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Aspect: Can it emerge stronger from the economic downturn? 

Aspect: Can it emerge stronger from the economic downturn?

Aspect: Can it emerge stronger from the economic downturn?

2/13/2003
By Donna Fluss
ICCM Weekly

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The turmoil in the call center marketplace is creating huge opportunities for companies that can survive the downturn and use the slowdown to strengthen their products, services and customer base.

It’s not a given that any of the existing players – Aspect, Avaya, Nortel, Cosmocom or Interactive Intelligence – are going to survive in their current form, but it is certain that there will be great demand for call center/contact center infrastructure and platforms, once the economy revives.

Aspect’s strong technical expertise and outstanding customer service have earned it a committed customer base, which includes 74% of the Fortune 50. Aspect’s clientele isn’t expected to shrink much and is likely to significantly increase its communications infrastructure spending after the recovery. But, as hard as it is to be an infrastructure provider in a down economy, when investments are on hold and companies are fighting vendors over the prices of essentials like pens and PCs, Aspect is increasing its challenge by redefining itself as a Business Communications Platform, a relatively unknown category, that is not in high demand nor well understood by end users.

Aspect By the Numbers
Aspect, like many of its peers, made its share of mistakes during the dot.com era and is confronting serious financial issues that could threaten its existence if the economy doesn’t recover in the next 18 to 24 months. For example, in Q3 2002, Aspect reported a $60 million loss, which included a $22.7 million restructuring charge (which includes a staff reduction of 22%, 400 people), $38.6 million write off of intangible assets and $20 million to repurchase some of its convertible debt. But the company isn’t waiting for an economic miracle and is putting itself back on track.

Its current product road map and product messaging is clear, except for the debate over redefining its market place. Aspect has been cash flow positive from operations for the last three quarters and is using its cash generated to strengthen its balance sheet. Aspect is concentrating on selling to its existing customers (with 80% of product revenues from its install base), a good strategy in a recessionary economy.

Even though prospects are not currently making significant investments in call center infrastructure, they are paying a great deal of attention to changing technologies and future trends. For most of the past 30 years, prospects purchased call center hardware bundled with software.

Once the economy recovers, there will still be a demand for classic call center solutions but an increasing percentage of prospects will want software-oriented solutions with a universal queue and a clear upgrade path to Internet Protocol (IP). Aspect’s current product strategy coincides with this trend.

Its new soft switch (IPCS v1.2 became generally available in Sept 2002) separates hardware from software and though currently limited in scalability beyond 250 agents, it meets the functional requirements of the most demanding contact centers.

As it is building an IP soft switch from the ground up, Aspect is going to encounter surprises along the way. However, as long as it continues to invest heavily in R&D, Aspect should be well positioned with a highly functional and scaleable IP switch within the next few years.

While Aspect’s current product strategy is much stronger than it has been in years, it is still haunted by ghosts from its recent past. Some doubts about Aspect’s viability are simply noise created by the competition, however concern about Aspect’s leadership, financial stability and ability to sell its new line of products outside of its current customer base are somewhat justified.

Paradoxically, one of Aspect’s greatest strengths, its technology-oriented senior management team, is also its greatest liability. While greatly respected by its customers for “listening,” understanding and delivering customized solutions, Aspect has not been successful in communicating with the financial community. Aspect’s new clear product strategy helps, but it must also improve relations with financial analysts or Aspect will continue to be under-appreciated and undervalued.

It’s great that Aspect is succeeding in up-selling to its existing customers, but to survive during the recession and prosper during the recovery, Aspect needs to extend its current customer base in and out of the US. For this to happen, Aspect needs to build lasting domestic and international partnerships with viable vendors who have a long-term outlook. Aspect appears to be making progress in this area and in Q3 2002, the company announced that indirect revenues were approximately 14%.

Aspect’s New Moves
Aspect’s product marketing messages have become very crisp, clarifying its positioning and making it obvious that it wants to be a player in the greater contact center market place. However, in an attempt to plot their future direction, Aspect is transforming itself into a Business Communications Platform provider. Aspect’s new software-oriented IP switch establishes the foundation for this change, but the market and Aspect’s dedicated customers are still looking to Aspect for ACD and related products and services. For the time being, Aspect’s mixed messaging could prove more confusing than beneficial.

The market is currently too weak to venture into what is perceived as uncharted territory. What customers want and need right now are good, dependable solutions from trusted vendors.

Aspect Products
As Aspect continues its product innovation, it is also in the process of retiring old products. Aspect wants its customers to upgrade to its new contact server CTI products and has forced the issue with a November 2001 announcement of “end-of-life” for two of its older CTI products – Application Bridge and Prospect. End-of-life for Prospect was May 2002 and for Application Bridge products is November 2002. There are hundreds of sites still using and dependent upon a variety of Application Bridge or Prospect solutions.

The announcements have not been well received by these customers, who are comfortable with existing products and are not in a hurry to upgrade for lack of currently available money or resources. Because Aspect still wants to retire these products in order to standardize and simplify product support and facilitate the migration to its new product set, it has recognized the need to be more flexible with its customers.

Aspect’s existing customers are very loyal and satisfied. Aspect is dealing responsibly with the challenges associated with the recession and is still investing in its future. Its convergence product road map makes it clear that Aspect is staying true to its heritage of managing large volumes of customer transactions, albeit with a much larger selection of products. Aspect is an acquisition target, as its stock price is low, but few companies have the buying power – clout or cash – to purchase it. If it continues with its current strategy, funding new product development while building channels, Aspect should be well situated to improve its market position, once the economy begins its recovery.

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