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An Exclusive Interview With James Foy:
Concerto CEO Discusses
The $1 Billion Aspect Deal

By Glenn J. Kalinoski, Executive Editor, Customer [email protected] Solutions


There was little time for President and CEO James D. Foy to rest following last month's announcement that his firm, Concerto Software Inc., had joined forces with San Jose-based Aspect Communications Corp. Soon he was off to Europe during the week of July 11 to meet with enterprise-class customers ' the types who utilize multiple teams for support services ' to discuss their thoughts on the deal.

"I've spoken to half a dozen enterprise-class customers...in the UK, and those are the companies that traditionally spend tons of money on professional services, either internally or externally, to make their contact centers work," Foy said in an exclusive interview with Customer [email protected] Solutions, during which he discussed the Concerto-Aspect deal. "What they're saying is this is great news for them. They're all delighted. They're saying this is just a perfect match because, in a lot of cases, the customers that we're talking to were already Aspect customers and already Concerto customers, but just getting different parts of the solution from the two companies. Now they can get that much more complete solution from a single company."

"The merger with Concerto is an exciting opportunity to create a new standard of excellence in customer interaction," said Gary Barnett, Aspect's president and CEO, in the July 5 announcement of the deal. "The contact center market is evolving with the advent of new technologies, like voice over IP, and growing customer demand for reduced complexity and increased capabilities."

The space in which Westford, Mass.-based Concerto will find itself means dealing with many competitors. Foy's answer to this included information about the advantages of the merged companies' expanded presence in the market.

Foy described the combined entity as the world's largest company completely dedicated to the contact center. "We have no distractions," he said. "None of the wannabes in the industry can even begin to measure up now to the range of solution portfolio we have."

Foy covered the synergies that will result from the combination of the firms. "[What our customers] get is a much more complete solution to the contact center problem they face, which is evolving and becoming more difficult every day," he said. "They get more of the solution now from Concerto."

He described his firm as the world leader in the predictive dialing space, thanks to the Davox and Concerto heritage. With Aspect, he used the term "world leader" again to describe the firm in workforce management. "Add to that impressive technology in the multimedia unified platform, which provides pretty much all of the components of the contact center, which until recently ' even still in many cases ' are supplied by multiple niche players that present a massive integration problem for the customer and they spend lots of professional-services dollars on gluing this stuff together and making it work," he said. "And even then, they're not able to have a single, unified view of the system from the administrative point of view or from the reporting point of view.'

He added that Aspect has been "preaching very much the same gospel" that a unified solution is the answer in the long term, and "when a single company can provide all that, and provide a very simple transition route to that platform when customers require that additional value, then that's enormously reassuring for our customers."

He said customers will get more of everything and can expect more products, more solution and more support. "We'll have half of the company, which will mean more than a thousand people involved in the support and the services side of our business," Foy continued.

The scale of the deal, valued at $1 billion, speaks for itself. Aspect shareholders will receive $11.60 in cash for each share of common stock, representing an approximate 15 percent premium to the average closing price during the 30 trading days leading up to the July 5 announcement.

The Technologies
There was nothing that can be described as modest in the language used in the announcement, which mentioned the combination of Concerto's "leadership in predictive dialing and unified contact center systems with Aspect's leadership in contact center workforce management applications and performance analytics." The announcement then noted how the new company would be able to offer a product portfolio that will include multichannel routing, self-service IVR, Internet contact and virtual contact center capabilities, reporting, monitoring and recording.

Foy described his firm as now being the "gold standard" for predictive dialing, workforce management and ACDs, with the ACD technology from both Aspect and Rockwell FirstPoint Contact (the latter having been acquired by Concerto in November 2004). "We can see that the technology is going to extend to provide more sophisticated voice applications and more sophisticated business process management solutions that work directly into the contact center," he said. "As the consolidation of our industry continues, and obviously this is a major consolidation, so the stack builds and so additional capability is built...which can be seen to be essentially standard."

The issue of product overlap will be addressed as the companies become one entity. But Foy couldn't provide specifics until the product roadmap details are worked out. He did say that work has begun with the architecture and technology personnel at both companies, both collaborating on development.

Foy also provided customers some assurances. "We're not going to dead-end any of our customers," he said. "We will never give any one of our customers a single reason not to continue to buy our products. If they have any one of our products and they want to buy more of it, then they can. That's also true of the ACD, and that will also be true of the Aspect ACD.

"I think we've already seen some benefits of technology Aspect has been working on that are very attractive and could be rolled into products that we're building in the future, and I mean in the near future, I don't mean a long way down the road."

The Merger
When asked about who will take which positions within the merged company, Foy was unable to be specific at this early stage, but he took some time to describe the "luminaries of the industry" now belonging to the Concerto family. They include Jim Mitchell, a founder of Davox; Chief Technology Officer Roger Sumner, who came on board with the acquisition of Rockwell FirstPoint Contact last year; and Aspect CEO Gary Barnett, described by Foy as a founding engineer of Aspect who "has been involved in every significant innovation that has come from the company." Barnett will be joining Concerto as part of its executive management team, though Foy was unable to discuss additional details regarding Barnett's future role with the company.

