|Frankly, I am not sure if Wall Streets
current focus on CRM and call centers is a blessing in disguise or if it
will really hurt the industry. To appreciate what I am saying, I would
like to take you back five years to review what happened when Wall Street
had its first love affair with our industry and, more specifically,
with teleservices outsourcing companies.
Five Years Ago Teleservices Companies Were The Darlings Of Wall
Perhaps this publication should be given credit for, or blamed for,
piquing Wall Streets interest in our industry in the first place. By
providing the industrys only verifiable market statistics and growth
rates for teleservices agencies, we might have inadvertently encouraged
Wall Streeters to take a closer look at our industry.
As most of you know, C@LL CENTER CRM Solutions is the industrys
first and only credible source of information on the industry (as
distinguished to such a high honor by Mr. Alex Fraser, marketing manager
of Hewlett Packard). Since 1985, this publication has ranked the
teleservices sector of the industry in three different ways: The Top 50
Teleservices Agencies, both outbound and inbound; The Rising Stars, which
is a ranking of the fastest-growing teleservices companies; and The MVP
Quality Awards, which distinguish the recipients based on the quality of
their service. The combination of these awards and communication of the
phenomenally rapid growth rate of some of the teleservices companies
naturally attracted a series of investors toward such award-winning
I recall, for example, that a company that for many years was in the
number-one position in one of our rankings was sold to a group of
investors for more than 100 million dollars. A number of other very
profitable companies were also acquired by investors, while still others
joined Wall Street by going public. If you read my June 1999 editorial,
Teleservices Companies Fail Or Succeed, you will discover that
shortly after they became involved with Wall Street, many experienced a
mountain of problems. As I stated in that editorial, the call center/CRM
industry is extremely complex and sophisticated. Since they did not
understand that, Wall Streeters thought they could simply come into our
industry, acquire a company, terminate the employment of all key
executives and management who built the company, replace them with a group
of recent MBA grads and the company would prosper. How wrong they were!
Every single one of the acquired companies that followed this highly
ill-advised, downright stupid management philosophy ended up being
destroyed or near bankruptcy. A case in point is the acquired company that
was number one in our rankings for over a decade: It no longer exists! Can
you believe it? The company in question was not only the perennial number
one in the industry, but its original management was, by far, the most
highly respected and competent management in the entire industry.
A Warning To New Acquirers
If you are serious about investing in our industry, I urge you to adhere
to the following guidelines, then, and only then, decide whether or not
this industry is for you:
- Without fail, you must read my June 1999 editorial and understand
what it is really saying and why so many companies were forced to near
- Plan to keep key personnel (and in a well-managed company that means
everyone) and the corporate culture that has made the company to be
acquired a success. Dont think you can save money by coming in with
a chainsaw and cutting everything everywhere. Remember that this
industry is a people industry and is technologically complex. There is
positively no room for amateurs in this industry.
The Right Way And The Wrong Way
One of the greatest mistakes most acquiring companies make is paying
100 percent cash up front, then laying off all key personnel. That is
practically a kiss of death.
There is, however, a successful acquisition model that is practiced by
the management of a company called SR. Teleperformance. This particular
company, which has an extremely good track record of acquiring successful
companies and keeping them successful, has a new approach. Mr. Daniel
Julien, the chairman and CEO of the company, never pays 100 percent cash
for any acquisition. Rather, he pays a maximum of 50 or 60 percent down
and then keeps the entire management team and staff while giving them a
tremendous incentive to stay with the company and do a terrific job. Here
is how it works. If a company is valued at 100 million dollars,
Teleperformance will purchase the company for 60 million dollars down and
then provide incentives for the owners and management to work together to
double the value of the remaining 40 million dollars in the next five
years. As such, instead of receiving only 40 million additional dollars,
the owners and management will now receive an additional 80 million
dollars if they meet the objectives. In this manner, the owners receive
$40 million and everyone is happy. With this kind of highly innovative and
sensible acquisition policy, Teleperformance management has been able to
develop a network of worldwide teleservices companies and has maintained a
growth rate of 50 percent per year in both sales and profits. If you
contrast this highly intelligent method of acquisition with the disastrous
one explained above, you will see that there is no shortcut to success.
The ruthless termination of key people simply does not lead to a
What Turned Off And Then Turned On Wall Street?
Obviously, five years ago, Wall Street was very happy with the
extremely rapid growth of our industry, which in some cases, exceeded
several hundred percent per year (for the Rising Stars). The stocks of
companies going public doubled and quadrupled in a relatively short time
until problems of over- capacity, price erosion and the subsequent loss of
quality led to disaster. As soon as just one of the teleservices companies
missed just one quarter of Wall Streeters expectations, Wall Street
turned a cold shoulder to our industry. The value of stocks that were
previously $80 per share dropped to as low as $1.50 per share! Our
Cinderella status turned into out of favor status and Wall Street
has practically lost interest in our industry for the last four and a half
What Changed Wall Streets Mind?
Wall Street has renewed its interest in teleservices companies over
the last two years as the teleservices industry has become involved in
e-commerce and Web-enabled teleservicing. I must give Wall Street credit
for recognizing the tremendous opportunity that exists for call/CRM
centers as the backbone of the Internet revolution. Today, nothing is
hotter than business-to-business, consumer-to-business and
business-to-consumer e-commerce, and Wall Street knows that call/CRM
centers are playing a key role in this market.
