Patrick Watson: That's one of the key challenges. So it's, it's how do you differentiate? How do you succeed in these markets? How do you provide optimum customer experience? How do you best automate the, the, the experience for customers across, you know, ordering, provisioning, deployment management, but it's, but it's all of those topics and we, um, and, and also increasingly contact center as well.

Cause that's one of the best ways to, to differentiate and add, and add value.

Tom Arbuthnot: Welcome back to the Teams Insider Podcast. Really good one for you this week. I talk to Patrick Watson at Cavell, Patrick and I go back quite a long way, and he's one of the analysts that I always talk to around our market. Cavell have got really good numbers around Teams, Teams Phone, also what's going on in the UCaaS space.

So Patrick and I get into all the details of what's going on in the market. Many thanks to him for making the time and also thanks to Audio Codes who are the sponsor of this podcast. Really appreciate their support of everything we're doing. I hope you enjoy the show. Hey, everybody. Welcome back to the podcast.

Excited to have Patrick on the podcast. Patrick and I go back quite a long way. Too long to put on the record, I think. Yeah, but, uh, Patrick's from Cavell. And actually, Patrick, maybe you could introduce yourself and a little about what you eh do at Cavell and what is. 

Patrick Watson: Yeah, of course. Yeah. So Patrick Watson. So I'm Head of Research now at Cavell.

I've been at Cavell nearly five years. Prior to that, I was a tech journalist. That's where we go all the way back. Back to then, Tom. And prior to that, I've worked in IT and communications for pretty much my whole working adult life, which is longer than my face, you know, seems. And Cavell, we're a research consultancy firm that's been working in communications for more than 15 years.

So primarily around market sizing within communication markets. So if you wanted to know how many business telephony users there are in the US, How many of those are using a, a cloud based platform? That was primarily, uh, Cavell's main focus of research. So we have lots of the big technology vendors are our customers in terms of buying that market sizing research.

But as, um, sort of technology is expanded and particularly, I don't know, we'll talk about Teams and telephony today with the, with the incursion of Microsoft more and more into the space. There's been continued convergence. So we've branched out our research into other areas, cloud networking, Microsoft, particularly, um, and also customer experience and contact center, if we use customer experience, sort of the umbrella term.

So it's quite a broad portfolio now in terms of the technology research that we cover. 

Tom Arbuthnot: Yeah, and it's kind of the, I guess, the technology has kind of led you there, right? It was very segregated back in the day, and it was PBX, and then it was UC, and then it's, UCaaS got into mix and I guess it all just started to make sense to be talking about all of it.

Patrick Watson: Exactly that. And we want to be led by customers. So Cavell's customers are industry customers. So technology vendors, the tier one telcos, tier one and tier two service providers and smaller channel organizations. And traditionally, the ones that we'd have dealt with would have had a telephony based portfolio.

So as you said, PBX technology, and As those, the traditional revenue and margin streams have been squeezed, so your termination, your minutes have massively, the price has really been commoditized over, over a sort of 10 year period. Those providers have been looking at other areas of technology to augment their revenue portfolios.

And now I think one of the things, and we have an internal debate all the time, about all the time is sort of market definitions. And what. Type of provider is a telco who is a service provider who is a managed service provider and it's because there's this convergence of technology. And as you said, our research has has reflected that convergence and we've moved into those other areas so we can try and help those customers understand the sort of supplementary supporting areas of technology.

Tom Arbuthnot: And you've had some kind of, I think, the go to numbers, certainly through the Teams growth phase back in the early days, it's been interesting to watch, watch those numbers. I think you were, you were one of the research firms that were waving the flag pretty early on, like, Teams is coming, Teams is coming.

And then it came, uh, like, like, what are you, what have you seen with, I guess, telco service providers as Teams has come and really come to be a big force in the, in the phone space? 

Patrick Watson: Yeah, so, so this was one of the areas that, that we, well, first, when I first started, so more than four years ago, that we saw as was going to be a big disruptor in the space.

