When you pick up the phone in the Chicago area to call United Parcel Service about a package pickup or delivery, you aren’t going to be talking to a UPS employee. Instead, dialing 1-800-Pick UPS connects you with a person who works for a Deerfield-based company called Apac Teleservices.
Likewise, when you’re having trouble with your new, user-unfriendly piece of computer equipment from Hewlett Packard or IBM, the toll-free help desk phone number you call could very well hook you up with an employee of Sykes Enterprises, based in Tampa, Fla., rather than the company that actually made the equipment.
Want to sign up for Caller ID or Call Waiting from one of Baby Bells? If you live in the South or far West, chances are you’ll arrange for your new phone services through a person who works for Omaha, Neb.-based Sitel Corp. rather than the phone company.
This is the newest, hottest wrinkle in telemarketing, but it isn’t the telemarketing we all love to hate.
You, the customer, are the one placing the call and chances are you won’t even know you’re talking to a telemarketing employee sitting in a call center rather a person working directly for the company you’re calling.
In telemarketing parlance, the industry growth is being fueled by “inbound” traffic–initiated by the customer– rather than that annoying “outbound” traffic–unsolicited calls trying to sell you something.
“Apac is working for our customers and the end users shouldn’t even know that,” says Rick Aspan, a spokesman for Ameritech Corp., which recently signed a contract with Apac.
“All the customer wants is to get their package delivered, get their problem solved,” he added.
Telemarketing exploded in the ’80s as companies increasingly began to outsource certain marketing and customer service telephone functions rather than handle them internally. The reasoning: it’s better for the corporate bottom line to focus on core competencies and pay a specialty company–a telemarketer–to take care of the phone calls.
“Companies are cutting costs to stay alive and they’re doing it by downsizing, rightsizing and outsourcing. What that means is, they stick to what they do best,” says Eric Efron, co-manager of the Aggressive Growth Fund at USAA Investment Management in San Antonio, which holds three of the newly public telemarketing companies–Apac, Sykes and Sitel–in its portfolio.
“They don’t want to maintain a permanent payroll (for telemarketing), so they let other companies do it for them.”
Last year, telemarketers dialed up about $650 billion worth of business, according to the Los Angeles-based American Telemarketing Association.
Although much of the telemarketing industry is still rooted in the simple, often-questionable pitching of everything from time shares to chimney cleaning, the growing use of outsourcing by large corporations for customer service functions has created a far more sophisticated and specialized branch of the telemarketing tree.
Triggered by the proliferation of the 800 toll-free numbers, telemarketing companies that just a few years ago were solely outbound are increasingly building their inbound business.
“Inbound has been growing twice as fast as outbound since 1993,” says Ross Scovotti, president of Teleprofessional Inc., which publishes a trade magazine out of Waterloo, Iowa.
For example, Apac’s inbound business was zilch in 1993, but now accounts for 45 percent of the company’s revenues, which reached almost $102 million in 1995. Sykes, with 1995 revenues of $63 million and profits of $1.3 million, is 100 percent inbound.
As outsourcing–both outbound and inbound–increasingly becomes the acceptable way of doing business, telemarketing companies are scrambling to position themselves to handle the needs of such corporate biggies as Ameritech.
Although the telemarketing industry is highly fragmented, total outsourcing revenues of the top 10 teleservice companies (four publicly traded and six privately held) reached $1.2 billion in 1995, according to Scovotti.
Apac, for example, which was described recently by William Blair & Co. as “focusing its efforts on what it considers the higher end of the food chain,” has seen revenues double almost every year since 1992, to $101.6 million last year from $13.5 million. Profits have risen to $7.5 million from $844,000 in the same time period. For 1996, analysts are projecting more than $25 million profits on $240 to $250 million in revenues.
From a two-man operation that started life by selling radio time in the mid-1970s, the Deerfield company now has 9,000 employees in 50 call centers that handle more than 203,000 calls per day.
And companies like Apac and its new brethren don’t want anything to do with the word “telemarketing,” which triggers a Pavlovian negative response in so many people.
“Please. Don’t call us telemarketers. We’re so much more,” says Marc Simon, Apac’s chief financial officer.
“Teleservicing–that’s the new word that’s coming into vogue. It’s a better word, it reflects the fact that we’re providing customer service rather than just marketing,” said Douglas Ewing, spokesman for Sitel, whose revenues reached $101 million last year and whose range of clients includes Allstate Insurance Co. and J.C.Penney Life Insurance Co. as well as most of the regional Bell operating companies.
(Because of non-recurring expenses, Sitel reported an $18.1 million loss in 1995; it had a profit of $2.9 million in 1994. Excluding the expenses, net income would have been $5.2 million.)
The people fielding calls about computer software or UPS deliveries are in positions that “are not part-time, gum-chewing jobs,” Scovotti says. “Increasingly, these are highly educated people who have been trained to do their jobs.”
For example, Sykes employees get about four weeks training before they start helping callers with their computer problems. Likewise, the training Apac gives employees answering UPS questions is different than that received by those who are servicing other clients.
This burgeoning industry created by corporate outsourcing has been greeted with enthusiasm on Wall Street.
Sykes, Sitel and Apac, which have all gone public within the last 13 months, have seen their newly issued stocks soar. Sykes almost doubled to $35.50 its first day of trading on April 30, and now stands at about $50.50. Sitel has more than tripled to about $39.25 since it went public in June 1995. Apac has quadrupled to about $38.50 since it went public in October.
The newest kid on the Nasdaq block is ICT Group, based in Langhorne, Pa., which went public at $16 on June 14, and is now trading at about $21.75. RMH Teleservices Inc. based in Bryn Mawr, Pa., filed with the Securities and Exchange Commission last week to sell an initial public offering of 2.8 million shares.
“This is a hot group,” USAA’s Efron says. “Probably there’s been some excessive enthusiasm (on Wall Street), but I think it’s going to continue to grow. We took some partial profits in Sitel and Apac, but we’re remaining committed. These companies have to be big to be serving the large companies (clients).”
Scovotti, however, sees an end to the spiraling growth of outsourcing although he predicts it won’t happen until the turn of the century.
“At the millennium, I predict we’ll see a turn. (Corporate America) is going to say, all right, we’ve downsized, now let’s start pulling this stuff back in-house, and do it ourselves.
“It’s just the nature of the beast.”
