AI has replaced 40-50% of contact center agents but only increased revenue 50%, raising questions about market expansion. If AI costs $1 per interaction versus $2-4 for humans, the software market could grow from $10-15B to $75B by capturing even part of the $150B labor spend.
They're at they have their average customers replaced 40 to 50% of their humans with AI and their ACV is only up 50%. It's only up 50% with half their humans replaced with AI. Right. So how much you could help me think about intellectually, but how much does that really expand the TAM? Like, if it's only 50%, that's not enough for your compounding math to be exciting, is it?
If what you're saying is correct, it wouldn't be. But I wonder on each of the dimensions. I mean, my Funny enough, I've just been doing some refresh work on the, as you say, the call center, contact center space. And interesting, you come up with roughly the same rules of thumb that I see in robotics, a totally different space, which is people tend to replace labor when there's a two for one arbitrage. In other words, when we're selling robotics, and I've seen this over and over again, you go in and you say you're spending 100 grand on labor. If on a RaaS robot as a service basis, we can do it for 50, they'll do the deal. Less than that, it's not worth the brain debt. But you typically can get that, you can have the market, and you can get that. And I think in call center, for example, I think that email and call resolution is a two to $4 a pop kind of human, email human resolution based process. I think we are seeing companies getting plus or minus a dollar. So I do think you can get that, you get half the labor you save to you. Right? So by definition, if you're only saving a little bit of labor, you're not going to get enough to uplift. But zooming out, the contact center software market is 10 to 15 billion a year of annual spend. The contract center labor market is at least $150 billion. So now I'm going to arm wave just for a second and you can give me shit. So you could look at that and go, oh my God, it's 75 billion if you do the two for one rule. So it expands from a 15 billion to a 75 billion market. market if you can, quote, eat the labor. I don't think you can eat all the labor by any means. But I do believe there is going to be at least a 2x time expansion, 3x time expansion as you take the simple contact center queries and resolve them on a two-to-one basis for half the price using AI. And you'll and the AI company will be able to take that capital, take that money. So I do think there will be time expansion. I don't think it will be all-- it's not going to eat the whole context out of matter. There's going to be humans on phones and answering emails for the foreseeable future. But I do think there is both automation to be done and time expansion to be gained. If you're pricing it so low that you're giving it just at the margin to your existing stuff, then yeah, that's going to be hard. But I think the value is there such that you can command more.
I'll tell you, I'll give you two other quick thoughts, what it's worth, Terry, you can take me off it. A lot of the folks that are exploding, I don't mean in the AI context center with huge numbers, have either acquired or indirectly acquired BPOs. So they're attaching into that 75 billion in a very interesting way. Not all that revenue is necessarily software, SaaS or AI. I'm not saying it's sketchy, but it might be the, some leaders might be at the edge of slightly sketchy. But I'll give you, like I look at what's like, maybe that's gonna happen. The one I'm watching, I'm just curious, I don't have the answers is, I'm huge proponent of AI replacing sales reps, right? We've talked about that. Everyone out there in the market selling these products is basically trying to sell a 30 to 50 to 60k price pointed up. When we get really good at it, it might be 20 bucks a month, it might be 20 bucks a month. It wouldn't surprise me if when the cursor for sales comes out, for real, it's not a bunch of traditional sales processes trying to charge 50 grand. It's like, this is just software. This is just, this is a really good wrapper and it's 30 bucks a month.