So obviously as team moved, Teams moved on from, from, from Skype and I, I, I think. We dedicated a lot of time to try and forecast what impact it was going to have in the market. Uh, and Microsoft obviously released very oCCaaSional high level telephony enablement numbers. So 20 million plus. 

Tom Arbuthnot: Yeah, they're pretty selective and pretty vague, aren't they?

They're all the percentage on oCCaaSionally in the earnings calls, we get an actual number and the earning calls are the best place because they have to be rigorously checked. But as you say you get the big numbers, don't you? 

Patrick Watson: Yeah. And, and, and Tom, in the interest of transparency, that's great for Cavell, because if anyone wants the remainder of the detail on how that breaks down versus direct routing, OperatorConnect, Teams phone mobile and calling plans, we carry those numbers.

And the way we get that,

Tom Arbuthnot: how'd you get that? Oh, you're going to say it. 

Patrick Watson: You read my mind. Yeah. So we get that data through Interviews with service providers, telcos and vendors, and we get that data back on an anonymous basis. We feed it into our data models, and that gives us that, uh, that that sort of level of detail.

But I think to your original question, I think when the when Teams and Telephony first came out, there was a huge amount of naivety in the market about how much impact and how pervasive A really effective Microsoft communication telephony solution was going to be, so there was a lot of education required in terms of what are the different options and as they've developed, and I think we still do a lot of work in this space.

It's still of interest to a lot of telcos. The majority, so we cover global markets, we'll cover telephony data in 190 countries. So if you did want to know how many telephone users there are in Bermuda, we we carry that. We carry that data, although I didn't get to go to Bermuda and count. 

Tom Arbuthnot: I'm really tempted to ask you for the exact number now.

Patrick Watson: I should have that to hand whenever I say that, but primarily we focus on North America and Western Europe. And I think those markets are still the vast majority of Teams telephony users. So the US accounts for more than a third of the Teams telephony users deployed globally as that market, then around a third in sort of Western Europe and wider Europe and the rest of the world.

But the market is still, as you would expect, massively dominated by direct routing in terms of those installed users because it's the solution that's been most you know, mature and developed.

Tom Arbuthnot: Yeah, it's been around the longest, hasn't it? Day one, it was that. And also a lot of customers went from Skype, where they already had the SBC infrastructure.

So they had SBCs. 

Patrick Watson: Yeah, exactly that. And, but I think we are, we, we forecast that in the, in the long term Operator Connect will probably become the, the, the, the majority of the market in terms of deployments, just 'cause of those, those benefits that the solution in an ideal world provides in terms of simplicity and administration and management, especially from the end user side.

But, um, and, and we have seen in our, in our interviews recently, a a bit of a pivot, a bit of a move towards Operator Connect. So some of the, the, the most successful partners, particularly if you look at the most advanced markets. So you look at the US you look at the UK organizations that have really managed to confirm, uh.

A channel Operator Connect play because ultimately a lot of these solutions aren't driven necessarily by the telcos, but by but through the channel, especially to smaller businesses and those organizations that have really managed to, uh, firm up their Operator Connect channel play have had a lot of success within the last 12 months.

So that that's a real change we've seen from from 2023 that the OC is really having an uptick in the channel. 

Tom Arbuthnot: And is it fair to say that I think Microsoft, uh, those 20 million Teams phone users, it's dominated by enterprise. Like that's where Microsoft is strong. The kind of SMB and mid market. I mean, I obviously mainly work with enterprises, but I'd be interested in your, you've got a wider perspective.

Patrick Watson: Yeah, completely. And it depends on your definition of enterprise, because you use the US definition of enterprise. You're talking thousands of employees in an organization. And then you look at. European business market demographics and generally in Europe, we'd use any organization of 250 seats or more to be part of enterprise.

But you're absolutely right. So we do lots of every year. We both online survey and focus group tens of thousands of businesses globally about their adoption of technology, their attitudes towards ask them an array of questions across different tech areas. And we've done that Over the last few years, specifically around Microsoft.

