TTEC announced last week that it is exploring strategic options for its TTEC Digital business.
The company intends to capitalize on the current valuation premium associated with AI, a business it has successfully grown. The decline in its BPO business this quarter and its debt level were also likely key factors behind the strategic review.
With revenues approaching $500 million, TTEC Digital is one of the few CX-specialized mid-size system integrators to have emerged from the transformation of the North American contact center channel over the past decade.
Its evolution illustrates how fundamentally the channel has changed.
In the pre-cloud era, VARs were an essential channel for implementing contact center solutions. Deployments involved substantial system integration, creating a lucrative services opportunity alongside product sales. Professional services could represent $2 for every dollar of product sold.
The cloud changed those economics. Vendors increasingly took large enterprise deployments directly, while cloud and more holistic solutions reduced the amount of integration required for deployment. Professional services attached to product sales fell to less than 50 cents per dollar, a decline that market growth could not offset.
The result was a fundamental reformatting of the channel. Many VARs were acquired or transitioned into Technology Advisors (TAs) served through Technology Solutions Distributors (TSDs). Those that remained evolved into specialized SIs focused on a technology ecosystem. A few exceptions, including Miratech, Servion, and of course TTEC Digital, have developed multi-vendor practices.
AWS’s entry into the contact center market accelerated another part of this evolution, driving Global System Integrators (GSIs) to establish contact center practices. Initially focused on deploying Amazon Connect, they quickly expanded to other platforms and into integrating contact centers with the broader enterprise fabric.
This created a new opportunity for SIs. Rather than simply deploying the contact center, the opportunity increasingly became connecting it to CRM and other enterprise applications, and implementing AI, now a top priority in CX.
TTEC Digital is a product of this transformation. It started with a traditional contact center deployment business focused on Avaya and Cisco. Today, it has become a multivendor CX, CRM, and AI business, with sizeable practices around Amazon Web Services (AWS), Cisco, Genesys, Google, Microsoft, NiCE, Pega, and Salesforce. It built these capabilities through several acquisitions, including Serendebyte, VoiceFoundry, and Avtex. It has also built a portfolio of solution assets around these platforms to complement products and accelerate deployments, while significantly expanding its managed services business, which now represents roughly two-thirds of its revenue.
TTEC Digital generated $104 million in revenue last quarter, down 8.5%. The decline reflects the fading of one-time on-premises license and product transactions and declining revenue from its two legacy practices.
It will be interesting to see how TTEC’s strategic review unfolds, and what it ultimately reveals about the future role and economics of specialized CX system integrators.