Inflationary pressures continue the march towards digital transformation and nearshore/offshore labor supply.
By CAS November, 2022
In Q3 2022, the deal count in the customer relationship management (CRM) decreased over 55% from Q3 2021 and deal volume is down significantly from a highly active Q3 2021. This figure is driven primarily by lack of M&A amongst large publics and take privates from private equity firms. Also, the venture capital funding in the CRM-targeted technology entrants has also slowed down significantly.
As inflation runs rampant and employment figures are remaining consistent (unemployment rate at 3.5% as of September 2022, unchanged for most of FY2022), labor intensive businesses like customer relationship management/business process outsourcing companies are being challenged. We have seen a continued search for nearshore and offshore delivery to combat margin compression, which is a trend we continue to harp on. However, a candid challenge is that work standards have also continued to increase, so establishing outsourced relationships are a challenging sell where control is often relinquished to the local operations. This is leading to a potential dynamic where companies will look to acquire or joint venture with nearshore/offshore delivery centers to control the work product and margin. Other companies with the inability to offshore or nearshore due to client stipulations have successfully augmented their thin labor force with useful technology tools, while others have spent a lot of money and effort trying to implement new technology solutions to drive margin enhancement.
In Q3 2022, a transaction between Nutun Digital Business Services (formerly Transaction Capital) acquired Synergy Contact Centre, a 1,000+ seat contact center in South Africa. We have seen heightened interest in the African BPO market as the labor pool to draw from is expanding. Another deal to highlight took place between Kingswood Capital Management who acquired Support Services Group, Inc, with locations across US, Canada, Dominican Republic, Philippines, Mexico, Costa Rica, Panama, Jamaica, Malaysia & Hungary. These two acquisitions showcase the interest in global expansion and delivery in the BPO/CRM sector.
Another trend we are monitoring in the CXM/BPO vertical is the continued enhancement of point software solutions. Talkie.AI raised a 2.6M to tackle the gigantic healthcare services market. Their solution offers fully automated customer service solutions for voice-based organizations (a large swath of the market). We expect there to be new market entrants in the technology and artificial intelligence verticals looking to solve and tackle this problem for organizations of all size and scale. API integrations to the existing software in the space will continue. Turning what was once a labor focused problem into one handled by software is a key driver of growth/survival for companies experiencing the pain in the outsourcing vertical.
Noteworthy transactions
Kingswood Capital Management acquires Support Services Group, Inc.
Nutun (Transaction Capital) acquires Synergy Contact Centre
Talkie.Ai cap raise
Moneypenny acquires AlphaPage
