# AI is expanding contact-center demand while capital delays consolidation

Markdown copy of https://realalpha.app/s/ai-is-expanding-contact-center-demand-while-capital-delays/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Bret Taylor](https://realalpha.app/builders/bret-taylor/) · Bret Taylor is co-founder of Sierra. · Co-founded and leads Sierra, an enterprise AI agent company; chairs OpenAI's board and co-created Google Maps.
- Host: [Joubin Mirzadegan](https://realalpha.app/people/joubin-mirzadegan/) · Partner, Kleiner Perkins · Took Palo Alto Networks' cloud business from $2M to $50M+ ARR in a year.
- Show: Grit
- Episode: [How Sierra Is Pulling Ahead in the AI Race | Co-founder Bret Taylor](https://realalpha.app/v/6v9q6k8aF6E/), Mar 9, 2026
- Moment: 17:27 to 21:57 of the episode (5 min), playing on https://realalpha.app/s/ai-is-expanding-contact-center-demand-while-capital-delays/; the episode from there: https://realalpha.app/v/6v9q6k8aF6E/?t=1047

## Quote

> “prior to large language models and generative AI, **about $400 billion a year** were spent on contact centers and BPOs”
> — [Bret Taylor](https://realalpha.app/builders/bret-taylor/) at [17:44](https://realalpha.app/v/6v9q6k8aF6E/?t=1064) · Grit

## Takeaways

1. Contact centers and BPOs represented about $400 billion in annual spend.
2. Lower costs could lead companies to handle more customer calls.
3. High private valuations make acquisitions harder for incumbents.

## About this segment

Bret Taylor puts the pre-AI contact-center and BPO market at about $400 billion annually, with cheaper service expected to drive more calls. Abundant venture funding keeps too many competitors independent until valuations correct.

From “How Sierra Is Pulling Ahead in the AI Race | Co-founder Bret Taylor”, Mar 9, 2026. [Watch the full episode](https://realalpha.app/v/6v9q6k8aF6E/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[17:31](https://realalpha.app/v/6v9q6k8aF6E/?t=1051) that this space is, you know, like next to coding, uh, one of the biggest spaces or markets that I've ever seen. So I don't know, like square that for me. I think you're right. I would say there's two reasons why I think there's a lot of competition. One is the market is gigantic. Um, and you know, prior to large language models and generative AI, about $400 billion a year were spent on contact centers and BPOs and that sort of category. And I think that with AI, you end up generating more demand when the unit economics go down. So put another way, if you do 100 million phone calls a year with your call center, when the cost of phone calls go down, you'll probably you a lot more phone calls, you know, as a consequence of it. So I think the market is gigantic and which is why there's a lot of people going after it. I also think there's, I'll use it,

[18:31](https://realalpha.app/v/6v9q6k8aF6E/?t=1111) that'll mean it's too unfair, but there's sort of an excessive amount of venture available as well. And so as a consequence, you don't really get, right now, we're not really getting the culling effect of the winners and losers. We estimate we're, you know, three or four times larger than and the next biggest player in our space, but none of them have been consolidated yet. I think, and it's, that'll happen.

[18:51](https://realalpha.app/v/6v9q6k8aF6E/?t=1131) I believe it will. Not because they're, as I said, they're not a bad company. They just mean there's like, you know, it's like the economics of software. You know, there's basically, you tend to get a large number of companies all going after a space. Then you tend to get incumbents purchasing the second, third, fourth place players. And it works out well for everybody. It's kind of the economics of Silicon Valley.

[19:12](https://realalpha.app/v/6v9q6k8aF6E/?t=1152) right now, because of the wide availability of capital, the valuations for the second, third, fourth, fifth, sixth, seventh, eighth, ninth place players are all so high that they're not really affordable for the incumbents to absorb. So you just end up with lots of players in the space. I imagine we'll just see some consolidation over the next few years, just because that's sort of the ebbs and flows of these technology cycles. And you'll end up where you know the folks in the lead have the privilege of sort of becoming the next incumbents if you will you know and remaining independent but because valuations are so inflated right now it's just not economical and especially with valuations depressed with a lot of the incumbent software stocks because of the sort of gray cloud of it.

[20:00](https://realalpha.app/v/6v9q6k8aF6E/?t=1200) hanging over all of them. So it'll just be interesting. I think we'll need probably a modest correction for a lot of the natural kind of consolidation to happen. But I think it will. I think it's sort of a matter of timing and more than anything else. But I do think the markets are different and it's not just service. One of the things I firmly believe is that there is not enough applied AI companies working on AI agents for business processes that are are extremely valuable, as opposed to working for tooling around AI itself. You know, I think software engineering and customer service are certainly two of them. I think the legal tech market, the legal AI agent market is maturing. You know, we're really close to Harvey, one of the entrants, but there's a couple other decent players. They have competition now as well.

[20:52](https://realalpha.app/v/6v9q6k8aF6E/?t=1252) And just like you said, they're credible companies, right? They're good companies. And so competition's good. I'd love to see that in finance. I'd love to see that in other parts of, I'll say, the back office. It'll be interesting to see what happens in marketing. Martech is sort of famously saturated with a billion different vendors, but I think there's a lot that can be sort of truly automated there from purchasing ads to content marketing where you see some investments as well.

[21:21](https://realalpha.app/v/6v9q6k8aF6E/?t=1281) And my view is that that will be, I think that's what most companies would prefer to buy, i.e. buy solutions to their problems or, you know, buy improvements to core business metrics. But just because the market is so new right now, there's just not a really mature applied AI market in a lot of categories. And so it's going to have to go through a wave like we're going through in coding agents and customer service agents, which is you need a lot of companies trying it.

[21:49](https://realalpha.app/v/6v9q6k8aF6E/?t=1309) You need to have the free market do its job of culling, and then you'll see some consolidation on the other side.