Customer experience giant Zendesk recently announced the acquisition of Klaus, an Estonian AI startup, for an undisclosed sum. This tactical purchase builds on Zendesk’s expanding portfolio of workforce optimization and quality management capabilities powered by artificial intelligence.
As customer expectations around service personalization and resolution speed increase exponentially, companies must leverage technology to deliver empathetic and effective service consistently across human and automated agents. The addition of Klaus’ conversational AI will provide actionable insights to help Zendesk customers meet and exceed rising CX standards.
The Explosive Growth Driving the AI Imperative
Customer service teams today face skyrocketing demand across rapidly multiplying channels:
- Global customer service call volume is predicted to hit 325 billion calls annually by 2025, rising at a 12% CAGR from 2021 levels according to Oracle.
- Forrester anticipates service teams will see a 20 to 30 percent increase in digital inquiries such as web, mobile app and smart devices by 2023.
- Meanwhile in a Aspect survey, 87% of consumers said they would take more serious action following a bad customer service experience than they did just a year ago.
At the same time, customer expectations for service quality continue rising across metrics like channel choice, wait times, self-service and personalization. 89% of customers now expect real-time support as a given. Delivering differentiated yet scalable customer experiences against this backdrop poses an immense challenge.
The answer lies in AI. Leading research firm Gartner predicts that by 2025, analytics and artificial intelligence will influence 75% of customer service organizations‘ success metrics.
| Year | Global CX Technology Spend | % Change YOY |
|---|---|---|
| 2023 | $580 billion | 16% |
| 2024 | $710 billion | 22% |
| 2025 | $890 billion | 25% |
Source: Forrester
As shown above in analyst projections, investment in transformative technologies like automation, predictive analytics and machine learning is rising exponentially to meet market demands. AI will increasingly become the competitive differentiator for customer experience. That‘s why Zendesk‘s acquisition of Klaus signals where the industry is headed.
What Does Klaus Bring to the Table?
Founded in 2018, Klaus has developed an AI-fueled quality management platform designed specifically for customer service teams. Its machine learning algorithms pore over all conversations – whether chatbot or human-to-human – to identify:
- Positive and negative sentiments
- Risks or escalations
- Follow-ups
- Outliers
These granular insights extracted from customer interactions allow organizations to pinpoint bright spots as well as gaps across their entire CX operation. Klaus enables data-driven decisions around how to boost agent performance, refine knowledge base content, optimize digital self-service tools and tailor coaching.
According to Klaus CEO Mariliis Holm, their technology can analyze up to 3 million conversations per day – enabling enterprises to "scale empathy" in a way never before possible.
Integrating these capabilities natively into Zendesk‘s Support Suite and other offerings creates an integrated solution for managing high-velocity, ever-changing customer relationships in the modern digital era.
Zendesk Completes the AI CX Puzzle
In June 2023, Zendesk acquired Tymeshift, a digital-native shift scheduling tool loaded with AI capabilities. Tymeshift brought advanced capacity forecasting and real-time workload matching directly into Zendesk‘s portfolio. This complemented Guide Enterprise and Explore Enterprise – machine learning powered self-service and analytics offerings launched in 2021.
Klaus represents the final piece in Zendesk‘s AI customer experience puzzle. With proactive call analysis fueled by natural language processing and machine learning, Zendesk customers now have access to:
- Historical insights to improve knowledge bases and bots
- Real-time alerting to coach agents
- Predictions to properly staff and route each interaction
As Adrian McDermott, Chief Technology Officer at Zendesk stated about their $45 million acquisition of Cleverly in 2021:
"We expect AI to become table stakes for customer experience, which is why we continue to invest in machine learning and automation capabilities natively within Zendesk.”
The Klaus deal reinforces this vision and strategy. For Zendesk, integrating conversational AI is not about reacting to point competitors but rather executing on their long-term roadmap to make AI a plug-and-play CX utility.
Competition Heats Up in AI-Driven CX Segment
As customer obsession becomes increasingly critical for survival, investments in customer service and experience tech continue to accelerate. Zendesk competes in a crowded landscape filled with giants like Salesforce, Oracle and SAP vying for market share.
Niche disruptors have also emerged, like the conversational AI startup Observe.ai which recently raised an $125 million. Flow.ai is another hot Silicon Valley startup applying AI to quality management, with backing from leading VC firm Accel.
Legacy telephony brands closely tied to call centers are also adding AI into their suites – Five9 bought Inference Solutions in 2022, while NICE inContact launched customer sentiment analysis capabilities powered by AI the same year.
To defend its premium position serving over 100,000 organizations, Zendesk is placing multiple bets across the AI-driven CX ecosystem. While Klaus represents a small acquisition, its technology forms an integral part of Zendesk‘s future as AI becomes foundational. Integrated natively into its suite, Klaus provides functionality that is still siloed across many competitor offerings.
| CX Software Vendor | Type | 2022 Revenue | Key 2023 AI/ML Focused Acquisitions |
|---|---|---|---|
| Zendesk | Pure Play | $1.4 billion | Klaus, Cleverly, Tymeshift |
| Salesforce | Diversified CRM | $31 billion | n/a |
| ServiceNow | Diversified ITOM | $5.9 billion | Era Software, Intellibot |
| Genesys | Legacy Telephony | $1.5 billion | Pointillist, Exceed.ai |
Source: Company Financials, Press Releases, Crunchbase
As shown above, Zendesk trails giants like Salesforce and ServiceNow in overall revenue but is aggressively catching up in terms of AI capabilities. Meanwhile, legacy call-center centric brands like Genesys are also attempting to modernize CX though substantial M&A investments.
The Path to AI-Powered Customer Service Excellence
While competition accelerates, consumer studies show that CX quality remains widely uneven. 32% of US online consumers say they will switch brands permanently after just one bad experience.
Winning in the market long-term will require companies to take a predictive, proactive and prevention focused approach to managing the customer lifecycle – enabled by artificial intelligence.
According to my experience architecting AI solutions, personalization and problem prevention will be the key value drivers.AI will not just optimize operations but also:
- Drive 1:1 understanding of customer needs and expectations
- Continuously tailor interactions to align with these signals
- Address pain points before they happen
Netflix, Spotify and Uber set the gold standard today by serving up individualized recommendations and experiences powered by AI. Companies not transforming customer service to offer this level of personalization at scale will quickly fall behind.
By acquiring Klaus, Zendesk bolsters its portfolio with expanded capabilities to help its 145,000 customers around the world build closer customer relationships though the power AI-generated insights. But true 1:1 understanding will require integrating signals from across platforms, channels and the entire tech stack.
Over the next 3 to 5 years, I expect vendors like Zendesk to pursue partnerships and platforms plays that seamlessly combine first party data across sales, marketing and service/support touch points. Strings of small tactical acquisitions will give way to more foundational investments and potentially a reshaping of the entire CX vendor ecosystem.
