NICE Systems Reports Great Financial Results and Acquisition
February 15, 2011

 

NICE Systems has announced its financial results for 2010, and they make impressive reading in what many consider a difficult market, for contact center systems. I’m not prone to quoting financial figures, but with revenues up to US$695 million (from US$589 million) and non-GAAP profit and margin up to US$451.9 million and 65%, respectively (from US$371.1 million and 63.1%), it certainly seems NICE’s customers are in safe hands. The company also is generating lots of cash, so potential competitors and acquisition targets should beware; this is where the surprise mentioned in my title comes in.

Alongside the financial results, NICE also announced the acquisition of CyberTech International. On the surface this doesn’t look like a strategic acquisition because NICE Systems is already strong in the call-recording space, and the CyberTech product would seem to overlap considerably with what it already has. NICE CEO Zeevi Bregman admitted that there is some overlap, but the key to the acquisition is that the CyberTech product is aimed at small and midsize companies rather than large enterprises. It therefore signals a move by NICE into what my research shows is the biggest segment for contact centers: those with less than 100 seats. As well, being based in the Netherlands, CyberTech brings with it European customers and presence, which should help NICE Systems penetrate more of that market. Along with the announcement came the usual reassurances about protecting existing customer investments, but the reality is that customers will have to wait and see what impact the acquisition has on them.

Against this background, I detect NICE Systems transitioning away from its roots in call recording, quality monitoring and workforce management. These are the core components of the NICE’s contact center product line which serves the enterprise business sector and is by far the biggest of its three lines. My research into the use of contact center technologies shows that these markets are reaching very high levels of penetration and thus becoming harder to maintain and expand. A few months back NICE Systems announced the acquisition of eglue which provides the heart of its new real-time process optimization product, which in plain terms is about using a smart agent desktop to optimize the way agents handle customer interactions. This fits into what I call the customer experience management (CEM) space, which features proactive management of customer interactions as they are occurring. NICE also is placing a heavier emphasis on analytics, with products to support operational, desktop, speech and cross-channel analytics. Although the CyberTech acquisition might seem to go against this current, I see NICE Systems focusing more on value-added applications that support CEM and contact center performance management in its widest form.

Not content with all this, NICE Systems is venturing into the back office, adding another component to its enterprise business. These have to run alongside its Security and Actimize fraud prevention businesses. Some would question how all these bits jell into a cohesive business and wonder whether NICE systems is taking on too much. But the latest financial results say otherwise. Personally I applaud the move into CEM as I think the customers of NICE’s customers (that’s a complex way of saying you and me) would like every company to significantly improve customer service and give us better experiences. Understanding what we think is key to improving these processes, and the old eglue product could deliver those improvements while we are actually on the phone.

So where will NICE go next? A radical move would be to integrate Actimize more closely with real-time optimization. I see other vendors putting more intelligence behind how agents respond to our requests, and an adaptation of the products behind Actimize could be the way for NICE Systems to respond to these developments. Are you finding your customers more demanding? Are you looking for more intelligent systems to help meet those demands?

Let me know your thoughtsor come and collaborate with me on Facebook,LinkedInand Twitter. 

Regards,

Richard Snow – VP & Research Director


 

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