Contact Center Solutions Featured Article

Wall Street, thus far, has been less than lukewarm about Convergys’ acquisition of IVR and next-generation, contact-center specialist Intervoice on July 16th. Concern arises from the fact that the company is prepared to pay $335 million in cash when it entered the quarter with only $80 million in “cash” on its balance sheet. Indeed, even though we knew that Intervoice was “in play” with a change of management and a revamped product line, we did not count Convergys as one of the prospective buyers, partly because of its cash situation and partly because Convergys has not been tremendously active as an acquiring company of late.

 

Investor skepticism discounts two important aspects of the Intervoice acquisition. For one, the purchase will be “accretive” for Convergys. Intervoice is, after a year in the red, a profitable company that ended its last quarter (May 31) with $112 million in cash or near cash, along with maintenance contracts that are guaranteed to bring another $95 million.

 

More importantly, the real value Intervoice brings to Convergys is its loyal, long-term installed base of customers. Most of them have major decisions to make as they are forced to transition from legacy, proprietary systems to the more service-oriented world of IP-telephony and open standards, especially SIP, XML (including VoiceXML and the Web).

 

In Opus Research’s forthcoming report, “Customer Care On Demand: Accelerating Deployment While Reducing Risk”, we show that business customers increasingly look to third-parties, like Convergys, to ameliorate the risk associated with maintaining high-quality, phone-based customer care while, at the same time, juggling IT projects often with smaller internal technical staff.

 

Contrast this acquisition with Intervoice’s string of M&A activity over the years. In its 30 years of existence, the company has kept evolving through internal product development coupled with strategic acquisitions. During the first bout with industry stagnation in 1999, the company joined its chief competitor, Brite Voice Systems, in a “merger of equals” that carried the name Intervoice-Brite. It had the effect of doubling the company’s size while eliminating its major competitor but did little or nothing to expand the market.

 

More recent acquisitions were designed to grow the depth and breadth of service offerings to give Intervoice customers confidence that the company was serious in its adoption of new standards and capabilities. The acquisition of Edify in 2005 brought the company more applications and services to sell into the financial services market on a new, “open” applications platform. Bringing Nuasis into its fold gave the salespeople a chance to call on the unified communications devotees among both existing clients and prospects.

 

Broader offerings did not fuel either the topline or bottom-line growth of the combined companies. As a result, Wall Street punished Intervoice. From its high water mark of $36 in early 2000, the company dipped as low as $1.04 in mid 2002 in the wake of certain accounting scandals. As a credit to the power of a strong installed base, the company survived and thrived a bit in the mid-2005 period, but never found the engine of growth that could propel revenues far beyond the $200 million mark.

 

Though Wall Street may not believe it, Convergys is acquiring Intervoice on very favorable terms. Intervoice is already profitable and it entered the year with a much more coherent product roadmap and go-to-market strategy than prior years. Its customers are ready to migrate off a set of platforms that have reached “end-of-life.” Convergys, with its deeper financial resources and broader service offerings, is a more credible solutions provider and integrator at this sensitive, transitional stage.

 

Customers want multi-vendor solutions and Convergys is “vendor agnostic” at least with respect to ACDs where it works with Avaya, Cisco, Nortel and Genesys. Moving IVR and voice processing functions and applications into its network cloud will enable Convergys to accommodate the “standards- compliant” Intervoice platforms along with its existing infrastructure for both Web-based, live agent and automated service, including the Genesys-based SpeechPort platform.

 

In addition, because Convergys has strong operational history both in contact centers and back-office billing for wireless carriers, it has demonstrable experience integrating front-end systems with complex customer databases to support both billing and customer service. It is also largely indifferent to whether clients deploy solutions on their premises or in the Convergys network.

 

Opus Research sees very positive signs surrounding the acquisition. In our forthcoming report we will show how enterprises of all sizes are looking to third-party outsourcers to solve both technical and business problems. During challenging economic times, most have selectively pared down their IT staffs, often eliminating some of the full-time positions of individuals who specialize in arcane disciplines like voice user interface design or contact center workflows.

 

Convergys is on a short list of voice self-service solutions providers, including Verizon Business, AT&T, IBM, EDS (soon to be HP), Qwest and a few others that will tout global scope, vendor independence and deep experience. Extending contracts with Intervoice is, by no means, a done deal, but Convergys’ Open Hosting approach gives these prospects a chance to move forward selectively by outsourcing some or all of the networking, voice processing and application processing on an “as needed” basis.