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NelsonHall CMS Insight: October 2009

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Dear #FIRSTNAME

Latest News and Developments

  • Convergys Awarded $55m Technical Support Contract by Fortune Top 10 Telecommunications Company

    Oct 07, 2009 | Contracts by John Willmott
    industry: Telecoms

    Convergys has been awarded a $55m contract renewal to provide tier one technical support to Internet subscribers of a Fortune Top 10 telecommunications company.

    The service will be delivered by approximately 1,000 full-time offshore personnel.

    Analyst comments:

    Convergys is continuing to win key contract renewals following management changes in its customer management services business in 2008 and is maintaining positive revenue growth within its CMS business.

    It is particularly important for Convergys to win contract renewals at the present time since a number of its competitors are becoming increasingly concerned by the current tendency of organizations to consolidate their CMS suppliers as they emerge from their post-recessionary sourcing reviews.

    Convergys is being helped in its efforts to retain and expand its contracts with existing clients by its emphasis on use of analytics and customer insight to drive improved customer experience combined with its new operational management's renewes focus on cost of service.

  • Sykes Enterprises Acquires ICT Group to Enhance Capabilities in Financial Services and Healthcare

    Oct 06, 2009 | Mergers and Acquisitions by John Willmott

    Sykes Enterprises has agreed to acquire ICT Group for $263m and create a combined customer management services company with revenues of $1.2bn. ICT Group had H1 2009 revenues of $194.4m. Sykes expects to realize synergies of $20m per annum.

    Sykes aims to strengthen its capabilities in emerging sectors such as financial services and healthcare and take advantage of the trend to supplier consolidation by organizations accelerated by the recession, particularly in the U.S. credit card industry. In particular, the merger:

    • Extends the delivery footprint for each vendor, with Sykes now able to offer its clients delivery from Mexico, India, and Australia, and ICTG able to offer delivery capability from Continental and Eastern Europe, Brazil, and China
    • Strengthens Sykes' industry-specific expertise in the financial servicees sector, where ICTG has developed services covering retail bank customer service, lockbox processing, and mortgage and auto loan processing
    • Positions Sykes in government, healthcare, and energy sectors. ICT had annual revenues of approximately $50m in the government and healthcare sectors.

    While the support functions across the two companies will be consolidated, integration at the site level is expected to be minimal and confined to ensuring use of similar reporting platforms and sharing best practices in recruiting, training, workforce management, and site selection.

    The industry sector profile of the combined company by revenue is:

    • Telecoms and technology 56%
    • Financial services 25%.

    The acquisition also boosts Sykes delivery footprint in North America. The delivery profile of the combined company by number of seats is:

    • U.S. 19%
    • Canada 7%
    • APAC 39%
    • Latin America 20%
    • Europe 15%.

    Analyst comments:

    Unlike many other areas of BPO, customer management services, like IT application management, is a mature market where organizations have traditionally used multiple suppliers to maintain competition and to support particular requirements.

    Another similarity with the AM market is that organizations are now rationalizing and consolidating their CMS service providers at an accelerated pace as a result of the recession. This together with enhanced requirements to support organizations' mature operations via more focused multishore delivery while supporting their entry into emerging markets with local delivery is leading to a spate of M&A activity in the CMS market as vendors supplement their delivery location portfolios. Examples of recent acquisitions in the CMS industry as vendors seek to match their clients' increased delivery expectations from a smaller number of suppliers include:

    • Stream's acquisition of eTelecare, who in turn acquired The Phone House Ltd
    • ACS' acquisition of e-Services Group
    • Aegis' acquisitions of CCN Group, UCMS, and an 80% stake in Ismart-Timex Pvt Ltd and its failed bid for ICT Group
    • CCA's acquisition of Intra Call Center.

    Further CMS industry consolidation is likely with:

    • West filing for IPO
    • Convergys needing to expand its European service capability
    • TeleTech's recent revenue performance suggesting that the company is lagging behind its major competitors
    • Teleperformance likely to be on the look-out for suitable acquisition targets.

    ICT Group was clearly struggling to compete sufficiently to maintain its independence, having shown a revenue decline for the past six quarters. Sykes is clearly hoping to reverse this revenue decline within ICTG's current client base, which is largely complementary to that of Sykes, while taking advantage of ICTG's more advanced industry-specific capability in the financial services sector.

  • 24/7 Customer Launches Twitter Research and Analysis Tool

    Oct 05, 2009 | New Offerings by John Willmott

    24/7 Customer has launched 24/7tweetview, a Twitter-based social media research and analytics tool aimed at assisting companies in analyzing customer opinions expressed using Twitter.

    Analyst comments:

    This is potentially a great move by 24/7 Customer for increasing awareness of the company and creating opportunities to engage with new prospects.

    In particular, this offering provides a mechanism for engaging a new audience of organizations with low-cost consultancy services in an area of high current interest and concern.

  • Aegis Acquires 80% Stake in Ismart-Timex Pvt Ltd

    Oct 05, 2009 | Mergers and Acquisitions by John Willmott

    Aegis Limited has acquired a 80% shareholding in Sri Lanka-based Ismart - Timex Pvt Ltd.

    Ismart - Timex Pvt Ltd offers tri-lingual call center services and was established with approximately 7,000 personnel.

    Analyst comments:

    Aegis continues on an ambitious acquisition program despite its rejection by ICT Group in favor of Sykes.

    This is the company's third recent acquisition following the earlier acquisitions of CCN Group and UCMS, and the company's 14th acquisition in total, with the company maintaining its target of 3-4 acquisitions per annum.

    Aegis is likely to use its acquisition of Ismart-Timex to expand its emphasis on F&A outsourcing, and the company is diversifying well beyond customer management services with the formation of Aegis Tech to target IT infrastructure management iincluding remote infrastructure management.

  • IBM Acquires Wilshire Credit Corporation to Enhance Capabilities in Mortgage BPO Services

    Oct 05, 2009 | Mergers and Acquisitions by John Willmott
    industry: Retail Banks

    IBM has acquired the core operating assets of Wilshire Credit Corporation from Bank of America.

    In particular, IBM has acquired the Wilshire mortgage servicing platform and will hire Wilshire's 900 personnel. Wilshire's operating assets will become part of IBM's Lender Business Process Services, Inc.

    Analyst comments:

    IBM is increasingly seeking to add industry-specific processing capability to complement its customer management services capability, with the North American banking sector a major target for service expansion.

    Loan and mortgage processing is a natural area of expansion for IBM, following the company's launch of its loan modification offering earlier this year and its launch in 2008 of a Federal Housing Administration (FHA) loan fulfillment service.

    Overall expect IBM to become increasingly active in industry-specific BPO, particularly in the banking and government sectors.

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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John Willmott

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