So there's the trend, which I think everyone will be familiar with the collaboration solutions. Generally, it doesn't matter what it is, whether it's Webex or Zoom or Microsoft Teams, skews to larger businesses, generally because of their more disparate nature. Smaller businesses tend to be local. I mean, obviously there's nuance to this, but tend to be locally closer and collaboration is less relevant.

So there's multiple factors. Collaboration is more relevant in large enterprise. And then from our enterprise research, If you use Microsoft Teams, you are more likely to enable telephony for your users if you're a larger business. So you get this sort of multiplier effect where you're more likely to use collaboration, more likely to use Teams if you're larger, and then in turn, more likely to use telephony.

So you make a really good point there. And it really does depend on the market you look at, partly because of the business demographics. So trying to compare France or Germany to the US is. is, is really difficult because the business demographics, but there's a rough rule that around 70 percent of the users are going to be deployed in, if we look at the European definition of enterprise, organizations of 250 plus, and then the remainder in smaller businesses.

But you're right, it dramatically skews towards larger enterprise. 

Tom Arbuthnot: It's interesting. I mean, like it's 20 million phone seats now with Teams, and that is like to clarify Microsoft definition that is like activated with a phone line. There's way more licensed, interestingly, and there's kind of a lot of licensed white space for Microsoft to activate.

Patrick Watson: Well, I think I think that's the really interesting point. And you and I have talked about this previously. And when you look at, um, Microsoft's financial releases, as you said, which are the best place generally for the information. You can do some jigsaw identification in terms of the licensing, and I think the last time we, we looked at it, we made an approximation.

There was probably 60 million or more E5 licensed users globally. So in that, when you look at it in that way, 20, 20, say 22 million PSTN enabled users through Teams, but out of Microsoft Teams. Uh, a licensed base of more than 60, there's a, there's a, there's really a lot of that phrase low hanging fruit to go after in terms of people that are already licensed for phone system, but just haven't added on direct routing or OC or calling plan 

Tom Arbuthnot: for those not in the weeds with the licensing.

It's E5 is Microsoft suite that includes phone. So you'd already have that, but also they sell phone standalone. So you could assume some percentage of that 22 million. Yeah. are not in E5 as well, 

Patrick Watson: particularly in smaller businesses. Yeah, absolutely. 

Tom Arbuthnot: Yeah. So it's really interesting to see. And that's what Microsoft are preaching to a lot of the partners and telcos is like there are there are seats out there already licensed.

And interestingly, I see When there's economic pressure as well, sometimes Microsoft do better in that scenario because customers pull their fingers out and say, Oh, we're already paying for the suite, maybe now's the time to cut this other system cost or the PBX is going into support or we can get rid of the maintenance costs when times are good.

Actually, there's not that much pressure to optimize the spend sometimes. 

Patrick Watson: Yeah, I would completely agree with that. I think we've seen that a lot in terms of The sort of streamlining and optimizing your software suite. And if the, the, obviously the Office 365 is a, is a, is a, is a key. Microsoft 365 is a key pervasive software suite.

And if you've got Yeah. 

Tom Arbuthnot: 400 million Yeah. Active users or something silly now.

Patrick Watson: I mean, the separation of Teams for anyone isn't aware this, um, the, the. The in the European economic area, Microsoft were were guided to separate Teams from the wider 365 suite from a competitive standpoint. And when that news first came out in the European economic area, we actually that there was one of the things we said at Cavell was I wouldn't be surprised if Microsoft do this from a global perspective, because someone much cleverer than me will have done the calculations in Microsoft.

And I think we asked businesses, If you had to buy Teams outside of your 365 suite, even if it was slightly more money, would you still do that? And 90 plus percent of businesses said they would still have done it. So it's not so much that it's inherently within the 365 commercial bundle, it's all those other benefits you get in terms of integration with the Microsoft suite more widely that's so compelling, not just the commercial bundle.

