Interview Excerpt with Alex

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Once Mosaix, the main threat to Melita in the mid-tier call center market was purchased by telecoms heavyweight, Lucent Technologies, its rise to dominance looked imminently achievable. 

The largest vendor in the inbound/outbound and call blending systems market had been eliminated and the players that were left no longer looked worthy opponents. Frantic, poorly executed acquisition activity in this space had littered the landscape with a number of causalities leaving the field open for Melita to realize its IPO dream of market leadership.

A rising star in the out-bound market, Melita’s former competitor Davox fell by the wayside when it attempted to merge with in- bound calling specialist, Answersoft in May 1998. Although the business combination managed to increase revenues by 15.8% to $88.9 million, profits dropped by more than 50% to $8.5 million for fiscal 1998.

EIS, another competitor, also failed to reap the benefits of diversification into call center integration and CTI workflow technology through acquisition. Its 1998 company revenues were actually smaller than those achieved before its mid-90s buying spree, dropping $26.7 million to $58.7 million on losses of $2.9 million.

Even Mosaix, which also bought workflow software and then began to financially falter, was still witnessing declining revenues until it was rescued by Lucent. Revenues fell $11 million to $110.1 million in 1998 on profits that had more than halved to $4.2 million.

While its competitors’ indulgences in M&A activity cost these vendors dearly, ravaging earnings and sabotaging growth rates, Melita flourished. The company rounded off seven quarters of sequential earnings growth in Q1 1999. Revenues were up 41.9% to $93.4 million and profits increased 11.4% at $11.7 million in 1998. By the end of 1999, company's revenues increased to nearly $100 million.

Melita, however, continued with its core business in predictive dialing and inbound/outbound calling systems that seemed at the time to remain he most profitable strategy for success. That was until June 1999, when company acquired PC based outbound call processing vendor, SmallWonder Softworks, and by September acquired Internet Collaboration solutions provider, eShare Technologies. Melita seems to be heading in the same direction as Genesys and Geotel. It is trying to widen the call center into a contact management center with web, email, voice, and fax capabilities, says Kevin Volpe at Gartner Group.

Diversification, he argues, is necessary to counteract the shrinkage in these vendors’ core market. The dialer business is at the very end of its technology cycle. Rather like Davox, EIS, and Mosaix before it, Melita needs to branch out, says Volpe. 

This business had been shrinking for quite some time and market contraction had provided the catalyst that set off the flurry of deal-making activity in the last three years (see the earlier report on Call Center Consolidation Causes Chaos).