AI and ML Vendors in Demand as M&A Heats Up

Consolidation is continuing in the customer experience (CX) industry with acquisitions focusing in one area in particular: companies specializing in artificial intelligence and machine learning capabilities.

TELUS International acquired Playment on July 6, shortly after its acquisition of Lionbridge AI in March. NICE snapped up privately held ContentEngine in July, which came soon after its April acquisition of MindTouch to expand its CXone offering.

“Our recent acquisitions of ContactEngine and MindTouch, plus our native Enlighten AI and data lake investments, puts NICE CXone in the unique position to cover 100% of customer need events through the addition of proactive outbound, intelligent self-service, and self-learning AI to make better bots faster,” said Chris Bauserman, NICE CXone vice president of marketing, in a prepared statement. TELUS International president and CEO Jeff Puritt offered a similar sentiment around his company’s purchases in a prepared statement.

Customer Experience M&A Is Sending a Clear Message

“There’s been a spate of acquisitions of AI developers by CX vendors, and I believe there are clear messages to read there,” said Marshall Lager, a Chicago-based CRM industry analyst. “First, customer experience is where the big work is being done in the CRM world now. Second, artificial intelligence is currently the best way for vendors to enhance their offerings, whether it’s something that customers will see or not. Lastly, I think generalist vendors are at the end of what they can do to develop AI, and there will be more acquisitions of specialists in the near future. The end result we can expect is CX tech that is more flexible and scales even better.”

“Recent mergers and acquisitions in the digital CX business suggests that customer-centric companies are seeking to improve the automation in their first line of customer interactions,” added Vivek Astvansh, assistant professor of marketing at the Indiana University Kelley School of Business. “This realization leverages the emergence of machine learning and conversational artificial intelligence. Feeding this M&A are technology startups that are developing proprietary machine learning programs that train themselves using the voluminous and fast-changing data that a company has about each customer.”

John Talbott, director of the Center on Education and Research in Retailing at the Indiana University Kelley School of Business, agreed. “Over the last several years a myriad of new companies have emerged in the CX space supported by early-stage capital and often focused on some subset of the overall customer journey.  Many are attempting to apply ML and AI processes to better understand customers and also enable predictive analytics. I think we are now in the second stage of this wave which is being dominated by failure or acquisition.”

Related Article: What’s Behind Sitecore’s Avalanche of Acquisitions in 2021?

Relevancy and Acqui-hiring: 2 Drivers of Acquisition Momentum

Another part of this merger process is that larger and more well-capitalized firms are insuring their continued relevancy by acquiring new technology and methodology expertise by acquisition rather than hiring, according to Talbott. “The term Acqui-hire has been thrown around and certain big tech firms in the social space have been doing this for years. It’s difficult to know which of the myriad of innovations will be the next big thing so more established CX firms try to keep their perspective fresh by buying new intellectual horsepower.”

Another driver for this M&A activity is the the CX consulting business is very strong, Talbott added. “Retailers and forward-facing entities of all types have realized post pandemic that they must change the physical experience and seamlessly integrate it to the digital experience. Apps which for many companies were languishing and did little other than provide a small screen engagement mechanism for their e-com site. The deployment of a user friendly integrated and highly function app is challenging and expensive another area for CX consulting to find engagement opportunities.”

Drilling deeper into the most recent M&A activity, Lager added: “NICE Systems has been making significant, if usually fairly quiet, advances in the use of AI in the contact center. CXone SmartReach is not one of those quiet ones. It’s a clear new footprint, a statement that this is how it’s going to conceptualize and build its solutions going forward. ContactEngine’s AI, which powers SmartReach, is a good example of using the AI as a platform to support varied processes and applications together.”

The TELUS International—Playment deal provides TELUS with vision systems and data annotation are critically important for any development of AI systems, Lager said. Adding Playment’s capabilities to its own expertise will give TELUS more tools to continue innovating in this field.

A Cautionary Note: AI and ML Aren’t a Magic Wand

Astvansh cautioned that companies looking to optimize digital CX could fall into the trap of romanticizing machine learning and AI.

“While statistics is the base of machine learning, and computer science the foundation for developing scalable programs that can implement machine learning algorithms, both statistics and computer science are the means to an end,” Astvansh explained. “The end is to offer a superior customer experience, which in turn must lower a company’s costs and raise its sales.”

He added that multidisciplinary startups must consider hiring not only statisticians and computer scientists but also linguists, voice analysts, psychologists, economists and marketers. Multidisciplinary teams can prevent the data scientists-led startups from viewing AI as an end in itself and instead measure how well the AI is lowering costs and raising sales for the client organizations.