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Big is certainly best, judging by this year's Marketing Direct Telemarketing League Tables. Not only have the three largest players - Vertex, Ventura and MM Teleperformance - all increased their turnovers significantly, but there has been major consolidation at the top of the table.

Thus, previously seventh in the table, was swallowed up by RLM in July last year; MM Group lost its status as the UK's largest independent contact centre when it merged with Teleperformance UK in May; and Moonriver Group strengthened its presence in this market when The Ops Room was folded into Ion Group.

With the amount of consolidation that has occurred in the past year, it is hard to come up with a realistic quantification of how the industry has fared in 2004 compared with the previous year. The total revenue of the top 20 telemarketing suppliers in 2004 is £946.1 million, an increase of 20 per cent on 2003's revenue. Much of this growth appears to be as a result of acquisitions by the big players.

These developments point towards an increasingly polarised industry, with the big getting bigger, those companies that can provide a very focused, niche offering thriving and those in-between facing a more uncertain future.

Indeed, in the middle of the table, there's plenty of evidence of turnover stagnating or even dropping.

Mike Purvis, enterprise director at Vertex, goes as far as to predict that five or six super-players will emerge in the coming years. "These will take the lion's share of the market," he says. "It's all going to be about scale. To be cost effective, you have to get the economies of scale."

Vertex, which sits assertively at the top of the table, is certainly in a league of its own when it comes to size. One account alone, Powergen, commands 2,500 dedicated staff and its turnover is £255 million, more than its nearest competitor. But a considerable chunk of Vertex's turnover can be attributed to business process outsourcing (BPO).

Although its heartland is the call centre business, it has expanded into BPO in a major way in the past couple of years. HR, finance and administration outsourcing give Vertex responsibility for areas such as payroll, recruitment, training, debt management and billing. Purvis argues very few companies can combine customer management outsourcing with a comprehensive BPO proposition - and he's probably correct.

But Vertex's business model does illustrate the challenges of compiling a telemarketing league table where like is compared with like. This year's table, perhaps more so than any other, reflects the diversity of an industry that's becoming ever harder to define, with the phrase 'telemarketing' an increasingly inadequate umbrella term for the business it represents.

One of the reasons for this is the growing provision of integrated services. Prolog and 2Touch, for example, have sizable fulfilment offerings which are included in their turnover figure. CPM - the Omnicom-owned company unable to declare its turnover because of the Sarbanes-Oxley Act but would certainly fall in the top 15 - has its origins in field marketing and this is still its core business. Other companies, such as LBM and Broadsystem, have as much expertise in data services as they do in pure-play contact centres. As such, customer relationship management providers would probably be a more accurate description of their business.

"Because of our data heritage, our revenue isn't just contact centre generated," says Caroline Worboys, managing director of Broadsystem.

"The integration of channels through online and offline CRM is where we're really getting the payback from the investment we've made."

Technology investment is a moot point and one that also plays into the hands of the larger providers with more financial clout. Arvato, which is one of this year's fastest-growing companies, climbing from 16th to 11th position after its turnover almost doubled, attributes much of its success to the strong financial backing provided by parent company Bertelsmann AG.

"The technology investment we can put in is huge," says Arvato sales director Phil Crossley. "Because of our global purchasing power there are economies that aren't available to middle-tier companies."

He argues that privately owned middle-tier companies are ripe for acquisition because they will struggle to come up with the funds to keep up with technology advances. Not only that but "blue-chip clients are nervous about putting their business with companies that don't have strong financial backing," Crossley adds.

If his predictions are true then independent companies including Garlands Call Centres, LBM, beCogent and The Listening Company are all likely to be attracting attention from the larger groups. But in the meantime they all, not surprisingly, are keen to emphasise that they are ploughing their own furrow.

For LBM this has meant expanding into Ireland with the announcement last month that it's opening a contact centre in Belfast, supported by £6.5 million from Invest Northern Ireland against the creation of up to 750 jobs. About 75 per cent of the company's activity is outbound work for clients including npower, phones4u and O2.

"It's the tougher stuff so if you can hit targets and budgets you tend to keep your clients," says marketing director Andrew Colwell.

Offshore issue

LBM doesn't have any links with offshore companies and Colwell doesn't perceive the offshore environment as a threat. "Offshore has its place in terms of back-office processing and simple data capture, but as soon as you move into more complicated conversation-based lead generation you hit barriers."

The offshore threat certainly seems to have receded judging by responses to the market trends section of our survey. Whereas last year it featured in sixth position as one of the key issues facing the industry, this year it has dropped down to eighth on the table (see graph, above). Offshore is now a fact of life rather than a threat, with most companies consolidating their presence in offshore markets and offering a combined solution.

Vertex, for example, opened its 750-seat site in Delhi in 2002 and is about to announce plans to double its capacity in India. It has even come up with a buzzword, 'smartshoring', to underline the fact that an offshore service can match, or even exceed, that of the UK. Ventura is also stepping up its investment offshore this year with a 1,500 agent contact centre in India.

