Contact centers are alive and well, but they have changed immensely over the last few years and are still evolving. The next generation of contact center firms doesn’t reflect the legacy world of scripted, low-value, transactional phone calls; it’s more about intelligent engagement supported by automation and augmented by AI. Changing customer expectations have impacted this space for years, and now we’re seeing a shakeout among the provider firms.
Arguably, no one knows this better than Chris Caldwell of Concentrix; he has been overseeing the fusion of two contact center behemoths for the last nine months. With a unique perspective from the helm of the contact center firm with the second-highest market share in a highly fragmented market (at 8.3%, more than double the third-largest competitor in the space), Chris is bullish on the dynamics that will disrupt this industry in the coming months and fuel Concentrix’ growth.
While the CRM BPO (business process outsourcing) market is experiencing healthy overall growth, we are seeing the decline of revenue generated by voice-only agents and a steady increase in text-only interaction modes, as well as the interesting element of combined talent that is capable of handling both text and voice communication (Exhibit 1). In sync with this dynamic, clients are demanding more technology, more integration, and more strategic value from their partners. The demand for integrated solutions means contact center companies need to invest significantly in automation. Plus, the competitive space is heating up with IT services and consulting providers jumping in to get a piece of the action.
Exhibit 1: North America CRM BPO Market— The BPO market’s reliance on text and text + voice grows as voice-only revenue shrinks
Source: HFS Research, 2019
These dynamics are driving a highly competitive market and polarizing the industry into large global providers that focus on operational excellence at scale and smaller players that offer a niche. In this heavily and increasingly commoditized business, operating at a larger scale means you can ringfence your legacy business and invest in strategic clients who want to work with a co-investment and collaboration mentality. It’s exactly that bet that Concentrix made in October of last year when it welcomed Convergys to the fold and made a big bet on scale, geographic expansion, and diversification. In this interview, Chris talks to us about his experiences combining two of the largest forces in global contact center and why if “you’re just doing voice, you’re dead” is becoming a reality in 2019 and beyond.
Research: Good morning, Chris. It’s good to talk to you again. It’s been a pretty eventful year for the Concentrix folks—you bought one of the Rolls-Royce engines of the call center world, Convergys. We have had some fun writing about it. It all sounds great, but could you give us a bit of your own experience going through a merger of that size? How hard was that? What have you learned from that? Where do you think this is going to go in the next six to 12 months?
Chris Caldwell, President of Concentrix Corporation: Yes, bringing two 100,000-people companies together has its own idiosyncrasies and a lot of moving parts. Primarily, it’s all around aligning the culture, and we spent a lot of time doing that and making sure [we were] picking the right teams in different regions. We also tend to move quite quickly, so we already had the first two layers done within the first 15 days, and we’ve started to roll out the third and fourth layers.
Honestly, that is just a huge amount of complexity. With client-facing people, you need to make sure the clients are on board. You need to make sure different styles of management are aligned. Also, we tend to have a more decentralized management style than Convergys. Convergys tended to be much more centralized, so we’re in the process of changing how the management systems work. It’s kept us busy, and we’ve learned a significant amount through the whole process. Ultimately, what we found was a lot of amazing people with a significant amount of tenure and a very good client set, which is what we did the due diligence on. So, hopefully, if we do our work properly, we’ll be integrated and growing by mid-2019, which is the plan.
HFS Research: How do you see the evolution of the broadening role of a contact center firm, then, when the clients are demanding more technology, more integration, and more capability? Do you see some of the tech-centric companies getting more into this space? Or do you see some of the winners on the contact center side making more investments in their own technology delivery footprints?
Chris: Yes, they are going to have to invest fairly significantly in their own technology, as well as use best-of-breed tools. So, the reality is that while we do some automation with our own tools, we’re going to use commonly used RPA (robotic process automation) tools because that’s what clients have standardized on. But, we’re all going to have to spend on the technology just to build it out. Just doing “butts on seats” has been dead for a while, and it’s going to increasingly get more difficult or get to a point where people just aren’t going to survive in that business.
