Where do we go from here? Contact centers are evolving beyond simply providing customer care.
The year 2016 proved to be exceptionally active on the acquisition and financial engineering fronts. The largest event was the $1.4 billion acquisition of Interactive Intelligence by Genesys. This was followed not far behind with the $940 billion pickup of cloud vendor inContact by NICE. In this article, we recap these and other significant events and close with some thoughts about the future of consolidation in our industry.
Aspect Rebounds after Restructuring
Aspect is a company built on mergers and acquisitions. There have been over 20 since the original company, North American Rockwell, basically created the modern contact center with the invention of the automatic call distributor. The numerous acquisitions have provided Aspect with a large installed base of contact center, workforce and self-service solutions, some of which were no longer competitive. Over the years, Aspect management has hastened the evolution of its legacy products with the launch of next-generation replacement products, more acquisitions and a concerted rotation to the cloud. A major step in that rotation to cloud services occurred in 2016 when Aspect, with the support of a majority of its creditors, eliminated $320 million of second lien debt and converted $60 million of first lien debt into 100% of the reorganized company’s equity.
In May 2016, Aspect emerged from bankruptcy. Chairman and CEO Stew Bloom said, “Our emergence from the restructuring process marks a major milestone in the multi-year transformation of Aspect’s business, through which we have evolved from a legacy technology company that sold a limited set of on-premises contact center software, to a contemporary and comprehensive provider of contact center and workforce optimization solutions in the cloud.” This financial engineering has now reduced Aspect’s debt burden by 45% and freed up cash for R&D and market development. Propelled by its intuitive icon and widget-based user interface, the launch of its enhanced Aspect WFO Suite, and measured migration to the cloud with Via, the company’s Customer Engagement Center solution, Aspect is now on the rebound. Pelorus Research revealed that Aspect is the market share leader in workforce management software, and Frost & Sullivan awarded Aspect the 2016 Global Company of the Year Award in the Workforce Optimization Industry.
Genesys Acquires Interactive Intelligence (ININ) for $1.4 Billion
On December 1, 2016, Genesys announced that it had closed its blockbuster $1.4 billion acquisition of Interactive Intelligence. Paul Segre, chief executive officer of Genesys, said, “The combination of Genesys and Interactive Intelligence creates the largest innovation leader purely focused on delivering exceptional customer experiences.” This latest acquisition is the largest of a string of acquisitions that Genesys has made since its spinoff from Alcatel Lucent as an independent entity in 2012. Since that time, Genesys has been under the primary ownership of Permira Funds and Technology Crossover Ventures. Company officials believe the combined company will offer the broadest complement of contact center solutions in the space and will be able to address all market segments with both premise and cloud solutions. The addition of ININ will ensure membership in the elite club of WFO players with more than $1 billion in annual revenue.
NICE Acquires InContact and Nexidia
Another blockbuster was NICE’s acquisition of cloud company inContact. This $940 million deal was announced in May 2016 and closed last November. NICE financed the acquisition with cash on hand as well as debt of $475 million. According to NICE, the acquisition marked the first time that one vendor offers both contact center cloud infrastructure as well as the full range of WFO applications and analytics, providing a seamless integrated environment. The acquisition helped NICE achieve its 2020 Strategic Plan early, enabling it to now focus on NICE2B, its plan to achieve annual sales of $2 billion. One of the pillars of that plan was to expand into adjacent markets. NICE has long concentrated its efforts on the very large contact centers where the big dollars are. inContact’s customer base includes large numbers of midsize and smaller contact centers, many of which were absorbed when inContact acquired Uptivity several years ago. Buying inContact substantially expands NICE’s served available market. Another goal of the 2020 Strategic Plan is the desire to “cloudify” its WFO offering. Acquiring an organization that already has a complete cloud portfolio and an existing revenue stream is a much faster and less risky way to achieve that goal. NICE CEO Barak Eilam said, “With NICE and inContact, organizations will get the best of everything: best-in-class analytics, applications and infrastructure in the cloud, and all fully integrated with a single vendor at a lower cost total cost of ownership and with full elasticity.” In an analyst presentation, Eilam noted that the combined cloud revenue from legacy NICE and inContact would be more than $300 million in 2016.
Where the inContact deal was essentially a revenue growth play, the acquisition of Nexidia in January 2016 was all about technology. NICE paid $135 million in cash to help secure what they believe to be a dominant position in speech analytics. Nexidia Interaction Analytics is powered by a technology called Neural Phonetic Speech Analytics which combines phonetic indexing with familiar search methodologies.
Verint Systems Beefs Up its Customer Engagement Lineup
In 2016, Verint completed two acquisitions: OpinionLab in November, and Contact Solutions in February. One of the core elements of Verint’s customer engagement growth strategy is portfolio expansion. OpinionLab fortifies the Verint Customer Engagement Optimization Suite with its advanced technology for capturing feedback from customers’ digital experiences. Through a previous acquisition, Verint already had a solid Enterprise Feedback Management solution for phone and email interactions. OpinionLab strengthens the digital piece, such as visits to web sites. Verint’s Elan Moriah, president, Customer Engagement Solutions, explained, “With the OpinionLab combination, we’re taking voice of the customer to a new level by giving organizations a complete solution for improving the customer experience across engagement channels.”
Contact Solutions is a provider of real-time contextual customer care solutions. According to Verint’s press release, “The addition of Contact Solutions advances the Verint Customer Engagement Optimization portfolio with cloud-based solutions that enhance voice and mobile self-service through automation and analytics-driven personalization.” The Contact Solutions personalization engine analyzes and adapts call flow based on caller behavior. For example, it can anticipate respondent behavior when encountering a self-service menu and arrange the menu choices to suit personal preferences.
The acquisitions of OpinionLab and Contact Solutions follow on the heels of Verint’s 2014 acquisition of KANA Software and further demonstrate Verint’s commitment to the lead the way on the emerging market for customer engagement software.
My Take
While each situation was somewhat unique, there are some commonalities. In the case of both Aspect and Genesys, large private equity companies held substantial stakes. These firms make money by acquiring companies, guiding them through growth and hopefully turning a big profit on the sale of the company or on a successful initial private offering. Technology companies tend to be valued more on sales growth then profitability, so the case of Genesys adding ININ makes a lot of sense, despite the absence of obvious synergies. Similarly, NICE’s acquisition of inContact provides a healthy revenue boost. The WFO market is mature. NICE has an impressive track record of consistent sales growth, but needs to make acquisitions to continue on that pace. Verint’s two acquisitions were more modest in terms of scale, but quite strategic to its aim of building a leadership position in the nascent market for customer engagement management software. Aspect’s restructuring freed up money for R&D and more aggressive marketing of the their next-generation product lineup.
Where we go from here cuts to the core question of just what business we are in. The conventional view is that we are in the customer care business. I think this may be a bit shortsighted. With the growing maturity of analytics and access to what is arguably one of the most valuable database of customer behaviors—billions of recorded interactions—the industry needs to understand that, beyond customer care, we are in the consumer information business. This is conceptually the same as Amazon and Google who have the ability to narrowly target offers based on an extensive database of consumer behaviors. Therefore, it is reasonable to consider that, in the future, the next big acquisition moves will not come from other WFO vendors but from the giant companies that sell software or services that analyze customer data. Examples include Oracle, SAP, Salesforce, Microsoft, Google and many others.