Who Really Wins with Vendor Consolidation?

This year, the contact center market has seen a lot of consolidation. Deals happen all the time, but mergers and acquisitions really seemed to pick up in 2018, and the world has taken notice. In these pages, we at CRM magazine recognized some of the vendors whose deals are reshaping the industry. In fact, four out of this year's six Rising Stars pulled off nearly a dozen key acquisitions valued at billions of dollars.

Even among our Service Leaders, several vendors that have made game-changing deals advanced into leadership positions as a result of those moves, while others continue to dominate their industry sector because of them. These include Genesys, which continues to benefit from its 2016 acquisition of Interactive Intelligence; NICE, which in 2016 acquired inContact; and Verint Systems, which has been reaping the rewards of its purchase of Kana Systems since 2014. Synnex, which acquired Convergys and rebranded it as Concentrix, appears on the outsourcing leaderboard this year for the first time as a result of that deal.

In the majority of these deals, the acquiring vendors moved into new categories where they had previously never competed. In a few, the vendors just solidified an already solid leadership position by eliminating a competitor. Vendors also buy other vendors to gain entrance into new geographies or verticals, to acquire high-profile accounts, or to bring in-house capabilities that they had previously only been able to offer through partners.

In recent years, though, user companies have become the real winners in the M&A lottery that has gripped the industry. Increasingly, companies have grown weary of having to rely on complex software from many different vendors to accomplish everything they want to do in their contact centers. No longer do they want to expend great time and financial resources to integrate and customize all of this disparate software to make it work according to their unique needs.

Several recent studies have confirmed that today's customer service leaders are demanding a simpler technology ecosystem that offers prepackaged, end-to-end customer service technology, and if contact center operators can minimize the amount of work it takes to stand up their facilities by getting everything they need from one vendor, even better. They also want solutions that can support omnichannel interactions and pass the contextual data across each of those channels so that customers don't have to restart conversations when they switch channels. They want consolidated performance analytics and reporting across all channels. And they want systems that can seamlessly tie into and share data with their CRM and other back-office systems, all without having to hire expensive consultants and systems integrators or bring in expensive middleware.

The industry as a whole stands to benefit from vendor consolidation in other ways. Because fewer vendors are involved, companies only need to write one check. Democratization follows because companies of all sizes, not just the large ones with deep pockets and a wide assortment of IT resources, can jump on new technologies when they become available. And companies can focus on customer service and process improvements instead of constantly purchasing, integrating, configuring, and customizing complex software.

Vendor consolidation, no doubt, will have its detractors. The common arguments are that such activities decrease competition and allow vendors to charge whatever they want for their solutions. It's a valid point, and it would be naïve to say that it hasn't occurred to some extent. Luckily, the industry is reacting. As we compiled the results of this year's analyst polling for our Service Leader Awards, we found more than ever that vendors were being penalized in a big way for high costs. In some cases, a high price tag might have bounced a vendor off the leaderboard entirely or relegated it to the "One to Watch" position, no matter how extensively it upgraded its products or added functionality.

What does this all mean for an industry where only a handful of vendors dominate each software category? Based on this year's market landscape, we expect to see best-of-breed components give way to even more integrated suites. CRM vendors' longer-term road maps will need to reflect this migration. And those not willing to provide the perceived value that users want from their solutions should be prepared to take the hit.

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Leonard Klie is the editor of CRM magazine. He can be reached at lklie@infotoday.com.

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