I also think that what we are seeing is that you’ve got some players who specifically are coming from IT services or consulting services and trying to get into our space, primarily because customers think, “Hey, I want your technology solution all wrapped up, with people, to drive the end experience, and, by the way, I want to pay for gainshare, a joint venture, or something else.” And so that’s going to be exciting because I tend to think those providers deal with better margins, and it’s harder for them to come down a little bit, and it’s a lot easier for us to move up.
What you’ve been talking about forever, OneOffice, is something we’re experiencing more and more—and that definitely requires technology. And frankly, anyone who fits in that category, if you’re just doing voice, you’re dead. You must seriously be investing in RPA, or you’re not going to be around in three or four years.
HFS Research: We tend to agree, and we think the customers are becoming more open to trying new things with new firms and new partners. A lot of what got many enterprises to where they are today isn’t necessarily what they need in the next two or three years. People are a lot more openminded about their partners and their strategy, so it’s interesting to see companies like yours branching into some of these areas and pushing the needle a bit. If you look out another year or two in the contact center space, do you think we’ll continue to see this aggressive consolidation? Or do you think things are going to quiet down a bit and evolve?
Chris: We’ve been saying, for the last five or six years that consolidation is coming, but I suspect what we’ll see is that the consolidation is going to speed up exponentially in the next 24 to 36 months. We’re seeing a lot of transactions with ludicrous multiples being paid, and I just don’t see people ever getting a return on their investment. The reality is that the trend has kicked off, and you’re going to start to see significantly more consolidation. You’ll also see more private equity (PE) money coming into the space, and those PE firms are all thinking, “Okay, we’re going to consolidate and roll it up,” and you’re also seeing clients push significantly harder on saying, “Hey, I don’t need 15 or 20 vendors. I’m looking for two or three partners,” and that’s driving a lot of consolidation.
So, I think the landscape for the next 24 to 36 months is going to be radically different. I think if we look at the top 20 providers, maybe five will still be around in 24 to 36 months. I think the rest will be consolidated or go out of business, and I think that’s a good thing for the industry as a whole. Bigger players can invest more and pick up more scale. I think you’re going to get this split where [there will be] a lot of boutique players that offer neat solutions, maybe some proprietary tech, and maybe not scale, but that are just really focused and doing an amazing job. Then you’re going to have these huge-scale players that are focused on serving global enterprises with consistency and proprietary tech that can be integrated with the best-of-breed tech. The “No Man’s Land” is that place in the middle, where you’re too big to be small, too small to be big, and you can’t invest in tech, and you can’t do global coverage, and you’re screwed, right? They’ll be eaten up and consolidated out of the business—probably sooner than most.
HFS Research: Yes. Some of them will, and some of them won’t, unfortunately. Some are losing relevance in what they’re able to bring to the table. If you’ve just got a book of clients—and those clients are not particularly happy with where you’re going anyway as a company—what is the acquisition value?
Chris: Yeah, well, you’re right, they’re going out, and, frankly, the barriers to entry in this business continue to go up. I mean, 10 years ago, to start a call center you needed at least some people who could fog a mirror and a phone line, and you could say, “Hey, I’m in the contact center business.” And now it’s, “How good’s your InfoSec security department? How many audits have you been through? How many certifications do you have? Are you able to do it at scale? What are your IT systems and tech? What are your consulting services? What are your mobile development services?” So, all those barriers to entry will really hurt those folks who are in the middle to the point where they’ll be out. If they have something unique they can provide a customer, they’ll be bought.
HFS Research: This is very interesting. So, “go big or specialize” seems to be the message.
Chris: Exactly. Don’t sit in the middle. You’re a sitting duck.
HFS Research: Well, Chris, this has been very interesting, as always. I look forward to continuing the discussions as this evolves.
Chris: Perfect. Brilliant. Have a great, great day.