Market Update, New Opportunities

Wednesday Oct 9th 2002 by Jonathan Eisenzopf
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The recent VoiceXMLPlanet Conference provided a glimpse into potential new markets that may emerge as a result of VoiceXML technology. Author Jonathan Eisenzopf takes a look at the top insights that he received from the conference in this article.

The recent VoiceXMLPlanet Conference was a great opportunity to hear from vendors and potential customers to get a better picture of the state of the market. It also gave me a glimpse into potential new markets that may emerge as a result of the technology. In this article, I will provide a list of the top insights that I took away from the conference.

Customers will buy VoiceXML solutions

First, the good news is that customers are taking VoiceXML seriously and will be either replacing older IVR technology or developing new systems based on voice technologies. Most companies were evaluating vendors or in an early pilot stage of an initial project rollout. However, customers are moving cautiously and are taking more time to evaluate the products and companies.

Vendors are supporting voice

One trend that I've been watching very closely is the rate at which IVR vendors integrate VoiceXML into their products. Edify and IntervoiceBrite, two well-recognized vendors both talked with me about how they were integrating VoiceXML functionality. Edify will be adding VoiceXML to their existing platform. IntervoiceBrite will actually be offering a separate product line based entirely on VoiceXML, which will provide customers with a nice migration path. Sun has partnered with BeVocal and Nuance to offer carrier solutions that will compete with other high-end offerings such as the Lucent Speech Server. Now that existing vendors are moving hard to support VoiceXML, it's possible that other VoiceXML gateway companies that are not already partnered with a larger vendor will do so. The good news is that the large vendor movement into this space validates the technology and will provide the momentum that some customers have been waiting for before making a move. 

The Voice ASP Market is shifting

Most new voice portal startups initially moved to the ASP model after the consumer voice portal market failed to materialize. Since then, these voice ASPs have refined their focus or decided to get out the general voice ASP business. Telera sold the hosting part of its business to Qwest. Tellme is focusing on large enterprise customers. BeVocal is shifting their focus to carrier hosting solutions. Voxeo has picked up some of the slack and will likely serve a large portion of the small to medium sized business market. I predict that existing call center service bureaus and IVR hosting providers will begin offering voice-enabled services within the next 2-3 years and with the large telecommunications carriers, will take a majority of the voice ASP market.

 Focus on carrier customers

A large percentage of vendors and service providers I talked to are focusing on serving the large landline and wireless carriers. This isn't a surprise because the carrier business spends more money on telephone solutions proportionally when compared other industries. The problem with that strategy as I see it is that the carrier business is not doing so well these days. When you consider bloated capacity with large-scale layoffs at companies like Verizon and the elimination of many CLECs, it's hard to believe that there will be enough revenue to prop up the entire marketplace in over a long period of time. Add to that the long sales cycle of up to a year or more for each carrier customer, along with the limited number of stable carriers in the business. Given these clues, I have to question whether this focus will be detrimental to a few of the companies that rely almost entirely on the industry for their revenue.

It would be wrong to say that everyone is carrier focused though. For example, General Magic, which offers an enterprise Java-based voice platform, is focused on selling integrated voice solutions to the enterprise. This approach seems to make more sense in the long run, however, the rate of adoption of VoiceXML in the enterprise is not happening as fast as some would like.

I think everyone realizes this situation and is making plans to enter the enterprise marketplace and eventually the medium-sized business market in the long run. It will just be a matter of timing. Given that, the market has still progressed faster than I expected.

Confusion about who the customer is

 Who is the customer? Is it the IT manager, call center manager, or telephone systems manager? Actually, it's all of the above. They all have to agree that VoiceXML solutions are a good thing. The problem is that IT departments don't understand how to wire up a telephone patch panel any more than a telephone technician understands how to code a Web application. A coming together of these various branches as well as a unified education process will have to take place. Technical jargon will have to be translated among disciplines and the groups will have to learn to work together more closely than before if voice technologies in the enterprise are going to work. What this tells me is that voice technology in the enterprise will likely have to be accepted and adopted at the CEO/CTO/CIO level before companies will implement it. This means that voice solutions may take more time to sell than say a database system or development tool where the demand and customer are clearer to identify. Over time, selling will become easier as people become more familiar with the technology and the benefits it brings. In the mean time, the market will need to continue the education process.

VoiceXML Rollouts Will Pickup in 2003

There are still many customers who have been working on adding speech recognition to their legacy IVR systems. Right now, I have counted more Fortune 500 companies that are using speech recognition without VoiceXML than with. There will certainly be some large VoiceXML deployments this year within the telecommunications carrier and financial services market, but so far, the majority of deployments and case studies that I have been gathering have been speech recognition without VoiceXML. This is ok--VoiceXML will probably come at the next upgrade cycle for some of these deployments. Some of the companies developing new systems based on VoiceXML may begin rolling them out later this year or early next year. The bottom line is that companies are working on these systems now and we will see deployments begin to pick up in 2003.

SMB Market Underserved = Opportunity

Right now, most vendors are focused on serving large customers. This doesn't mean that there isn't a market for voice systems. In fact, I believe that the small- to medium-sized business market is being underserved. There are companies offering communication solutions such as voice mail, auto attendant, email, and other productivity and standard telephone services to small businesses, but there is a much broader opportunity for serving vertical segments of the SMB market. There are so many more possibilities than just "a better PBX system." One example is RadioVoodoo, a company that has developed a product that allows listeners of radio stations to request songs, participate in surveys, provide feedback on programming and build customer loyalty. That's real value in a package that doesn't have to be targeted at the large enterprise or telecommunications carrier market.

Improvements in ASR and TTS Needed

Despite the great improvements that have been made that enable speech recognition to work on the telephone for production call automation systems, the complexity and time required to develop speech recognition grammars is still too high for the average developer at the average company. In addition, text-to-speech quality is still not good enough to replace recorded prompts.

Here are the two challenges that must be overcome for speech technology to gain the same level of adoption as the Web:

  • speech recognition engines must reach the point where they are over 90% accurate without requiring pre-defined grammars
  • the difference between speech synthesis output and a human speaker must be indistinguishable.

About Jonathan Eisenzopf

Jonathan is a member of the Ferrum Group, LLC  which specializes in Voice Web consulting and training. He has also written articles for other online and print publications including WebReference.com and WDVL.com. Feel free to send an email to eisen@ferrumgroup.com regarding questions or comments about the VoiceXML Strategy series, or for more information about training and consulting services.

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