Key Trends Seen in CRM Mergers and Acquisitions

Yankee sees M&A activity centered on product-line expansion, outsourcing consolidation and hosting

Yankee sees M&A activity centered on product-line expansion, outsourcing consolidation and hosting

Boston — August 16, 2004 — The thaw in the U.S. economy in the last year made the environment ripe for customer relationship management (CRM) companies to use merger and acquisition (M&A) activity to expand their product range and market presence, according to a new research note from technology consultancy Yankee Group.

In its research note, Yankee discusses the trends that the consultancy says enterprises must understand so they can plan the evolution of their CRM and contact center architectures.

Trend 1: Product Line Expansion

The CRM space is no stranger to companies seeking to expand their product ranges. Concerto is an example of a company that acquired a series of companies over the past 5 years to expand its reach from outbound dialing. After a number of acquisitions, Concerto offers a comprehensive multichannel contact center suite. Amdocs' acquisition of XACCT helped it expand its already deep expertise in billing and mediation systems.

Trend 2: Knowledge Management Companies Acquiring Assisted Channel Technology

Enterprises providing self-service over the Internet often have found benefits in offering assisted support to users. This results in improved customer satisfaction, live call deflection or increased sales. The converging of e-mail, Web chat, Web collaboration and knowledge management companies into fully integrated suites of Internet-based assisted and self-service software has created a classic market consolidation. The market is still two years away from delivering on the true promise of these acquisitions, but the process has begun, Yankee says. Some examples of this M&A cluster are Kana acquiring Hipbone, Primus acquiring Amicus, iPhrase acquiring Banter, and LivePerson acquiring Island Data.

Trend 3: Outsourcing Consolidation

IBM recently acquired India-based Daksh, which provides outsourced contact center services. ClientLogic's acquisition of ServiceZone added contact centers in the Philippines. Far-shore contact center outsourcers have begun to mature and now need expanded access to markets and capital to grow to the next level. This category will experience more M&A activity, Yankee believes, because of continued growth of this service option and the need to build more scale to compete effectively. In some cases, major customers are acquiring far-shore-based service firms (such as Citigroup's acquisition of e-Serve).

Trend 4: Hosting

Siebel purchased a company focused on hosted CRM (Upshot) and one focused on contact centers (Ineto). The on-demand concept continues to gain traction in the CRM market. More players will look to existing smaller firms to expand delivery options through hosting, according to Yankee. Many firms providing hosted speech (such as TellMe, beVocal, Netbytel) are smaller, venture-backed firms that have been in business for three to five years, so investors will be looking to execute their exit strategies soon, Yankee says. Likewise, Echopass, Whitepajama, Five9s, Cosmocom and Telephony@Work are all smaller firms that provide hosted contact centers and that Yankee sees as likely acquisition candidates in the next two years.