By Rich TehraniEighteen Years Of Mergers
In May of 1998, I wrote a column in these pages entitled "Merger Fever – For Better Or For Worse." In that column, I mentioned that at that time, one of our exhibit salespeople came to me and exclaimed “The industry is contracting!” (www.tmcnet.com/338.1). It turns out, of course, that this salesperson was very wrong, and the call center market enjoyed decades of growth from that point forward.
As part of that 1998 article, I mentioned that the call center market was so different from the traditional software space where one size fits all. I went on to say that mergers aren’t necessarily a bad thing, and there was plenty of space for well managed start-ups.
I then gave an overview of the features and functions a call center solution should offer. They were as follows:
Logging and monitoring;
Help desk/customer service;
Multimedia routing (voice, fax, video, e-mail, chat);
Complete reporting and analysis;
Agent performance evaluation;
Field sales connectivity;
Computer-telephony integration (CTI);
AIN (advanced intelligent network)/SS7 connections;
Adherence to open standards, ODBC, SQL, COM;
Upgradable/No forklift upgrades;
External and internal sales channel (VARS and in-house sales reps); and
Simple yet powerful user and management GUIs.
To this list I would now add support for IP communications, though I suppose multimedia routing is more or less the same thing. I would go on to say that integration with other applications is more important than ever, so service-oriented architecture (SOA) will become increasingly prevalent.
In addition, there is a shift in usability coming via the advent of the widespread use of AJAX, a technology allowing browser-based applications to seem like software running locally. In addition, the hosted market is becoming more important; as a result, companies are wise to look at a hosted solution before they make an informed choice of what to implement in their contact centers.
In a strange demonstration of the fact that history often repeats itself, another salesperson here at TMC recently told me the market was consolidating again. This time, though, there is more truth to this comment than in 1998. Here is why.
Many companies, especially venture-backed organizations, have "exit strategies" they are looking to exploit. Initial public offering (IPO) and M&A are the two primary options that companies have.
In the last five years, the IPO market has become much more complicated and expensive. Companies must show profit – and lots of it – to effect a good IPO. In addition, the extra overhead imposed by Sarbanes-Oxley compliance has scared many companies away from going public at all.
This leaves acquisition as the best way to allow initial investors to get their money back. Couple this with the fact that the market is coming out of a very rough period during which many companies were valued far lower than the investors expected. As a result, small to medium-sized companies in the marketplace need to exit, and getting purchased is the easiest way to attain this goal.
At the same time, a few monster companies are emerging in the market: Aspect and Oracle, to name only two.
First, let’s consider the former Concerto Software. Massachusetts-based Concerto went on a spending spree over a period of several years, purchasing companies such as the call center division of Rockwell, Melita and others. These companies all had one thing in common: great technology, but an array of management problems that kept them from growing effectively. By acquiring them, Concerto got great technology at great prices. The company then went for the big catch, and merged with Aspect, becoming the entity now known as Aspect Software.
From a market share perspective, the company made some great moves, but consolidating the disparate technologies the company has assembled will take a good deal of time. Still, Aspect has become the 800-pound gorilla of the call center market.
In the CRM space, SAP has been doing a masterful job of growing through integration. SAP’s CRM applications have been integrated into a suite of offerings by SAP. This strategy is working exceedingly well.
Oracle is obviously not taking this lying down, as the company has been assembling a CRM powerhouse through acquisitions, and the latest CRM company to be picked up was Siebel.
In response to the growth of the on-demand market, the Oracle also purchased Telephony@Work to integrate hosted contact center offerings with hosted CRM. Telephony@Work doesn’t have to be in a hosted environment to work, but it certainly does excel in such environments, as the company’s software has been powering MCI-hosted offerings for years.
The question worth asking is whether the market is indeed contracting. While I don’t think it is, and the researchers are showing healthy growth ahead for CRM and call centers, there is something happening in these markets that is new. The players are becoming truly huge.
In the past, when there was consolidation in a market, a slew of new players were created from the engineers of the acquired companies. It was common practice for these engineers to get a big payoff check and then go and get funding to do something new and exciting. This is how the tech markets and other industries have worked for years.
As a result, I expect these recent mergers to be the fuel for the next generation of call center and CRM companies. As a result I expect more competition in the hosted and SMB spaces.
We seem to be in a new era of call center/CRM behemoths and some surrounding satellite companies of more modest size. I think this is a healthy step for any market, and liken it to leaves falling off trees in winter to be replaced by new leaves in the spring.
As you may recall, we recently marked the twenty-fifth anniversary of this publication. I hope to have a wrap-up editorial on this same topic for our next quarter-century anniversary. Hopefully you will still be reading.