Tom Arbuthnot: Yeah, you're right. I think the bundle definitely helps Microsoft get their feet under the table, but it's interesting that you say they've now broken out globally, and I think it's $5 extra for your team, so you can technically buy office 365 slash M365. They're slightly different, but Microsoft use those terms interchangeably and you have to now worldwide for net new customers or enterprise add Teams on and they get simultaneous pressure.

They get pressure from the competitors saying 5 is not high enough because obviously they want to charge 10, 12, 15 for their suites and you get pressure back from like kind of Microsoft saying that well, we're adding cost to the bundle. It's uh, both directions. It seems like Microsoft have come out on top somehow by unbundling it.

Patrick Watson: Yeah, exactly that. I mean, is it really in the the business benefit for 365 with Teams now to be more expensive than it was previously, which is ultimately what's happened? And as you mentioned from a competitive standpoint, if you look at Teams as a as a five, Euro, dollar, pound, whichever, whichever way you look at it, add on, compared to, so if you look at Slack as a native, you know, at it's cheapest price, it's going to be considerably well, you know, half again on top of that.

So from a competitive standpoint, as you said, it really doesn't seem to have made a huge deal of difference. And from a business side, if you're buying this greenfield, you're going to be paying slightly more money if you want 365 in Teams. 

Tom Arbuthnot: So let's talk about, you mentioned kind of the pressure there that, that UCaaS and Teams and not just Teams, the other UCaaS as well have brought on the market in terms of the telcos, the channel, like, like the minutes cost just seem to have, you know, gone through the floor.

And also I think I always like talking about this at your events because it's really fun. It's like talking to telcos about, let's be honest, the concurrency is way down. Like people are doing a lot more on meetings on VoIP. So what, what reaction have all the different areas of that you focus on had on that?

Patrick Watson: Yeah, I think that's a that's a really the concurrency point that you make is key. So as I said, we track Um, the total business telephony markets of all of the developed markets that we cover. And we have. So if you look at the US, for example, we've got the overall business telephony market. So not the cloud market, but the overall business telephony market declining about 7 percent year on year.

And it's because of exactly that, that you said. So if you move your Legacy, Thousand User Enterprise, where maybe a good high proportion of them, 80 percent might have had a DDI. If you move them into a new collaboration centric, and it might not be Teams, you see the same effect on on RingCentral and 8x8 and WebEx and Zoom as well.

It's very unlikely that you migrate. An exactly concurrent amount of users. And we've seen really, and I know you have as well, I've been talking to you previously, in large enterprises, really significant drop offs where the enterprise has made a decision that actually only 20 percent of the staff that had a DDI previously need to need to use that going forward.

Tom Arbuthnot: Yeah, I've seen very aggressive. I've seen some organizations go as far as you know, they were 10, 000 and they're down to 2, 000 now like that's an extreme but like it also I've seen kind of DDI on requests so a bit like a you know if you want one submit for it we'll give it to the core people based on previous usage but otherwise it's submit.

And it's interesting because that kind of reflects on this, the license seat count out there. Even if adding telephony only adds a couple of bucks a user, does the enterprise want to do it? And that's where Microsoft came in with the shared calling offer, which I feel like nobody in the telco industry particularly wants to talk about, but they have this ability now to share a DDI over thousands of users to give them basic outbound calling.

Patrick Watson: Yeah, the telcos and the providers. I think acknowledge in some cases that shared calling has its place within an organization and that from the Microsoft side, actually, it is a good idea. However, it is not a sort of universal catch all to cheapen your telephony costs. There are. I think a lot of the telcos and providers that ultimately are providing the connectivity are concerned with the bandwidth and compliance and emergency compliance and regulation associated with shared calling, which does propose some problems.

So I think you're absolutely right. You're not going to see a huge amount of telcos. Talking about shared calling because it's turkeys voting for Christmas. But I think in some cases for enterprises, you know, in groups, obviously shared calling is a very viable and attractive opportunity, but it's not a universal catch all for just cheapening your telephony costs.

