Nice (NICE) faces aggressive new competition as the contact center-as-a-service industry gets disrupted by generative artificial intelligence and cloud-based solutions, Oppenheimer said in a note Thursday.

Analysts, including Timothy Horan, said that the industry is generally healthy, but the biggest challenge for Nice and the sector is that major cloud service providers are focusing on moving entire companies' data, applications, security, and networking to cloud platforms and then use AI agents to fully automate all the operations.

Another challenge for Nice is that 75% of industry revenues are now generated from the cloud, up from 25% seven years ago. This shift has been a major source of growth. Most contact center operations have already moved from on-premises to cloud, where Nice has a strong presence, the analysts said.

The brokerage expects the loss of market share for Nice to slow, as large enterprises will take time to transition fully to the cloud and will likely use a hybrid approach for a while.

"We expect enterprises to start increasing spending on AI-enabled [customer centers] this year given the massive, tangible productivity improvements," the analysts said.

Oppenheimer has a perform rating for the company.

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