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January 06, 2006

Recent Consolidations Underscore Next Phase for Standalone IVR Vendors

Robert Liu, Executive Editor

Continued consolidation illustrated by recent M&A deals this week from Genesys Telecommunications Laboratories and Intervoice underscores the market forces that are confronting all interactive voice response (IVR) vendors. And, sooner or later, IVR companies will likely be absorbed into call center software or contact center solutions providers, leaving little likelihood IVR vendors can exist on their own in the not-too-distant future.
“Is there still a market for a standalone IVR company?” said Sheila McGee-Smith, president and principal analyst at McGee-Smith Analytics. “You can’t be a leader in this space as a standalone play.”
Earlier this week, Intervoice followed through on its November announcement to acquire Edify for $33.5 million in cash from S1 Corporation. Meanwhile, Genesys Labs scooped up Brazilian self-service/IVR specialist, GMK, to give the Alcatel company a foothold into the lucrative market. And those deals comes on the heels of last year’s spate of mega-mergers when ScanSoft scooped up Nuance; NetByTel acquired TuVox; and Aspect Communications merged with Concerto Software.
On a conference call Thursday hosted by Genesys, President & CEO Wes Hayden shed light on some of the behind-the-scenes details of the transaction that McGee-Smith believes provided remarkable insight for the market in general.
“One of the most interesting things that Wes said was [GMK] came to them,” the industry analyst explained to TMCnet. Even though GMK was already regarded as a high quality service provider with an enviable customer base, it was still interested in tapping into holistic solutions like Hayden had with his Genesys Voice Platform.
In other words, if you consider IVR and self-service solutions to be first- and second-generation call center systems, then VoiceXML-enabling could be considered the third-generation solutions that motivated GMK (known locally as “Gimme-Ka”) to approach Genesys, Hayden explained on the call. And in the call center space, that logic isn’t uncommon these days.
“In the large enterprise segment, the recent focus has been on providing self-service as part of the complete service picture and therefore the contact center suite,” said Krithi Rao, Frost & Sullivan research analyst.
Clearly, Genesys wouldn’t have agreed to the deal unless it was mutually beneficial. The call center giant viewed GMK’s home market of Brazil as one of its international priorities like China, India and Russia. But years of persistence has taught Genesys that Brazil, albeit stable, remains a very closed market.
“We’ve made a number of attempts to partner and hire people. It's very, very difficult to make the level of investment without the revenue stream to support it,” Hayden said.
But even though his company was clearly motivated to complete the deal, Hayden told TMCnet he in no way paid a premium for Gimme-Ka’s assets. The Genesys official said he paid valuations comparable to other IVR companies like Edify, which sold for 0.9 times revenue, or Intervoice, which trades at roughly one-and-a-half times revenue. GMK has revenue in the range of $10 million to $50 million.
To be sure, some market observers still believe in the long-term viability of standalone IVR companies. “Most contact center suite vendors that have an IVR component still focus on providing the whole solution. However, there are still customer segments out there than can derive benefit from just deploying an IVR and do not need the functionality of a complete contact center suite,” Rao said.
“IVRs have evolved in their capability and their functionality in an enterprise. IVRs are acting as information portals and sometimes just providing options to the enterprise's customers when they call the company. [As such,] IVR sales may not always be in conjunction with call center or contact center deployments,” Rao added.
“Finally, the small and medium business segment (SMB) is still a relatively untouched market that can be addressed by standalone IVR vendors. They have an opportunity here since it takes a separate focus to develop solutions for the SMB segment,” the Frost & Sullivan analyst concluded.
Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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