Tom Arbuthnot: Yeah, that's fair. So what are you seeing? Like, it feels like we've had a somewhat of a hockey stick, certainly with Teams over the last few years and with phone. What's your current thinking based on your research over the next, like, say, 12, 24 months? 

Patrick Watson: Yeah, so We have actually heard, so we've just conducted the last round of interviews of our cloud communications market reports, which we conduct every year, where we will try and interview as many providers as possible and survey as many providers as possible, so more than 100 across North America and Western Europe are those leading providers, and because of feedback for that, we're actually slightly slowing the forecast for Teams telephony, and that's, that's not that's based purely on the feedback that's coming back from industry. And what we have heard is that a lot of the early adopters have moved and you are left with the more challenging deployments, the more challenged, challenging legacy migrations that require more work in terms of architecture.

The legacy environment is still obviously key for a lot of businesses, but needs to be integrated into the new collaborative world. So we've slightly downgraded the forecast across particularly direct routing, which is obviously the sort of fastest growing area. I think more of that will move to OperatorConnect.

When I say we've downgraded the Microsoft forecast, we still have Microsoft Teams telephony options growing at a around 20 percent in developed markets, which is considerably higher than most other PBX solutions in the market. 

Tom Arbuthnot: Yeah, and in an overall declining market as well. 

Patrick Watson: Absolutely. So, um, it's not that Teams isn't growing fast.

It's just you're maybe seeing a slight de acceleration from that point, post pandemic, where it was really rapidly accelerating in terms of user telephony adoption. But that goes back to our initial, your initial point about the licensing. Um, if you would still think there is, there is a huge, relatively easy to access amount of low hanging fruit.

There's still associated costs. Even if you're licensed for phone system, you've got to add on, you know, your numbers and your telco plan. But it is interesting that we are hearing from providers that maybe that acceleration has slightly slowed. 

Tom Arbuthnot: Interesting. And what about UCaaS? It's interesting, like my world has got more and more talking about UCaaS with the obviously certified contact centers in Teams.

I think we're up to 20 certified Teams contact centers, which seems a bit ridiculous now. You've got Microsoft jumping in with Dynamics. What are you seeing in that space? 

Patrick Watson: Yeah. So, well, so, so both, so, so the UCaaS side, And, and so if we, if we ignore our, our Teams work for a minute, we, we had been focusing on UCaaS markets and there was this increasing conversion between UCaaS and CCaaS.

And what, what we've really seen from a vast number of providers is this pivot towards, if you talk about customer experience as an umbrella term and contact center and CCaaS underneath that, we've seen that real pivot towards. CCaaS and customer experience. And part of the reason for that is exactly what we were talking about previously, that some of those traditional revenue and margin streams have been diminished.

And what you see on the contact, the CCaaS side are incredibly buoyant prices. And at the moment from our data, and we ask enterprises every year, What do you pay per user per month for your contact center licenses? What do you pay on a consumption model? We aren't seeing the same level of price degradation that we are seeing on the UCaaS or Core Telephony side.

Tom Arbuthnot: Which is curious, isn't it? Because it's all gone online, but a lot of it's gone online. I feel that market is like seven years behind where UCaaS kind of got commoditized by some big players. There's still lots of competition in there. Lots of innovation. AI has just massively got in there, but you're talking 120, $150 a seat.

In some cases, some solutions. 

Patrick Watson: You're absolutely on the money there. So our enterprise research the last time we did this, the average price paid per user. So if you're looking at a subscription model first of all, and obviously there are other models and I'll come on to that in a minute. That's an additional complication, but if you're looking at a subscription model, I think the average price paid in the US was $125 per user per month, which is really. In Europe it's less than that. It's I think it was about $95 per user per month or 80 something euros. But it is that price buoyancy that's so attractive to the industry. And you look at, I think, as a perfect example, look at a provider like 8x8, who have really pivoted to being a customer experience and Microsoft first telephony provider.

And they were the first, what you'd consider, sort of core UCaaS provider to be accepted onto the operating network. Really 

interesting play. 

