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Customer service consolidates on the Web

Specialized vendors offering email, online chat, and voice software for Internet retailers feel the pinch to unify services as customer support becomes increasingly critical.

Companies selling the technology that links retailers to their customers via email, online chat, and soon, voice, are consolidating at a rapid clip to better meet the growing customer service needs of Internet retailers.

E-retailers industrywide are realizing that to keep a customer is cheaper than to acquire a new one (See related story.) And as service has become more critical, retailers are demanding product suites that will help them interact with customers online via such self-help features as frequently asked questions (FAQs), email, real-time chat, and eventually voice.

Consolidation is the logical route for smaller, specialized firms seeking to provide one-stop shopping for customers, which are often start-ups seeking fewer service headaches.

The wave of consolidation began rippling through the industry in February, with the merger of BaliSoft, which sold self-service and email products, and ServiceSoft, which marketed voice and data management software. The new company, called Servicesoft Technologies, became perhaps the first company to offer a suite.

That merger was quickly followed in May by email-management vendor eGain acquiring Web chat company Sitebridge, which offered technology for Web collaboration, telephone callback, and IP-based voice.

Then traditional "customer care" software vendors, which market software for telemarketing or customer support call centers, swooped into the consolidation party. Software-maker Melita acquired business-chat company eShare for 5.5 million Melita shares, today worth about $60 million.

"Consolidation is definitely the way the industry is headed," said Cormac Foster, an analyst with Jupiter Communications.

However, not everyone is going that route. Adding capabilities via acquisitions requires the challenge of integrating two different sets of technologies. Some companies such as customer service chat software maker Acuity and FaceTime Communications have opted to build their own suites because of the challenge.

While Web-based retailers can choose an Internet-based solution, brick-and-mortar players with established call centers face bigger hurdles.

"As soon as you want to integrate Web-based technologies with the voice infrastructure, you're talking about something much more complex," said Steve Robins, a senior analyst at Yankee Group.

That complexity is one reason FaceTime, which lacks any telephone capability, has stayed away from acquisitions.

Forrester Research analyst David Cooperstein expects traditional software players in customer care to join the acquisitions spree too.

"I expect big customer service [vendors] like Oracle and Siebel Systems to start picking up channel-specific plays," Cooperstein said.

Yankee's Robins concurs but says the old-line vendors must worry about their existing customers.

"Many traditional client-server or call-center vendors have not acted as quickly as they might," he said. That may be because they lack the skills to build Web-based systems and fear the impact that integration issues may pose for customers, he said.