Since Barak Eilam was appointed NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) CEO two years ago, its operations have “changed gears” and the company has accelerated its development with two significant acquisitions. The 40-year-old Eilam, who announced his vision for a “2020 plan” when he took on his new role, has been constantly on the move implementing those ideals at a pace that surprised investors, analysts, employees and clients.
NICE trades on both the Tel Aviv Stock Exchange and the Nasdaq at a $3.7 billion valuation after surging 50% since Eilam was appointed.
Each year, NICE holds a US conference for its clients. The 2016 NICE Interactions conference held in Orlando in May celebrated the company’s 30th anniversary, a week after its billion-dollar purchase of inContact.
The word “reset” could be heard in the various rooms occupied by the conference, unsurprising given the technological changes observed, the rapid growth in cloud service technology, and the increasing competition in the field.
Speaking to “Globes”, Eilam shared his thoughts on the recent acquisitions, the customer service center market, and his vision.
NICE has extensive experience in successfully integrating acquired firms. How will the inContact merger play out?
“We have some experience and expertise accumulated in the company over the years. We know what works and what doesn’t. We are looking at a large and significant purchase for NICE. We do not have the end of the process in mind yet, but we have an organized plan for what we want to do. You need to look at what you want and try to see what obstacles will be in the way.
“We also do not wish to stop inContact’s momentum, its fast growth. We do not want to interfere with its growth, only accelerate it. As a team, we will leave the management in Salt Lake City unified while integrating in critical areas to create value for our clients. That is our goal. We are focusing on product integrations in development and other elements more related to the sales sphere. Their CEO will stay with us for many more years; he is an impressive fellow.”
How will that affect your workforce?
“We bought a growing company with more than a 1,000 employees. The merged company will have some 4,500 employees. There might be some slight adjustments, but our intention is to grow not to downsize.”
Integrating three firms
The inContact acquisition is subject to regulatory approval, which is expected within the next 3-5 months. The deal will be completed by the end of the year and will cushion the non-GAAP per share profit in 2017 with the 2016 effect only marginal.
The newly-acquired inContact has a revenue forecast for 2016 of $259-265 million (compared to a pre-acquisition forecasted revenue of $1 billion for NICE) an increase of 17%-19% from 2015. The company is expected to break even (non-GAPP) with an EBITDA of $20.5-$21.5 million.
What sets you apart from your competitions? What will you offer that your competitors do not?
“Through NICE, I have worked in customer service for 17 years. One of the issues that consistently frustrated clients is the separation into two areas of service: the companies that provide the platform for customer service and the companies that offer applications to manage the call centers where NICE is a significant player. These two areas do not complete and have been essentially run side by side. Both are growing, but the latter is growing at a rapid pace because clients are transitioning to cloud management. We will offer a new approach by connecting both areas under one roof.”
No one else offers such a service?
“We do not currently see anyone offering a similar package. There are companies that have a little of one and some of the other or are strong on one end but weak in the other. We are connecting two powerful players and offering their combined services to client. Another aspect is analytics, which is why we acquired Nexidia a few months ago. In a nut shell, we are offering the integration of three firms.”
One-year payoff
How long will it take to complete the integration?
“There are several moves we can take immediately and there are others that will take longer before they can be offered to clients. We have an organized plan but we already see that our clients our understanding our vision. We have laid out an aggressive vision.”
On average, how long does it take a client that uses your services to upgrade his software to see a return on their investment?
“Our solutions helps clients do one of three things, mostly it is all three in unison with each client picking their own recipe: first they save money, then we help them increase their revenue, and thirdly we look at customer satisfaction which is hard to measure.
“Each one seeks their added value somewhere different. When we sell services to increase their savings for return on investment it can range between a few months up to a year. Most of our clients see a return on investment within a year. In the world we live in today, it is difficult to sell anything to a client if they do not see return on investment within a year.”
I would consider two years to be a very short period.
“And you are right. It used to be that way up until a few years ago, but there is less patience today. The business environment is very aggressive and competitors are able to respond much more quickly.”