Tom Arbuthnot: Yeah, that was fascinating to see UCaaS provider. They pushed direct routing very early as well. I think they saw that a lot of their customers were going that way. So how can we still serve the customer? But it was They've got, they've got pretty good coverage on OperatorConnect, and they've got direct routing, and they've got their kind of plugins for Teams as well.

And as you say, Contact Center, and the Contact Center is certified as well, actually. 

Patrick Watson: Yeah, yeah, it is. And that's one of the things speaking to the management team there, that they want to be able to enable flexibility for customers, whatever the customer chooses, whether, and it might not be that A whole user base is going to Operator Connect, but maybe it'd be the most suitable for one location globally on a on a particular geography.

So having that ability to offer it. I think the other thing that we've seen on the on the contact center side is This real focus towards the informal, maybe not informal contact center market or the contact center light market. And I think generally as analysts and industry commentators, we haven't got the terminology right.

But if you look at RingCentral, RingCX, which is their solution in space, GoTo have got a specific Contact Center Solution, Targeting, sort of 20, 25, 50 User Organizations. So we've, we've seen this real refocusing as well from the UCaaS providers looking to, it's effectively that level between top tier UCaaS, which might be $25 a seat and the cheapest you're going to get from, uh, from, uh, uh, what you'd consider like a, uh, a really renowned CCaaS provider.

It's sort of 65, $70 a seat. There's that gap in between. So we've seen a real sort of. Pivot to that market. Interestingly, Tom, we've tried to size this because we get lots of questions about it. You know how many informal agents are there out there? And it's virtually impossible because how do you define an informal contact center agent?

What features do they have? So it's one of the one of the first world problems that we have in terms of trying to forecast markets like that. 

Tom Arbuthnot: I mean, when I talk about anecdotally, I talk about is the is the agent living in The contact center like is the contact center their UI or is the contact center a percentage of their their time on screen and that that's that's how I try and talk about it.

But you're right, it's really hard. It's interesting. The Gartner Magic Quadrant just came out for UCaaS and Microsoft got dinged for Teams doesn't have a full UCaaS in suite. Yeah. Uh, whereas somebody like a, an 8 By 8 or a Ring can kind of ride the entire journey in theory.

Um, but obviously that they have a, they have a UCaaS in company. Uh, yeah. Or sorry, CCaaS in company in that they have dynamics and yet they're also pushing on QS app as like this contact center light type scenario. 

Patrick Watson: Exactly that. And I've, I've always found the Microsoft Contact Center strategy really easy, really interesting because it was one of those things that's constantly been commentated on by myself and loads of other analysts in the space that, Oh, Microsoft will make an acquisition in CCaaS

they will make a CCaaS acquisition. Obviously, they've made, you know, supporting acquisition, Nuance, other providers that have added to that capability. But I think the strategy that they've got in terms of, you mentioned the 20 plus certified contact center vendors. In order to move up the levels of certification, effectively, you have to deploy more and more of those services in Azure.

And that is obviously an intrinsic benefit to Microsoft. So they've got the third parties who, who are miles ahead of Microsoft in the CCaaS space. And we can't, you can't just sort of move away from that, looking to improve their accreditation, put more and more stuff in Azure. And then, as you mentioned with, with Dynamics.

There's the additional, um, play that Microsoft's got. I think the problem that they've got is on the name, really, because the fact that they're calling it Dynamics Contact Center seems like it's limited to Dynamics and anyone, and it's not. 

Tom Arbuthnot: How was it not Copilot Contact Center? I feel like that's the, you know, how there's this thing about Microsoft's third version.

So we've had DCCP, Dynamics Contact Center platform. Now we've got Dynamics 365 Contact Center. I feel like it's Copilot Contact Center is definitely coming. 

Patrick Watson: Yeah, I couldn't agree more because that is. Uh, and, and even, and we study the industry and we, when I first read about that, I thought, this can't just be dynamic and dynamic.

