Analyst Perspectives

I recently attended the Interactive Intelligence Interactions 2016 conference and came away with four key insights regarding the company’s plans and progress in providing contact centers in the cloud. These include the short-term success of PureCloud, the company’s financial performance, the importance of customer support and dealing with change.

PureCloud has surpassed the company’s expectations.

A little over a year ago, the company announced it was adding PureCloud Engage to its product portfolio. Like many other consultants and analysts at the time I commented that this was quite a risk as its other two products – CIC and CaaS – are both highly successful, and PureCloud was a completely new development on what was then a fairly untried platform – Amazon Web Services (AWS). Company CEO Don Brown opened a special track for analysts, consultants and media with the news that although CIC and CaaS remain successful, the results for PureCloud exceeded his expectations – 24 new accounts in Q4 of last year, 118 in Q1 (vs. a target of 50) and the same number expected in Q2. As a result it has nearly 200 accounts in production in every region in the world that AWS serves (North America, Latin America, U.K., Middle East, Japan and Australia). Brown showed that the architecture, and by using AWS services, speeds up development cycles to such an extent that in one year PureCloud matches and in some cases exceeds the capabilities of CIC, which is a mature product. He admitted that there are a few areas such as workforce management, outbound dialing and administration that need improvement but insisted that overall the product has rich capabilities and more are being added.

Brown compared CIC to a Sherman tank – that is, it’s a proven if monolithic product that is effective for companies that operate large contact centers on-premises. CIC remains the foundation of the company’s financial results, but PureCloud is its future. That said, he was adamant that there are no plans to stop evolving or supporting CIC, which is good news for existing and potential customers. Much was made of the architecture of PureCloud, which is based on the concept of using microservices (small pieces of code that handle specific functions). This design makes it highly flexible and scalable because customers can start by implementing only the capabilities they immediately require and add new ones when required. For its part Interactive Intelligence can add new capabilities by adding new microservices (such as support for emerging communication channels) without having to rebuild the whole system. It also uses AWS microservices for various system functions, which makes it totally dependent on the AWS platform. Don insisted that PureCloud will run only on the AWS platform and will never be ported to another environment.

The company’s financial performance continues to impress.

Strong sales are backed up by an impressive financial performance. Revenue has grown steadily growth over the last five years, reaching US$390.9 million in 2015 and estimated to surpass $430 million in 2016. In 2015, just short of two-thirds (59%) of the total was recurring revenue, mainly subscriptions for CaaS, the single-tenant, cloud-based version of CIC, and a small percentage from PureCloud subscriptions. The company expects income to shift even further toward recurring revenue as PureCloud sales accelerate. To sustain this growth while waiting for the number and value of PureCloud sales to grow, the company has worked on improving the margins for its CaaS business, which now are more than 50 percent. In a market where some other vendors are struggling with cash flow and levels of debt, the combination of increased revenue, better margins and internal operating efficiencies puts Interactive Intelligence in a strong position to reassure customers and prospects of its ongoing financial viability.

The company focuses on keeping customers happy.

As well as increasing cloud-based revenue, PureCloud has a fundamental impact on the company’s target market, moving the focus from fewer sales to large customers to more sales of less upfront value to smaller organizations. During a panel discussion, each of three speakers from new accounts emphasized the importance of customer service to them and testified that so far Interactive Intelligence has met or exceeded expectations in this respect. One speaker described the company’s help in transitioning quickly from CIC to PureCloud, but on a slightly less positive note comments were made that PureCloud needs additional capabilities. At this point the product is immature, and prospective customers should not get carried away with the architecture but evaluate its capabilities with the same diligence they apply to any other product.

Management strategy involves partners.

I began my career developing contact center systems from the ground up to meet customer requirements. Over time I have tracked the progress to on-premises products and more recently cloud-based systems. During this journey one important aspect has always been the role of partners and consultants, regardless of models. The basic value proposition of cloud-based systems is that it is easy to sign up, get online and get going, yet I see cloud-based vendors generating large volumes of professional service business for partners and consultants. Don Brown explained that “yes, it is easy to get PureCloud up and running, but that this is only the start of the journey in getting full value from the product.” PureCloud allows organizations to change the way they interact with customers, but this involves changing processes and people as well as adopting new technology. Cultural and behavioral change is probably the hardest thing for companies to do, but Interactive Intelligence asserts that its partners can help customers work through it. PureCloud includes multiple APIs that allow it to be integrated into existing architectures; companies can do this themselves or work with partners that have the skills and industry understanding to make it happen.

My research over the last two years leads to two indisputable conclusions. The first is that to meet customer expectations companies must support multiple channels of engagement, and the second is that customer experience is an enterprise issue because customers engage with both multiple channels and business groups as they move through their journey of doing business with an organization. Our research shows that companies face three major issues in meeting these expectations: difficulty in integrating systems, managing communication channels as silos and giving customers inconsistent information at different touch points. The architecture and capabilities of PureCloud can help companies address all these issues. It has features to enable integration with existing systems and can manage multiple channels of engagement as one. Being cloud-based it can be shared by all users who engage with customers and give each user the same information.

Some of the consultants in the audience suggested this might involve too much complexity in too short a time for some organizations; on the contrary I see it as a strength because companies can build toward providing omnichannel experiences at a pace that allows them to get comfortable with one set of changes before moving to the next. Of course technology alone is not enough – companies need to change processes and train employees as they move through the journey. Many of the people who will be involved along the way will be from the business side of the house; to them I say don’t get bogged down in the technology but stay focused on the capabilities you need and building toward your final goal, keeping an eye on the benefits it will bring your organization.

Regards,

Richard J. Snow

VP & Research Director, Customer

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