Recently, Precision Response, a respected teleservices company, was
acquired by USA Network for $680 million and as we understand it, this
represents 16.6 times EBITA (earnings before interest taxes and
amortization). Reportedly, this unheard-of multiple was paid for this
outstanding company because of its strong and powerful position as an
effective CRM (customer relationship management) company, as well as an
e-commerce support company in which the e-commerce revenue was growing at
a phenomenal rate. So, Wall Street, as I predicted, woke up to the fact
that no e-sales or e-service company can exist successfully without
providing world-class customer service, customer care and customer
relationship management, which is where the teleservices companies come
in. Lets face it, customer relationship management today is a highly
complex field. It includes customer loyalty, customer retention and
day-to-day interaction with customers, just to mention a few areas where
there is absolutely no room for mistakes and no place for amateurs.
Obviously, CRM is best handled by the companies that specialize in it. It
is the specialty of many teleservices companies and indeed the
core-competency of such companies to do a first-class job of CRM. (To
avoid pitfalls and drastic mistakes, please read my January
2000 editorial). Corporate Americas core-competency is not CRM.
Wall Street has recognized this fact and now has a renewed interest in our
Let Us Not Blow It Again
Those of you who have attended TMC-sponsored conventions during the last
five years know that in all of my pre-keynote speeches, I warned everyone
that we must not lose sight of quality or Wall Street will come down on
the whole industry. I mentioned frequently that the good times could come
to an end someday. Some heeded my advice and others did not. As a result,
the entire industry took a tailspin and disaster struck. Our industry went
from the darling of Wall Street to the cellar in just a few months! Let us
learn from our past mistakes and get involved with the investment
community with our eyes wide open.
A Word To The Wise
Think of what other companies in our industry experienced after they
were acquired before you jump into an agreement with another group of
investors whose unrevealed plans are to cut costs and employment of key
people, which leads to running the company into the ground. Logic dictates
that no one benefits from this type of activity. Therefore, I urge you to
study hard, assess the situation and be extremely careful if you are going
to get involved with Wall Street once again. Dont destroy the fine
reputation of our industry by being short-sighted and blow our chances
As always, I welcome your valued comments.
Executive Group Publisher
Solutions EXPO Spring 2000 Attractions At A Glance
Must-attend attractions planned for
Communications SolutionsTM EXPO Spring 2000!
- Special Microsoft Communications Development Track: Attend
this unique conference track to learn about Microsofts vision of
the future of communications and how to leverage powerful new
operating system features, development tools and other software
resources to build tomorrows solutions today.
- Six Learning Centers: Technology-specific no sales, no
hype areas where you can compare and evaluate cutting-edge
communications solutions from industry leaders. The specific centers
are ASPs, e-Sales/e-Service, Next-Gen Wireless, Speech Recognition,
TAPI 3.0 and IP Testing Tools.
- ConvergeNET: A live, on-site network serving as the
multivendor interoperability proving ground, showcasing IP telephony
- Live Office of the Future: See the latest products every
professional needs to work smarter and more productively. These
products will be shown in-use by live office workers, on the show
- Consultants Corner: The industrys brightest minds made
available to answer your questions for FREE.
- Next-Gen Telco in a Booth: Explore the nuts and bolts of an
actual ITSP (Internet Telephony Service Provider) complete with
profit-generating enhanced services.
- Nortel Networks Succession Trailer. See the latest
next-generation network technology from Nortel Networks on display in
a unique 40 tractor trailer, right on the show floor! Sponsored by
- Live, Web-enabled Multimedia Call Center: A live, on-site
working call center employing the latest Web enabling technologies and
applications, making over 10,000 customer contacts in two days.
Sponsored by CellIT.
- Live CRM Showcase: The latest CRM solutions enabling
you to manage any type of customer interaction in a consistent and
highly flexible fashion. Sponsored by Aspect Communications.
- Your Remote Office: Take advantage of next-generation
communications server technology to redirect your phone and fax calls
to this special area of the show floor, which has been set aside as
your personal workspace. You will also be able to conduct conference
calls, receive voice mail, send faxes and check e-mail. Sponsored by
- Internet Phone Center: Make free long-distance calls anywhere
in the world, using a variety of the latest Internet telephony
services. Sponsored by Quicknet Technologies.
- Job Fair & Career Resource Center: Find your dream job in
the booming communications industry and learn about the latest
educational programs that will further your career.
- Messaging Center: See the latest Web-based unified messaging
in action. Every Communications SolutionsTM EXPO attendee will receive
a free account courtesy of TelePost. See how unified messaging
compares to your current e-mail service, which will be accessible as
Win products worth tens of thousands of dollars such as a new Jeep
Cherokee, digital cameras, Internet telephony gear, Palm Pilots and more.
Drawings will take place at the conclusion of the show on April 28, 2000.
(Must be present to win.)
PS. Dont forget. Exhibit Hall pre-registration is FREE! Save
$50 off Exhibit Hall registration at the show (and avoid the lines).