Tom Arbuthnot: It's the dynamics team own it. So it's in, I think that's area, it falls into that area is you love your name, but as you rightly say, it doesn't depend on dynamics anymore. It can be deployed without dynamics. The can be deployed headless. It's, 

Patrick Watson: yeah, you know, even better than me, than speaking to enterprises and, and this whole, the.

Telephony space can be confusing. The net is immediately. I think that will cause confusion if it was, as you said, Copilot Contact Center. I think that that immediately. So I wouldn't. You're right. The third iteration might well might well amend that problem. 

Tom Arbuthnot: And it's interesting under the covers that's all built on Azure Communication Services, which is the same platform that runs Teams.

And as you say, some of the third party contact centers can leverage that as well. 

Patrick Watson: Yeah, yeah. And I think that's what is so interesting about the strategy that whichever way you go, if you're obviously we're talking Teams here, whichever way you go, Teams Contact Center, Microsoft wins, I think, ultimately, um, and I think it's a really clever strategy.

Use the best, best in class out there in terms of your integration and certification process and also have your own solution which you can develop iteratively. And, um, And let's not forget, Microsoft, I can't remember the last time I looked it was like $19 billion they can spend every year on R& D. You know, if anyone's got the capability of rapidly accelerating product development, it's Microsoft.

Tom Arbuthnot: And the AI thing. I think, like, Contact Center, this is a whole different pod we're going to have to do, but Contact Center is going to get so disrupted by AI. You look at the voice stuff that OpenAI and others are doing of natural voice engagement. Like, I just can't see how it doesn't happen. And Microsoft are plowing, Both tons of money into AI and they have the stake in OpenAI, like that they've got, they've got, I feel like the big players, Amazon, Google, Microsoft, have this technology that other people are going to have to use or license or build, or they're going to have a natural advantage.

Patrick Watson: I absolutely agree. I think in terms of the, the AI piece, you, I was speaking to a provider. Um, of customer experience solutions. He was looking at adding some AI capability into their product set at what you consider the lower end of the market in terms of commercials, and they were looking at transcription and NLP, and they looked at it for the number of users, and it was commercially inviable for them to do using a third party at their current price point.

So you're right. I think smaller providers are, Are potentially going to be priced out of the market in terms of what AI capability and you're going to have to be looking at the larger providers.

I think the one, the one thing I would say about AI and my colleague Finbar's done a lot of work looking at AI in the in the contact center space is that the main restriction at the moment doesn't seem to be the technology. It seems that we did a study of consumers at the start of this year. And perception of customer service, I think 45 percent of consumers said they thought customer service is worse now than it was three years ago.

Um, everybody hates automated systems. I think it was the majority of people that we spoke to hate automated systems and chatbots. So the main resistance to some of this technology isn't going to be the actual technological capabilities on the back end. It's going to be Consumer perception and openness and telling that story with your customers that it's actually speaking to this, you know, completely into interactive IVR, you know, AI based system is viable.

Tom Arbuthnot: We've burned perception, haven't we? With the fairly rubbish versions. I mean, I said to one customer I was working with, actually, it'd be really interesting to do a Press one to talk to our AI agent, then you're self selecting. So people that want to skip the queue and take on the technology route would like, I mean, I'm very technology forward, but I do that all day.

Patrick Watson: You're exactly the same. So when we, when we were doing that consumer focused research, what, what we realized when we were, Putting the study together is that you have to, you have to differentiate between the type of inquiry. So if it's, if it's, so the classic example is if it's an emergency, I think the stat came back that 90 plus percent of people will always want to speak to a human.

It doesn't matter. However, I made the point that as a, and Tom, I think you'd be the same, as a technologist, I'm, even if my house is on fire, if I can speak to a chatbot and The service, ultimately the end service is the same, the fire engine still gets to my house, I'm fine. 

Tom Arbuthnot: Yeah, so much of contact centers, for better or worse, are agents sitting at desks reading out what they're told on the screen.