The deal has been approved by Aspect's board of directors and is expected to close as early as September 2005, subject to customary conditions, including regulatory approvals and approval by Aspect's shareholders. Upon closing, Aspect will no longer be publicly traded. The new company will be privately held by Concerto's investors, Golden Gate Capital, Oak Investment Partners and management. Foy will be the CEO and president of the combined company. Holders of Aspect Series B Preferred Stock will receive an equivalent amount of cash per share on an as-converted basis.

Aspect noted that, based on current preliminary information, revenue for the second quarter ending June 30 is estimated to be between $85 million and $86 million. Operating income for the quarter is estimated to be $7.5 million to $8.5 million and earnings per share for the second quarter is expected to be in the range of six to seven cents. This compares to the company's prior expectations of revenue to be between $90 million and $92 million, operating income of $10 million to $11 million and earnings per share in the range of eight to 10 cents. The expected second-quarter operating income and earnings per share include about $4 million in restructuring charges related to office space consolidation.

Revenue And Licenses
Revenue last year for Concerto totaled $189 million, excluding pre-acquisition revenue from Rockwell FirstPoint Contact, Melita, Positive Software and CenterForce Technologies. Aspect's revenue last year totaled $370 million.

Agent seat licenses for Concerto total 450,000 agents, including its outbound dialing and automatic call distributor (ACD) licenses sold to date. Aspect's agent seat licenses total 700,000 agents ' an estimate of Aspect's ACD licenses sold to date.

Estimated daily customer interactions ' based on an average of 110 interactions per agent per day, and assuming all seat licenses are in use ' are 50 million for Concerto and 75 million for Aspect. The global presence is 46 countries for Concerto and 32 for Aspect.

Concerto has more than 2,300 in-house and outsource global customers managing customer service, collections and sales interactions in financial services, telecommunications, transportation, retail and other industries.

Aspect customers include more than two-thirds of the Fortune 50 and other customers in industries such as transportation, financial services, insurance, telecommunications, retail and outsourcing in addition to large government agencies.

Foy also emphasized the company's patent portfolio, which he pegged at more than 300 patents approved with hundreds in the approval process while mentioning Aspect's rich portfolio of patents that will be added. "When you look at the strength of our technology base, that's also reassuring for our customers because we're not likely to be in a position where one of our competitors tries to compromise our position by saying we're infringing on any of their patents; because we've got such a massive defense of our own, that's just not going to happen."

In The Future
Foy assured the players in the expanding SMB (small to medium-sized businesses) market that they will not be left behind despite the firm's size. "An awful lot of dollars are spent in that area,"' he said. "It's great to get those $5 million orders from time to time from enterprise-class customers. They're very, very welcome and it's great that we've got technology that's scalable enough and broad enough to provide that class of solution."

He also pointed out that, in the aggregate, the revenues available from the SMB sector are vast. "For us to have a product which is scalable and configurable to the low end is absolutely crucial," he said. "We already have such a product. We've already made progress in that direction and that will continue." The low end, for Foy, includes the 50-seat level or, in some cases, even smaller. "We'll maintain that attention to detail when it comes to the smaller customers, those 25- to 50-agent customers," he said.

Foy didn't provide specific projections regarding the percentage of the company's business that will come from the SMB market, except to say it's substantial. Concerto's average deal size is in the 150- to 200-agent range, though a portion of the business aims for the 1,000+ agent mark.

Foy was asked if there have been discussions regarding the provision of products on a hosted basis.

"Not only have we been talking about it, we've been building that technology into our platforms," he said.

When asked about the degree to which Concerto would retain the well-known Aspect brand name, Foy asserted that there is enormous brand equity in the name, and "we would be reluctant" to give that up. But no determination has been made regarding how to leverage the brand's strength.

"I definitely do not want to lose the benefits of the Aspect brand," he said. "We're working on it right now and we'll make a decision quite soon."

Also discussed was Concerto's development of a broadly based distribution channel in the Asia-Pacific region where Aspect is not so strong. But Foy expects the company to be able to take advantage of a very strong presence that Aspect has established in Europe, particularly in France and Germany.

The consolidation of offices is also on the agenda. Foy said Aspect has a presence in Chicago, Atlanta and outside Boston. "Concerto has offices in all those places," he said. "We're both in Frankfurt. We're both in London. We're both in Sydney. We're both in Tokyo. There are going to be opportunities for us to rationalize some of these facilities and consolidate into one place."

But will Aspect's San Jose headquarters be retained?

"It's a little early for us to make that conclusion," Foy said. "There's always some measure of overlap and we'll obviously be addressing that. One of the great things about doing acquisitions relatively frequently is you get the chance to select the very strongest managers, the very strongest technologists, the very strongest marketing people and so on. We've gotten progressively stronger because of that, and I think it's definitely going to continue with the Aspect acquisition."

While Foy wouldn't provide specifics when asked about goals or targets, he said the company's profile has been raised successfully. "We can be a powerhouse in this industry now," he said. "We've created the platform to make that possible. Our revenues are going to be very, very significantly increased next year. We're going to continue to be very, very sharply focused on delivering value to our customers, because if we do that, everything else follows."

And what of future acquisitions? Does Aspect represent the last of the buying spree, at least for awhile?

"Never say never," he said. "I'm not ruling it out. This is a very significant acquisition. We're doubling the size of the company and it will take us a while to digest this."

For those who may doubt Foy's optimism, three years ago he made a statement about becoming a $1 billion company. He recently followed up, "So, you didn't think I was serious ... "

Three years later, Concerto is, in fact, a $1 billion company. CIS

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