Trimming a five-year plan to two years
Eilam joined NICE in 1999, going on to serve in a variety of roles. Before his appointment to CEO in April 2014, he was the CEO of NICE US for a year and nine months. After entering his new position, he sold the company’s security and cyber operations to Elbit and Battery Ventures to focus on the management and optimization of call centers and fraud production. The latter activity targets the financial sector banks, investment firms, and insurance companies.
Some of the speakers in the sessions talked of a transition from “call center” to “experience center”. How do you see that transformation? Can you explain the difference?
“The customer service center has undergone vast technological transformations in recent years, in a series of evolutions. Now we believe that we can take the next step and transition towards the experience center. We make it into a place where the client leaves with a positive feeling and a positive experience more than simply the quick troubleshooting. And it makes no difference if it is a five-person pizzeria or a massive bank. Everyone wants the client to be satisfied. In the past, we would take manual processes and create tools to automate them. I wouldn’t saw that we exhausted that area, but it is not exciting as it once was.
“Furthermore, in the past few years, the millennials have entered the service centers. It is not a simple work environment, it is exhausting, and it needs a dose of emotion. In the US there are call centers that house tens of thousands of people each one is unique and unlike the other. Until now, we have treated them all the same; but the moment you treat each one individually and focus on their strengths and only then connect the agent to the client-side, then they too have a better work experience, which is obviously beneficial to their company. That’s what we call the experience center. Up until now we had information on the client and the employee the agent but we did not know how to properly connect them. That’s what inContact adds alongside the analytic reinforcement from Nexidia. Now we can have responsibility for the entire process.”
This is recent?
“Yes. Now we can finally make all the right connections. We have the tools to turn them into the experience center. We need to remember that at the end of the day we are talking about people not machines.”
Have you not exhausted the US market? Will you be turning to Asia and other areas?
“Of course there are opportunities beyond the US. In Europe and Asia we are working hard to expand our operations. However, the size of the US is unimaginable; every time we think we exhausted all avenues, we find new clients. We have growth potential in all markets including the US. Any person who gambled against the US economy lost.”
Where do you see NICE in five and ten years?
“Somebody asked me today about our strategic five-year plan, saying it seemed that we finished it in two. I told him we were merely warming up, that we have a long way to go, and that I am a believer. We are celebrating 30 years in business and I see NICE as a much bigger company in a few years, which is focused on corporate software and solutions, with a wide portfolio of products, strong analytics, and cloud services. These four areas have a lot of potential for continued growth.”
Corporate Development VP: “We have two-three ideas that will shakeup the market”
Executive VP Marking & Corporate Development Eran Liron participated in the conference, as did other NICE executives; in a meeting with analysts and journalists he addressed recent developments. “Since Barak started his tenure and we announced 2020 Plan, we have made good progress and we have a few more ideas in the pipeline that we may unveil. We planned to become a purely software firm no hardware which is why we sold the security business.”
Addressing the Nexidia and inContact acquisitions, Liron said: “Even now we have clients with 2-3 NICE solutions compared to the 50 we offer; we have plenty of room to grow. Our vision is to offer real time analytics. We currently have that in fraud protection and we want to expand it to the call centers. The hope is to find a solution even before the customer calls to identify the problem and fix it even before the customer makes contact and the Nexidia acquisition will help on that end.
“The acquisition of inContact provides us with the opportunity for a reset it offers us the chance to start over and renew all of our solutions with far greater flexibility.”
Why did you buy inContact now and not a year or two ago?
“We want it to reach a critical mass. We met and investigated many companies before we made our decision. If we had bought it when it was still small, then we would not have been able to learn from it; that was an important consideration. It is important to remember that 95% of the activity in the call center market happens outside the cloud, leaving us with plenty of room to grow.”
How will Nexidia be integrated into the NICE portfolio?
“It will be integrated in two ways as part of inContact and as part of our WFO solutions (workflow optimization). Next year we will release the next-generation of solutions, with Nexidia which analyzes data at incredible speeds we will be faster and more precise. The competitive environment does not change much NICE will now compete in the cloud with its old competitors. The inContact acquisition changes the market and we have two-three ideas in 2020 Plan that will shakeup the market.”
The author was a guest at NICE Interactions in Orlando, Florida.
Published by Globes [online], Israel business news - www.globes-online.com - on June 15, 2016
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