That's why people get frustrated as well, because they're like, well, I can only say A or B, like, so they're already just a, like, in the worst case, the voice box for the computer. Um, but I mean, imagine zero ring contact centers like you just ring and like opening hours. Where's my order like? And that's where the nuance acquisitions interesting as well for Microsoft, because they've got that in the bag.

And that's some of the best voice rec stuff aswell 

Patrick Watson: you just you just hit. So also in that consumer survey. So we asked what are your biggest frustrations? Number one frustration waiting times. which automated systems, you know, put an AI enhanced systems can potentially alleviate. The second one was rude or poor quality agent interaction.

And as you said, that is, there is this intrinsic benefit between sort of agent experience and having to do those sort of mundane tasks. And then the the customer experience they then provide. So there is there's a possibility that it could rapidly remedy a lot of those areas. But I think that you're right that we've got a lot of work to do on the on the sort of consumer perception side.

Tom Arbuthnot: Awesome. I really want to have a longer conversation on that. But I also want to talk about your upcoming London event, Cavell Enable. So let's, let's talk a little about that. 

Patrick Watson: Yeah, great. So, so we, this will be the third year. So this is taking place on the 3rd of December in London. There are still tickets available.

As I said, it is industry focused. So it's generally service provider, telcos, although last year, Tom, you held a, you chaired an enterprise. 

Tom Arbuthnot: Yeah, we brought enterprise customers on to talk, which was really interesting to hear, to have it. A room full of telco and service providers listen to what the customers care about, don't care about.

I thought it was really fun. 

Patrick Watson: Yeah, and that got really, that got really good feedback from our service provider. So that event is focused around what we what we what we've called telephony enablement markets. So Operator Connect, it would be one. So where effectively it's a marketplace within an application or platform itself, and that the same would apply to WebEx Cloud Connect, which is the same web service provider.?

I think they've got 45 providers. So you can now add your telephony services for WebEx through one of those 45 providers through through Cloud Connect and also Zoom Peering. So we're focusing specifically on those enablement markets, because I think one of the things we heard from our service providers and telcos was this is really challenging.

How do we differentiate when we're effectively a tile on a digital e commerce platform? 

Tom Arbuthnot: Yeah, 103 now on Operator Connect, which is interesting. 

Patrick Watson: Yeah, and that I think is, um, that's one of the key challenges. So it's how do you differentiate? How do you succeed in these markets? How do you provide optimum customer experience?

How do you best automate the experience for customers across, you know, ordering, provisioning, Deployment Management, but it's, but it's all of those topics. And we, um, and also increasingly contact center as well, because that's one of the best ways to differentiate and add value to that. So, uh, yeah, we'll be covering all things, um, telephony enabled.

And that's 3rd of December in London. And you can go to, uh, Cavell.com if anyone's interested in more detail or tickets. 

Tom Arbuthnot: Yeah, if you're in this space, I'd really recommend it. It's one of my favorite events because it's hyper focused and the conversations you have in the room and some of the, you know, the, you share some bits of your research as well.

It's always a good event. 

Patrick Watson: Yeah, and it's always good to have you along. I think the more interest that we can garner from that, I think, and going back to your enterprise panel, it's really feeding back. What customers and businesses are saying to telcos and service providers who ultimately provision a huge amount of this telephony communication software that still hasn't gone away.

We talk about other traditional markets, but they're still responsible for this. So it's really, you know, trying to help them understand exactly how to succeed in these markets and what customers want. 

Tom Arbuthnot: Awesome. Well, Patrick, thanks for coming on the pod. Really nice to catch up and, uh, yeah, very much looking forward to Enable as well.

Patrick Watson: Absolute pleasure. We'll have to have a completely separate one about, um, Copilot in telephony because I know that has caused a lot of consternation. 

Tom Arbuthnot: Yeah, we'll definitely get into that. I want one on, uh, your, your colleague as well on AI in the contact center. Sounds like a good one. 

Patrick Watson: Of course, I'll drag Bimbo along as well.

Thanks for having me, Tom. Thanks, Patrick.