West Launches IPO, S-1 Shows Steady Growth and Profitability

westlogoAlmost two years ago, when companies like Yandex, LinkedIn and Groupon sucked most of the air (or at least capital) out of the Initial Public Offering marketplace, I posted this note about West’s “imminent” return to the market as a publicly traded stock. Well, it took this long, but based on the company’s S-1 filing, prospective investors can see the financial results of a well-diversified technology company, divided into two separate operating units. “Unified Communications” consists primarily of teleconferencing, Web conferencing and video bridging, as well as IP-based call routing and tricks surrounding events and outbound alerts. “Communications Services,” where the venerable West Interactive business unit resides, provides automated call handling, live agent services and handling and interconnection of toll-free and other calls, including emergency 911.

The company calls itself a “platform-based services business.” That’s a powerful metaphor that spans all sorts of platforms: from public safety to video bridging. In the automated handling of phone calls. But one of the interesting metrics has always been “ports” or port equivalents. According to the S-1, the company operates approximately 672,000 telephony ports. 384,000 comprise a huge IP-based teleconferencing platform. By Opus Research’s estimates, about 140,000 support interactive voice response. They trace their roots to the rock solid home-grown DTMF-based IVR system that West implemented back in the 1980s to support huge call volumes for credit card activation or third-party verification of long-distance carrier selection (remember those). But today, through regular investment in product development and acquisition of platforms from Genesys, TuVox and Holly, the voice application platforms are open, flexible and supportive of automated speech recognition and more conversational, natural language dialogues.

Both lines of business grew only modestly. Unified Communications grew 6.1% in 2012 over 2011, while Communications Services grew only 5.3%. But lumping Hosted Speech applications in with the declining sales of “direct response” agent services and “equipment sales in public safety” effectively masks the growth rate north of 13% that we see for hosted interactive voice based applications. From Opus Research’s parochial view, West is the market share leader in the hosted voice application domain, which is a market shared with Convergys, [24]7 (which combines Tellme and Voxify), Voxeo, Nuance on Demand, CenturyLink, Contact Solutions, Angel (recently acquired by Genesys) and many others.

Hosted speech applications are integrated into customer care strategies for thousands of companies and it is hard to define the water’s edge between contact center applications, Web-based self-service, mobile customer care and even virtual assistants. West may be correct in concluding that it is in the “platform” business, and we see the development and operation of the applications and human interfaces to support efficient self-service and assisted service to be vital to its health.

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