, are losing out to offerings from the likes of Oracle due to sometimes bloated and expensive services. Oracle CTO Larry Ellison said in a recent interview that many previous AWS customers are moving their cloud operations to Oracle’s OCI in a bid to save costs.
The Downward Trend Looks Set to Stay
To be sure, not all CX companies will be affected the same way. Inflation hits customers’ spending power, which in turn hits companies’ revenues. This in turn leaves firms less money to invest in their operations, and many try to cut costs to avoid raising prices and thus worsen the inflationary cycle.
In fact, Verint’s leadership recently stressed that it had not seen any material impact from rising inflation, attributing its growth to clients trying to save costs by switching to cloud-based automation.
But with every other big player falling like a domino in admitting a slowdown in sales, it is unclear how long everyone else will be able to hold out.
However, not all industries serviced by CX companies look set to be similarly affected. Salesforce CFO Amy Weaver noted that while retail, consumer goods and communications and media were the most impacted, high tech, energy and financial services stayed more consistent in their demand during the last quarter.
This downward trend is likely to continue for the foreseeable future, even as analysts predict that the CCaaS market will double in the next five years. They say this is driven by customers transferring IT resources to the cloud in ever greater numbers, which requires better performing customer feedback management solutions.