The customer relationship management (CRM) market has become one of the most crowded sectors in the industry. Contenders vie to squeeze their respective products into the CRM bracket in a bid to capitalize on the visibility and subsequent revenue potential this hot buzzword has created. As a result, the lines have become blurred in what were once separate markets with distinctly defined applications. Call center hardware and software, sales/marketing automation products and help desk applications all now fall under the CRM guise.
Software vendors rub shoulders with networking and hardware vendors in a market where Siebel, Vantive and Clarify with many of the ERP vendors find themselves alongside Genesys, EIS, Davox and Ericsson, Lucent and Nortel who all claim to offer pieces of the CRM pie. And the frenzy to deliver new products is about to generate untold M&A activity and subsequent consolidation in the market (see Call Center consolidation causes chaos).
Lucent Technologies, a networking giant that once confined its activity to telecommunications and data networking equipment, is one of the latest entrants to the CRM market. When it announced the acquisition of call center software house Mosaix at the beginning of the month, the former AT&T spin-off’s intentions were clear. It wanted to raise its visibility through making an investment in an outbound calling and work flow software house to provide additional CRM functionality to its CenterVu PBX-based customer care portfolio.
It’s less clear why Lucent chose Mosaix rather than long term CRM partner Davox. The only conclusion to be drawn is that Davox is still undergoing some merger distractions of its own resulting from its May 1998 purchase of in-bound call center vendor Answersoft, which may have lessened its attraction as an acquisition candidate. Certainly, Davox and Mosaix are roughly equal in size and therefore could be picked up for around the same price. Both vendors have also watched their revenues shrink as the outbound call center market developed into a dog fight between EIS, Davox, Melita and Mosaix itself.
Long term prospects in this market continue to look unfavorable and Mosaix, perhaps more than most, looked tired in a highly competitive market. Even market leader, Melita, which had grown 40% in the last year, was taking a pounding from Wall Street. Melita has consistently beat analyst estimates but its stock price has been very low for the past 12 months which is an indication that the market is really slow and is there won’t be an upturn, says Victor Halpert at Banc Boston Robertson Stephens.
That said, Mosiax had been showing signs of recovery. The company had begun to show tentative shoots of revenue growth under a new CEO and international revenues had been growing at 30% in the last couple of quarters, according to Halpert. However, year-on- year sales showed negative growth and shrunk 9% to $110.1m for fiscal 1998.
Lucent was therefore able to step in and purchase the company using its high flying stock for $145m with each share of Mosaix converted into 0.1927 of Lucent stock.
Mosaix had also just begun to gain market acceptance for an integrated out/in-bound call center suite known as Viewstar that had been built around an acquired product it bought two years ago and had finally brought to market. And this could be another reason why it chose to buy Mosaix instead of Davox.
The Viewstar suite will essentially become the front end to Lucent’s CenterVu PABX-based system and will provide screen pop, email, fax and/or phone support to Lucent’s back-end telephone system – essentially functions for which Lucent had always had to partner, primarily with Davox. Viewstar is designed to guarantee service levels by ensuring that on-line or telephone queries are answered with a designated time period. The workflow engine also creates a detailed record of customer transactions, preferences and buying patterns which, in turn, enables service staff to respond quickly to a customer and stimulate more business. It looks an attractive product because it could generate a fairly swift return on investment for any company that chooses to invest the technology.
As there is no product overlap between Lucent’s existing CRM portfolio and the acquired Mosaix software, the product portfolios are likely to remain unchanged. Lucent claims that it will support Mosaix 4000 and 5000 outbound call systems plus older predictive dialer software – the bedrock on which it built its business.
Mosaix also had a professional services organization of some 50 consultants which proved to be a draw for Lucent. It has been trying to develop a core team of consultants that can implement and advise on core call center infrastructure, since it bought Canadian call center consultancy, TKM, for an undisclosed consideration at the beginning of last year.
Lucent’s CRM acquisition spree is unlikely to stop at Mosaix. As a veteran in M&A activity there is a strong probability that it will buy in more CRM technology within the next 3 to 6 months. Nice Systems, a logging system software supplier, is at the top of the acquisition list. Logging equipment, technology that provides quality control of call center agents by monitoring customer calls or on-line queries and provides a record of either type of transaction, is the fastest growing sector of the call center market. These vendors are going to be part of the next acquisition wave. The market will grow from $90m this year to $160m in 2000, says Halpert.
Although that is a tiny fraction of the CRM market as a whole, which Lucent believes is growing at 27% and is currently worth $11bn, it nevertheless represents a growth opportunity in a sector where each competitor is looking to side swipe rivals to gain additional market share.
