Following the news that NICE Systems, a telephony-centric contact center vendor, is to buy US data firm Causata, we interview Carter Lusher, Chief IT analyst at Ovum on the significance of this deal:

Carter Lusher

Q: Why was the acquisition made?
A: “NICE Systems, a telephony-centric contact center vendor, needs to expand into other channels especially the Web. In addition, NICE needs to broaden and deepen its big data and fast data capabilities to handle dramatically expanding volume and diversity of customer-related data. While NICE had been working on those major functions through organic R&D, the Causata acquisition dramatically reduces NICE’s time-to-market.”

Q: Does this acquisition make sense?
A: “Absolutely. Causata provides NICE with important technology, domain expertise, and legal intellectual property. The vendors are not competitors so there are no conflicts between the product lines and little overlap in customer bases. As a private, venture capital-backed startup the acquisition of Causata will be quicker to execute than a public company.  Ovum considers acquisitions of startups that are focused on advanced technology and domain expertise to be “outsourced R&D” and part of a smart R&D strategy that leverages organic and acquired R&D.”

Q: What will happen to the acquired company?
A: “Causata will disappear as a standalone entity. Causata’s R&D team will be rolled into NICE’s Product Technology Unit.  The customer facing teams (e.g., sales, customer service, and professional services) will be added to the equivalent teams in NICE. Ovum expects that Causata’s top executives, except for R&D, to depart after a transition period. These are all typical for acquisitions of startups that have venture capital backing and an executive team that was installed to supplement the founders.”

Q: What does it mean for the competition?
A: “Competition will be confronted with dealing with an important new differentiator for NICE.  While it will take time to fully integrate Causata’s functionality in the NICE product suite, “relatively” straightforward product-to-product integration will enable some measure of functionality enhancement for the NICE products. More importantly from a competitive point-of-view, even simple integration will give NICE nearly 100% of the marketing and sales value of the acquisition.”

Q: What are your recommendations for the customers of both vendors?
A: “For NICE customers, this acquisition is a very simple “business as usual.” The Causata acquisition has no particular downsides for NICE customers, with the potential upside of new fast and big data functionality. For Causata customers the situation is much more complex. While NICE will continue to sell and support Causata products in the short run, there is no guarantee that it will remain as a standalone product. Causata customers and prospects should seek clarification on NICE’s roadmap for Causata and try to inject contractual protections for their investment in contracts.”