Technology and differentiation will continue to drive deal volume and consolidation. Software continues to receive the limelight, but certain functions can’t shake the need for headcount.
By CAS August, 2022
As companies in the customer relationship management (CRM) and business process outsourcing (BPO) verticals look to break out beyond the pack (given the relatively commoditized product offering today) and enterprises look to insource (more on this below), business process outsourcing firms need to look to specialization to continue growth. CRM Deal count was up in both deal volume and count relative to the first quarter of 2022 (approximately $2.6B and 15 deals, respectively), chiefly due to large public takeovers and strategic mergers. Transactions such as French BPO Webhelp acquiring Grupo Services in Brazil, creating one of the largest global enterprises handing virtually all outsourced services, are reflected. Zendesk being acquired by PE firms Permira and Hellman & Friedman for an all-cash transaction of approximately $10.2B is an excellent showcase of this unfolding trend. The transaction is not slated to close until Q4 of this year (so it is omitted from our Q2 2022 done deals), as are Konecta and Comdata (Q3 2022 close pending regulatory approvals) and Sitel and Majorel (Q4 2022 or Q1 2023), but all announcements highlight the high level of interest the CRM vertical is seeing from investors and strategics alike.
At our time at the CCW Las Vegas Conference, we came across various industry participants who are poised to make a splash in the CRM/BPO vertical. The adage coined by Marc Andreessen that “software is eating the world” feels particularly relevant here. The hyper scalers, like Amazon Web Services, Google Cloud, and Microsoft Azure seem to have a unique data advantage that isolated, commoditized software offerings cannot overcome. Over time, these verticals appear to be heading toward software-based, hosted solutions – where companies can handle a lot of their own customer relationships and experiences, powered by software(s). Glia, a New York based FinTech, acquired Finn AI to deliver a turnkey banking virtual assistant for digital customer service. The press release explicitly utilizes a term that hits close to home: “Verticalization with Scale.” This is particularly important as the conversational AI, speech analytics, and other once promised differentiators look to remain competitive, given the relatively commoditized offering today, as each will likely specialize to be adopted widely and offer a useful solution to end customers.
Another trend made abundantly clear at CCW is the necessity of work from home (WFH), specifically in the BPO vertical. There is a great degree of VC investment flooding the space as we rebound from the shocks of COVID-19. Odondo, a UK based BPO service, offers a unique model in providing pay as you use outsourced services. This model is markedly interesting, given the ability to compete on price. Tools such as Tetherfi, a WFH tool using edge-AI for agent face biometrics and camera vision to ensure WFH agents are secure and compliant, and Pathlight, a performance intelligence, quality assurance, and team communication platform geared toward BPO functions, become particularly important. As companies that extend a commoditized service (e.g., customer relationships management, product support, and direct response), look to remain competitive, the ability to offer WFH solutions and have the accompanying technology stack is paramount. Given the renewed focus to domestic job production, we at CAS would not be surprised to see a renaissance of onshore business process outsourcing utilizing a nationwide strategy and labor pool. However, in the interim, companies are still focused on strategic acquisitions like Woven acquiring SA Commercial in South Africa, or Fusion acquiring Boomsourcing, who leverages near-shore and off-shore delivery as well.
MetaSource was recapitalized by Eos Partners.
FusionBPO acquires BoomSourcing
AnswerNet acquires Calibrus Call Center Services