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NelsonHall CMS Insight: July 2011

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Dear #FIRSTNAME

Latest News and Developments

  • One Equity Partners Group Acquires APAC Customer Service

    Jul 07, 2011 | Mergers and Acquisitions by Thomas Whittle

    NCO Group has been amalgamated with APAC Customer Service in a quasi-acquisition through NCO's majority holders, One Equity Partners, an investment arm of JP Morgan Chase.

    One Equity Partners has agreed a deal worth ~$470m, representing a 57% premium of the closing share price of APAC.

    The deal is expected to close by end 2011.

    Analyst comments:

    This transaction is likely to be highly beneficial to NCO, for example in terms of:

    • Expansion of NCO's CRM and accounts receivable management delivery capabilities: NCO will gain APAC's onshore U.S. delivery centers with current spare capacity which can be utilized for NCO's accounts receivable operations. NCO will also gain further nearshore centers in the Dominican Republic, as well as three offshore centers in the Philippines. These centers will improve NCO's delivery profile and is in line with its proposed expansion of CRM segment revenues
    • Sector diversification: NCO generates a high proportion of revenue from the financial services sector, where APAC currently has limited exposure (see breakdown below). Further, both the size, and the synergies between the healthcare offerings of NCO and APAC may better place the company to compete for large-scale healthcare outsourcing opportunities in the U.S.
    • Work-at-home standardization and consolidation: both entities have growing WAHA operations throughout the U.S. which will benefit from centralized security, data centers and infrastructure services.

    In its FY 2010, NCO revenue contribution (with 2010 revenues) by sector was:

    • Financial services 43% (~$541m)
    • Telecoms 17% (~$213m)
    • Healthcare 10% (~$126m)
    • Retail 9% (~$113m)
    • Government 8% (~$101m)
    • Utilities 7% (~$88m)
    • Other 5%. (~$63m)

    APAC Customer Service generated 81% (equating to ~$326m) of its revenues in 2010 from 3 sectors:

    • Healthcare
    • Communications
    • Business services

  • Capita Acquires Ventura to Enhance Customer Management Services Capability

    Jul 01, 2011 | Mergers and Acquisitions by John Willmott

    Capita has acquired Ventura for £65m to enhance its capabilities in customer management services.

    Ventura achieved fiscal 2011 revenues, for the year ending January 31, 2011, of £156m together with an operating profit of £8m. The company was a Next plc subsidiary and its clients include O2, Orange, British Gas, and BMI.

    Analyst comments:

    Capita has recognized the importance of offering customer management services alongside its specialist industry-specific and back-office services and has taken steps to develop and scale its capabilities in this area.

    Indeed, it is increasingly important that BPO vendors offer a combination of customer management services and industry-specific services, as companies increasingly seek to integrate customer-handling and service delivery to achieve one-and-done customer service across multiple channels.

    In particular, this capability will enable Capita to offer customer management services into existing local authority clients where it has been forced to partner in the past with suppliers such as Vertex, e,g. in Service Birmingham, for the contact center services components of contracts. In addition, it will boost Capita's ability to target U.K. central government. Overall the government sector, principally central government, accounts for approximately 20% of Ventura's revenues, with three major clients being the Department for Work & Pensions, the Child Maintenance & Enforcement Commission, and the Legal Services Commission.

    It also potentially gives Capita a mechanism for enhancing its attractiveness to life insurance companies, enhancing its ability to offer end-to-end customer service in conjunction with open books and into the financial services sector in general.

  • Sitel Opens First Center in Belgrade, Serbia

    Jun 23, 2011 | New Offerings by Thomas Whittle

    Sitel has opened a contact center in Belgrade, Serbia.

    Sitel cite a well- educated workforce, high national literacy levels and lower costs as the key determinants for choosing Serbia for the expansion of near-shore services into the country.

    The center will be serving European clients, with the potential to serve English, French, Italian and Russian.

    Analyst comments:

    The opening of this center is the first that Sitel has undertaken speculatively, without a contract in place. The center will be operational by Q4 2011, and Sitel is anticipating that 90% of the utilization will focus on English speaking delivery for Western Europe, possibly with some smaller-scale multi lingual delivery of German and French.

    Serbia was opened as a means to improve the capabilities of Sitel's near-shore English delivery, in particular aiming to improve service levels relative to Bulgaria and Poland. The center is aimed at established outsourcers, rather than the first-time outsourcers who would be less prone to accepting a newly established and somewhat unknown delivery location.

