Though Google and Imtech dominate the IT news this week there is another story worth mentioning: the acquisition of Qelp by Sykes. Qelp, who featured in our recently published Fab 50, was founded in 2005 and has been able to show significant growth as a SaaS provider of customer self service software for mobile operators and MVNO’s. Clients include for example KPN, Ziggo, T-mobile, O2 and Deutsche Telekom. Revenue in 2014 was €4.1 million and growing at approximately 25% annually. The company has 50 employees.
Revenues are based on a subscription model which also proved to be the companies Achilles heel. A subscription based business model requires upfront investments, at the same time SaaS revenues are unlikely to keep up with this pace of investing.
This challenge is not only faced by startups. Mature companies transitioning to cloud models experience the same challenge. Salesforce, for example, spends about 70% of its revenue on marketing and still struggles to make a profit. Companies like SAP and Oracle are struggling to significantly grow their cloud revenues. In 2014 Exact and Unit4 both decided to avoid further public financial reporting on their SaaS revenues and accepted investments from third parties which took them from the stock exchange.
The acquisition by Sykes initially gives Qelp extra cash worth EUR 8.9 million, exclusive of the contingent consideration. If, in the next three years, revenue goals are met the company will receive another €9.8 million. This amount will be used to finance growth, and to further innovate solutions. In addition to the financial investment Qelp should also be able to benefit from the Sykes’ considerable client list of Fortune 1000 companies, including companies like AT&T and Huawei. The solution could be a welcome add-on for many of Sykes´ clients.
With Customer Experience being the buzz word for 2015 and key for business growth, Qelp is an attractive acquisition candidate. Mobile operators are battling for customer wallet and mind share. Much of the customer experience buzz however focuses on customer data and analytics. The customer service component is another crucial element in the customer journey, with customer self service being an operational money saver. Customers have high expectations, demand 24/7 support and value knowledge. Also, customers are increasingly IT savvy and prefer to search for solutions online themselves, avoiding IT help desks. Recent research commissioned by Aspect Software shows that: “65% of all consumers and 69 percent of millennials say that they feel good about themselves and the company they are doing business with when they resolve a problem without talking to customer service.” For vendors, the self service component is an efficient way to meet client expectations and to decrease operational costs.
Sykes provides customer contact management solutions on a global basis. The company has over 50,000 employees and is located in 21 countries. Though the Qelp acquisition will not have a huge impact on Sykes’ revenues or employee base, it still is considered a strategic acquisition. It fits the trend of micro acquisitions. Adding a smaller team to your company, with a proven track record and complementing functionality. It allows Sykes to avoid the risk of developing its own solutions, which might be late to market, or, because of incompetence, lack the required features & functionality. For Sykes adding elements of self service customer care, improving the customer experience, while at the same time making it less dependent on its traditional outsourcing activities are crucial steps for growth. We expect more vendors to follow the self service trail.