Enterprises Give Providers Higher CX Scores for 2023, Praise Use of AI Technologies, ISG Study Shows
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Insights
Enterprises' increasing satisfaction with technology and business services providers, particularly in AI services, indicates a positive shift in the industry's ability to adapt and deliver value in a challenging economic climate. The uptick in customer experience (CX) scores, especially in 'Governance and Compliance' and 'Execution and Delivery,' suggests that providers are successfully addressing key areas of concern for businesses. This is reflective of a broader trend where service quality and compliance are becoming differentiators in the competitive landscape.
From a market research perspective, the willingness of enterprises to pay a premium for AI features in software underscores the growing importance of AI in business operations. This trend could lead to increased investments in AI capabilities by service providers, potentially driving up their market value and attractiveness to investors. Furthermore, the report's insights into regional variations in CX scores can guide providers in tailoring their strategies to regional needs, potentially impacting their market share and revenue in different geographies.
The reported increase in CX scores across all pillars can be seen as a leading indicator of potential revenue growth for providers, particularly for those in the AI services segment. Midsized providers achieving the highest average CX scores could attract increased business, potentially impacting their stock performance positively. Investors may view these providers as strong candidates for portfolio diversification, especially in a market that values robust governance, compliance and execution capabilities.
However, it's important to scrutinize whether these improved scores translate into tangible financial outcomes such as increased contract sizes, client retention rates and long-term profitability. The report's indication that enterprises are cutting discretionary spending while optimizing technology investments suggests a cautious approach to expenditure, which could temper the financial impact of higher CX scores.
The emphasis on AI and its high CX score reflects a significant shift towards AI integration in business processes. This presents an opportunity for technology providers to innovate and offer more sophisticated AI-driven solutions. The report's findings also highlight the critical role of Application Development and Maintenance (ADM) in enterprise cost optimization, signaling a need for providers to focus on cloud-native and AI-based applications to remain competitive.
For the technology sector, the increasing demand for AI services and the premium enterprises are willing to pay for these features could lead to a surge in R&D investments in AI. However, providers must also be aware of the growing regulation in this space, which could introduce compliance costs and affect the pace of AI adoption.
Clients rated providers higher in all performance categories in an uncertain macro environment, ISG Star of Excellence™ CX Insights Report finds
The 2023 Annual ISG Star of Excellence™ CX Insights Report, which sums up ISG’s quarterly reviews on how enterprises rate their ITO, BPO and as-a-service outsourcing providers, shows enterprise customer experience (CX) scores increased from 2022 in all six pillars covered by ISG’s quarterly CX survey. The largest gains were in ratings for “Governance and Compliance” and “Execution and Delivery.” Enterprises gave midsized providers (those with annual revenues of
The average provider’s CX score rose from 80.1 in 2022 to 83.7 in 2023, despite an uncertain macroeconomic environment last year that saw enterprises reduce discretionary spending while working to optimize technology investments, ISG says.
“Heightened scrutiny on IT spend and tightening of outsourcing deals are driving providers to go above and beyond to deliver better CX to their customers,” said Heiko Henkes, ISG director and principal analyst in charge of the study. “Providers have stepped up their performance to meet rising expectations in the areas that enterprises consider most important.”
AI received a CX score of 78.9, the highest among emerging technologies, and is becoming a significant part of many outsourcing engagements, the report says. With both increasing enterprise use and growing regulation of AI — trends ISG expects to continue through 2024 — companies are seeking AI-related provider services in many areas, especially enterprise service management and compliance, the report says. Enterprises are willing to pay between 6 percent and 9 percent more per seat for AI features in software, according to ISG’s research.
In addition to higher CX scores for “Governance and Compliance” and “Execution and Delivery,” year-on-year improvements were observed in all other performance categories, including “Collaboration and Transparency,” “People and Culture Fit,” and “Business Continuity and Flexibility.” The average score for “Innovation and Thought Leadership” rose from 78.0 to 80.9 but remained the lowest of the six pillars.
The report also tracks CX scores for 17 technology areas, with Application Development and Maintenance (ADM) receiving the highest score last year, at 81.5, moving up three places from the prior year. ADM is becoming essential to achieving enterprise cost optimization and business objectives, especially given the rise of cloud-native and AI-based applications, ISG says. Scores for Contact Center — Customer Experience were close behind, at 80.0, with enterprises increasingly focused on improving CX.
Scores were lowest for Payroll/Benefits Administration (71.6) as firms grappled with changes in hiring trends, and for supply chain services (74.5) as organizations still struggle to improve in this area following the COVID-19 crisis.
The public sector raised CX scores more than any other industry in 2023, up 9.4 percent, as organizations recognized providers’ ability to comply with policies and regulations, proactively resolve issues and maintain strong cybersecurity, the report says. Public sector scores were highest by a wide margin, followed by manufacturing and financial services. Telecom and media industry clients slashed their average CX scores by 14.3 percent, but providers could improve these by better adapting to external changes and providing agreed-upon resources on time, ISG says.
Survey results by region show providers received lower average scores from enterprises in the
The report reveals details about trends in these and other areas, including the top technology vendors for CX and subcategories of what enterprises want from providers.
ISG will discuss the results of this study and preview its 2024 ISG Star of Excellence Research and Awards program during a webinar tomorrow, Thursday, February 22, at 10 a.m.,
The 4Q 2023 ISG Star of Excellence™ CX Insights Report is available as a free download from this webpage, with more detailed findings, including by provider, available by contacting ISG.
About ISG Star of Excellence™ CX Insights Research
CX scores reported in the ISG Star of Excellence™ CX Insights Report represent the weighted average of client satisfaction scores and importance scores across six dimensions: Execution and Delivery, Governance and Compliance, Collaboration and Transparency, Innovation and Thought Leadership, People and Cultural Fit, and Business Continuity and Flexibility.
Through ISG’s continuous Voice of the Customer survey research, customers are asked to rate the importance of each of the six dimensions and then rate their service provider/vendor on each, on a scale of 1-100. CX scores are also generated across industries, regions and technology domains and for each service provider/vendor.
ISG Star of Excellence™ CX Insights scores are an integral part of the provider assessments offered by ISG Provider Lens™ research, the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team.
Enterprises who wish to participate in the ISG Voice of the Customer survey research can begin the process by visiting this website. Providers also can nominate their customers to participate.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in
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Press:
Will Thoretz, ISG
+1 203 517 3119
will.thoretz@isg-one.com
Julianna Sheridan, Matter Communications for ISG
+1 978-518-4520
isg@matternow.com
Source: Information Services Group, Inc.
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