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November 07, 2007

Hosted Call Center Solutions Provider TouchStar Acquires Data-Tel Info Solutions

By Patrick Barnard, Senior Web Editor, TMCnet

Continuing with its strategy of consolidating the market through the acquisition of direct competitors, Denver-based call center software and solutions company TouchStar today announced that it has acquired Phoenix-based Data-Tel Info Solutions for an undisclosed sum.

The deal means TouchStar (News - Alert) will now sell Data-Tel’s hosted, turn-key call center solutions, which are primarily geared for the telemarketing industry. Data-Tel offers a wide range of solutions, from small-scale hosted solutions to enterprise-level systems, as well as a set of competitively priced stand-alone products. TouchStar plans to maintain Data-Tel’s full product line and will now operate the company as a subdivision, with development, support, marketing and sales being handled within TouchStar’s well-managed business framework.

During an interview with TMCnet last Friday, TouchStar CEO Steve Bederman said the deal fits in perfectly with the company’s ongoing strategy to grow rapidly through the acquisition of direct competitors which are cash flow positive and which will bring new synergies when conjoined with TouchStar’s impressive range of industry leading call center solutions and support services.

“We’re going to maintain Data-Tel as a subsidiary of TouchStar Software,” Bederman explained as he was exiting a planning meeting with Data-Tel officials last Friday. “We’re going to combine our hosted services with their hosted services .”

Bederman said with the exception of Data-Tel President and CEO G.L. Scott Murray, TouchStar will retain all of Data-Tel’s existing 25 employees and will also keep the company’s existing headquarters just outside of Phoenix, as well as it existing data center operating approximately 2,000 lines. Murray will pursue other business interests including the outsourcing business formerly owned by Data-Tel. TouchStar did not acquire the Data-Tel outsourcing services and has no plans to enter that market.

Bederman said TouchStar’s strategy of accomplishing growth through acquisitions has been part of its plan almost from the get-go. In late 2005, the company acquired New York City-based Digisoft Computers, Inc., which offers software based contact center solutions and the leading scripting tool available on the market. Then in December 2006 the company acquired Davenport, Iowa-based Sigmaworx Inc. (formerly ETS), one of the original predictive dialing solutions which had over 2,000 legacy customers. This was a move which significantly increased TouchStar’s market share. In both cases, TouchStar has maintained the full product lines of both companies, and Bederman said Data-Tel will not be an exception to this rule.

“It gives us a lot of flexibility to maintain them as a subsidiary,” he said. “At the same time, TouchStar is a well-centralized customer support organization and a well-centralized development organization and a well-centralized marketing organization. So what we will do from the corporate level is we will integrate Data-Tel staff in those areas that I just named. So what happens to the Data-Tel customer base is now they get the advantage of the intellectual property and mind-share from the whole, rather than from a small company.”

Bederman said in TouchStar’s view, this strategy of maintaining distinct product offerings is more effective compared to the (arguably more common) strategy of absorbing competitors, taking their proprietary technology and then doing away with their brands completely (or consolidating their products into a common shared platform, as so many other hosted call center software vendors have done).

“We used to feel so happy when one of the larger companies out there acquired one of our competitors -- because that competitor would just disappear,” he said. “So it would reduce our competition, in a sense. Our model is to maintain the entities as a whole and thus maintain the identity and the loyalty with our customer base -- and to maintain the value of the products. In order to do that, we had to learn how to manage multiple platforms -- rather than do what sounds simpler, which is the consolidation of products. We prefer to offer multiple platforms to give a customer a wide range of choices.”

With the Data-Tel acquisition, TouchStar now offers four distinct contact center telephony platforms, each geared for a specific set of call center types. Between these four platforms, the company can serve the needs of a wide range of companies working in practically all the major verticals and industries.