    The target services are low and mid customer care and tech support.

  • Transcom Restructures Delivery Amidst Reducing Volumes

    Jun 22, 2011 | New Offerings by Thomas Whittle

    Transcom has announced an amended outlook for 2012 and a restructuring plan to be executed in H2 2011.

    Transcom has suffered sharp volume decreases since 2008, and despite divestments including large French centers in Tulle and Roanne, the company still has overcapacity. This is reflected in profit margins of between €0.5m - €0.7m for Q2 2011 on revenues of ~€135m.

    Total cost for the restructure will be €32.8m. with the objectives being:

    • Annualized gross savings of approximately €10 to €12m when the restructuring and operational improvement plans are fully implemented
    • A reduction of available seats by approximately 10% (2,400).

    Analyst comments:

    The main thrust of the restructuring is center closures and geographic consolidation; Transcom will close four sites in Canada and consolidate other sites in the North America & Asia Pacific, North, Iberia, South and West & Central regions.

    There will thus be a major reduction in North American capacity, where Transcom has suffered from overcapacity since 2008. However considering Transcom operates over half of its centers with fewer than 300 agents, it appears that beyond merely cutting capacity, Transcom is also transitioning the delivery model to larger-scale centers.

  • West Acquires Contact One to Enhance 9-1-1 Offerings

    Jun 16, 2011 | New Offerings by Thomas Whittle

    Intrado, a subsidiary of West, has acquired Contact One. Contact One is a U.S. geographic information system (GIS) data management services company, with a focus on public safety operations.

    Analyst comments:

    In early 2006, West acquired Intrado, and two years later, acquired HBF Communications and Positron Public Safety Systems; becoming a large-scale provider of 9-1-1 and emergency communications infrastructure services. The primary attraction for West, aside from the chance to deploy its substantial infrastructure and IT offerings on a large scale, is the medium-term revenue stability that 9-1-1 management provides.

    West has been able to complement the earlier acquisitions, and develop Intrado's presence in this market through substantial investments in proprietary systems to develop IP-based emergency communications services capabilities. For example, The acquisition of IPC's command center service enhanced on-premise fully integrated services in November 2008.

    The Contact One acquisition will enable Intrado to provide customers with a graphical Master Street Address Guide (MSAG) management tool. West has invested heavily in securing the contract, and this latest acquisition shows clear intent of West to enhance capabilities and secure longer term business in this sector.

    At present, there are few vendors who can match the scale and scope of West's offerings in this niche, and it is likely West will continue to expand these public sector contracts in the short/medium term.

    West has been successful in integrating a number of diverse technology-based infrastructure companies into a cohesive public-sector offering. This has enabled the company to shed over 12,000 staff from 2008 - 2010 whilst maintaining positive revenue growth, coupled with EBITDA of over 27% for the three years to date.

  • Transcosmos to Partner with Wildfire for Social Media Offering

    Jun 15, 2011 | New Offerings by Thomas Whittle

    Transcosmos has strengthened its social media related offerings through a new partnership with the U.S. online marketing company Wildfire.

    The Wildfire platform is a desktop application enabling easy development of Facebook and Twitter promotions and campaigns (contests, sweepstakes, voting, coupons, group deals, surveys, quizzes, etc.).

    Transcosmos agents are being trained on the platform by Wildfire Inc., and will provide development work on the Wildfire Platform as well as custom design and analysis BPO for companies.

    Analyst comments:

    Transcosmos derives roughly half of its revenues from marketing operations and half from CMS services. Transcosmos has approached social media with particular emphasis on a marketing perspective; with two factors distinguish its service from typical CMS social-media offerings:

    • A focus on KPIs relating to followers/friends and social media notoriety, rather than issue identification or resolution,
    • The majority of agents delivering services for a client on-site, allowing closer interaction with marketing and PR lines

    Transcosmos' value proposition is centered on providing integrated CMS and marketing social media related services; considering the growing Facebook usage in Japan, this partnership looks likely to provide further impetus for the expansion of a strong offering.

Welcome to CMS Insight

Welcome to the latest "CMS Insight" article from NelsonHall.

CMS Insight complements the market analyses and vendor assessments within NelsonHall's Customer Management Services program by providing commentary and insight on key CRM BPO industry developments which impact your sourcing decisions.

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Thomas Whittle

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