Also in this report:

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– TelEvolution conference focuses on technology p.DR15

– Cantel renewal program makes it easy to sell the right plan p.DR16

It’s no exaggeration to describe the call centre business as ‘booming.’

The increasing importance of telemarketing and direct response advertising has brought substantial growth to this industry – and with it, a shift towards consolidation. Mergers are increasingly the order of the day, as North American call centre companies ready themselves to take on the next great frontier: globalization.

The need for economies of scale is one of the major factors driving this trend.

‘The call centre business, in the last number of years, because of the technology involved, has become very capital-intensive,’ says Parry Rosenberg, president of the Canadian region of Telespectrum Worldwide. ‘There’s a huge requirement for capital, and at the same time it’s labor-intensive, which means it puts pressure on cash flow.

‘We also have a growing marketplace, where very large programs are becoming the norm. Two or three years ago, programs of several thousand hours seemed big. Now you’re talking about hundreds of thousands of hours on single programs annually.’

There’s been a shift on the client side as well, adds Rosenberg. Instead of using 10 or 15 different suppliers, companies are now consolidating their business with one or two call centres capable of meeting all their needs.

Three years ago, Rosenberg started his own company, called PR Response. Last November, PR Response merged with Telespectrum Worldwide, a major firm based in King of Prussia, Pa.

Telespectrum operates 33 call centres across North America, including operations in Toronto and Winnipeg, with 3,500 outbound predictive dialing seats and several hundred inbound. Publicly-traded on nasdaq, The company has the capital necessary for substantial growth in the years ahead, Rosenberg says.

Cross-border mergers are only the latest step for the call centre industry, he adds. Globalization will be next.

‘We’re starting to see some of the larger u.s. companies putting branches in Europe, Australia and the Far East, and I think you’ll see that continue over the next couple of years,’ says Rosenberg.

Another notable North American consolidation was consummated last year, with the merger of S&P Data and Promark One to form International Data Response Corporation (idrc).

Dan Plashkes, ceo of Toronto-based s&p, is moving to San Diego to take over as president of idrc. He will retain responsibility for Canada, but will also be appointing a new general manager to oversee operations here.

Although he’s heading south, Plashkes is quick to point out that Canada is strong in the call centre business.

‘Canada is conducive to call centres because of the geography,’ he says. ‘It’s a vast country without the huge population of the u.s., which makes it very expensive to travel in order to make sales calls. So it lends itself to the telephone.’

Canada’s human resources also make it an attractive telemarketing centre, he says. The relatively high quality of education means a quality workforce. And a multicultural population means the ready availability of skilled individuals who speak various languages – a plus for companies with an eye on global business.

Toronto-based Phonettix Intelecom numbers itself among those companies.

Its president, Dorothy Millman, founded one of Canada’s first telemarketing companies, DMS Market Services, a quarter of a century ago. In 1995, the firm was acquired by Phonettix, a supplier of interactive voice response (ivr) systems to clients such as Bell Canada and the country’s major financial institutions.

Millman says this is a period of significant growth for the call centre business, thanks in part to the cost of current call centre technology, which is compelling many corporate clients to outsource their telemarketing needs.

‘To do what we’re doing would cost them about $11 million for 200 stations – and that’s assuming they’ve also got the necessary expertise in-house,’ she explains. ‘So companies are sticking to their core competencies more and more, and outsourcing things like this.’

There were two major reasons, Millman says, for the merger between dms and Phonettix: technology and access to capital.

‘The partner we merged with is a consummate expert on call centre technology and software, as well as a public company, with Royal Bank as a major shareholder.’

Phonettix has one call centre in Toronto and has just announced the planned opening of a second centre in Halifax this spring. The next step, says Millman, will be to take the business into Europe.

Colin Taylor, president of Watts Communications, is another industry veteran who has seen his share of mergers.

Originally CPM Communications (the first telemarketing company in Canada), the firm merged with one of its competitors before being acquired by the Watts Group of Companies in 1987. It has since acquired two other companies, including Southam’s telemarketing group.

Watts Communications runs call centres in Toronto and Charlottetown, along with an additional small centre in New Brunswick through sister company NCH Promotional Services.

Like his colleagues, Taylor sees the trend toward consolidation on the North American scale as a stepping stone to globalization.

‘There have been a number of u.s. companies that have gone public in this business,’ he says. ‘Now they’ve got millions of dollars burning holes in their jeans, and they’re looking for something to do with that money.

‘One of the things they’re recognizing is that the world is getting to be a smaller place. The whole process of globalization is running rampant, and if they’re going to be players on the global stage, they need to get outside u.s. boundaries.’

The easiest first step is into familiar territory such as Canada – hence the recent mergers between u.s. companies and Canadian players such as PR Response and s&p.

The impact of such consolidation in Canada, says Taylor, is that many medium-sized call centre operations will be squeezed out. The big players will inevitably be international providers.

For clients, the benefits of consolidation will depend on the scale of their telemarketing needs. Bigger, he says, may not always be better.

‘I think some organizations will find they are better served due to consolidation, because now they have critical mass with a single organization, and therefore will be able to get more done and achieve more with a larger team.’

Smaller organizations, however, may find dealing with large providers frustrating, says Taylor. There may be little opportunity for them to control the design of systems or determine the type of report they would like to see.

Taylor also says large clients that turn to a single large provider for all their call centre needs may well be taking on a serious risk, since a systems failure or bankruptcy could affect their entire business.

Whatever the implications, he adds, the trend toward consolidation is certain to continue.

At the same time, the call centre business will continue to grow, as client companies become ever more enthusiastic about the use of the telephone for commercial purposes.

‘I think you’re seeing a fundamental shift in the way work is done,’ says Taylor. ‘Companies swore up and down 10-15 years ago that they would never pay for a customer to phone. Now they are happily embracing 1-800 numbers.’