“Our belief is this: If we’re taking on the responsibility of consolidating the industry by acquiring direct competitors and reducing the choices available to the consumer base, then we have a responsibility to not limit their ability to choose appropriate products for themselves,” Bederman continued. “In one segment of our industry there is a company that has gone out and literally, over the last five years, bought up almost every competitor in that industry. And every time they did, they sunk their (competitor’s) products and insisted that everyone use this one platform. And today the only reasonable choice to a product for this particular segment is through this one company and their one platform -- so there’s not a feeling of collaboration with the consumer. We prefer to give consumers choice and meet our promises. So we’re adding value to these companies by laying in our methodology of operations while at the same time giving the customers the opportunity to make choices.”

The acquisition of Data-Tel’s corporate headquarters in Arizona adds to TouchStar’s geographic reach: In addition, it also operates offices in Davenport, Iowa (acquired from Sigmaworx) and in NYC (acquired from Digisoft), plus it has offices in Manchester, England; Mumbai, India; and Manilla, Philippines. Of course, making the pot even sweeter is the fact the TouchStar has acquired Data-Tel’s state-of-the-art hosting facility, which currently hosts about 2,000 lines. Bederman said TouchStar plans to expand the capacity of this facility by “five times” over the next year or so.

“That was very attractive to us,” Bederman said of the facility. “It was a strong asset – and it gives us a lot of independence when you add that into our current use of co-locations -- because now we not only have our existing co-los, but we also have this new facility for growth and redundancy.”

Bederman said the acquisition was actually a “done deal” in October. “Both boards have approved the deal -- the money has been exchanged -- legal paper work is finished -- and we’re in there managing it as of right now,” he said, adding that the company “just installed our new manager of the new operation and we’re now implementing our strategic plan.”

Bederman said through the deal, Data-Tel has gone from “a $5 million company to about a $10 million company overnight.” When asked whether the company brings any new proprietary technology to the table that will directly benefit TouchStar’s customers, he said, “there wasn’t anything in particular, but Data-Tel has a fantastic process for getting hosted clients running quickly.”

“Of course, we’re maintaining their intellectual property, but that was not the nature of the acquisition -- it was not a technology buy. It was absolutely a direct competitive buy as part of our next strategic steps. We have a large group of developers ourselves coming out with a wide range of products – so what we’re doing is taking out our direct competitors, and we’re doing that to consolidate the industry, under the brand of TouchStar as the brand of choice.”

“DataTel brings another suite of telephony products to the table,” he continued. “Although they’ve been a direct competitor, they have been much more focused on a segment of the telemarketing customer base that was much more attractive to them than it was, initially, to us..”

“ So now we have products that allow us to sell to the small, the medium, and to the enterprise level. In fact, I think it’s fair to say that there is no other company out there that can offer multiple products to meet customer needs the way TouchStar can.”

The addition of Data-Tel’s approximately 350 customers expands TouchStar’s customer base to about 2,100, and its labor force to about 225 employees.  Bederman said this transaction is just one piece of an ambitious plan for rapid growth that will play out over the next few years. With the acquisition of Data-Tel, TouchStar has grown to a $30 million company -- and with the planned acquisitions that are to occur over the next two years, he plans to grow it to a $100 million company in 2009.

“They key piece of whether this works or not lies in our ability to manage all of this,” he said. “We’re an incredibly process-oriented, well-managed, well-organized and highly managed company -- and you can’t do this unless you have an understanding of how to manage development, support, installations, marketing, sales, and how to manage the multiplicity of it all.”

TouchStar has been recognized as being one of the fastest growing call center technology providers out there.  In addition to offering on-premise and hosted call center software solutions, it also offers predictive dialers, automated voice messaging, ACD & IVR, scripting, recording, VoIP solutions, and an IP PBX (News - Alert) phone system.

Named one of the “Fastest Growing Large Private Companies in Colorado” for the past five years, TouchStar is backed by an equity partner and has already secured funding through state and national banks for future acquisitions.

And the company appears to be headed for more explosive growth in the months to come. Keep your eye on TouchStar!


Patrick Barnard is Associate Editor for Customer Interaction Solutions magazine and Assignment Editor for TMCnet. To see more of his articles, please visit Patrick Barnard’s columnist page.

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