Offshore may no longer be front of mind for the majority of respondents but there has been no change at the very top of the issues table. Downward pricing pressure (which certainly can't be helped by the offshore trend) still ranks as the greatest concern for practitioners, followed by recruiting staff who meet the right skill requirements and then retaining them.

Client procurement departments affect the contact centre environment just as much as the agency world. This price pressure, coupled with over capacity and the existence of some companies that will quote at cost or even a loss to get the business, means it's still a tough business environment for today's practitioners.

Cautious clients

Paul Turner, business development manager at Prolog, observes that clients are still risk averse. "We've been shortlisted for some major accounts which were never awarded. Either the decision was deferred or the client decided to stick with their incumbent," he says. It's still common for companies to use the tender process to "beat up their existing supplier on price," he adds.

On the plus side, Rachel Robinson, business development director at MM Teleperformance, says price pressure has at least reached a plateau.

"It's no longer falling," she says, but adds that the flip side of this is increased pressure on key performance indicators (KPIs) and service level agreements (SLAs).

"Expectation is increasing and we're getting to the point where accounts are too challenging to take on," says Robinson. For example, whereas a typical grade of service might see 85 per cent of calls taken in 20 seconds, clients might now ask for 95 per cent. "It's not possible to deliver against that unless there's an increase in pricing," she says.

What clients expect in terms of service and what they're willing to pay can still be at odds with each other. MM Teleperformance has the experience to realise that some accounts will be operationally difficult to make a return on so is increasingly selective about the work it takes on. Across the industry, notes Robinson, contact centres are "concentrating on their profitable business and losing their non profitable accounts".

That has certainly been the case for Spark Response, which enters the table in 19th position but saw turnover drop in 2004 from £10.41 million to £10.1 million. Business development director Martin Williams attributes this to the company focusing its efforts on its more profitable accounts and losing those that weren't generating revenue.

This repositioning means that Spark Response is in good shape for the coming year with a clear focus on offering multi-channel contact centre capability combined with integrated fulfilment "Our forte is end-to-end solutions, and about 70 per cent of our clients take advantage of both sides of the business," says Williams.

Core strengths

iSky is another company to have experienced a slump in turnover, dropping from £10 million to £6.84 million. Head of marketing Maggie Evans admits the company has had a turbulent year with a number of personnel changes.

iSky is run by an executive management team of three, but Evans is confident that business will improve, particularly now that it's part of a global entity, The Resource Group.

Key to future success, she says, will be focusing on the company's core strengths. "We're not in the business of offering a high number of seats on a big calling floor. We hire extremely qualified people and offer quality customer care. You should stick to what you do best," says Williams.

The recognition that a company should stick to its core proposition is a recurring characteristic of this year's league table. Richard Pamment, group client service manager at CPM, sums up the prevailing mood saying: "If you're not up with the big guys in terms of scale, you have to clearly carve out what your proposition is or you'll be caught in the middle."

For CPM this focus revolves around its expertise in customer care, particularly in the FMCG and retail sectors. Clients include Britvic, Kellogg's and British Airways - all of which have strong brand values they want to protect.

"We know we're not the biggest, but we also know we're bloody good at what we focus on," asserts Pamment.

This focus also extends to vertical sectors, and in particular financial services. From January this year contact centres carrying out regulated activity on behalf of financial services clients have to be authorised by the Financial Services Authorities. Companies that have completed this protracted process, such as MM Teleperformance and Chorus Direct, have automatically carved out a niche in this area. Chorus Direct has even launched a dedicated arm offering outbound services to the financial services sector, aptly named Chorus Direct Financial Services.

Local government is another vertical sector which is proving very lucrative for a handful of companies (see box, left), as well as utilities and telecoms.

But regardless of the sector a company has expertise in, there are certain issues that are all pervasive.

Focus on targeting

Consumer hostility to unsolicited calls, fuelled by the menace of silent calls, is behind the relentless increase in Telephone Preference Service registrations (see Think Tank, page 18). To combat this many in the industry point to the need for greater diligence in terms of profiling and targeting.

"To win back consumer confidence, telemarketers need to get their minds around the concept of better, more appropriate and relevant targeting," says Gareth Smith, marketing director at 2Touch. "That means more intelligent use of existing transactional data and also a more intuitive look at useful overlay profiling data. Understand the customer and you'll not go too far wrong."

Companies with a strong data offering - such as 2Touch through its parent company Acxiom, LBM with its division LBM Data and Chorus Direct which is part of the Data Locator Group - have a clear advantage here.

Establishing your competitive advantage and communicating that very clearly to the market is a key message to have come out of this year's league table. There's certainly room in the industry for different offerings, but medium-sized independents watch out. If industry predictions prove correct, you may well attract plenty of attention in the year ahead.

TELEMARKETING LEAGUE TABLE 2005

Rk Company Turnover Activity Number of

(pounds m) (as % of turnover) workstations

2004 2003 In Out Web FF/ Oth Tele-

Mail phone Web

1 Vertex 386.9 323.1 70 5 2 23 1000+ 1000+

2 Ventura 131.8 112.0 78 14 5 2 1 1000+ 1000+

3 MM Tele-

performance 53.0 40.0 40 40 10 10 1000+ 1000+

4 Sitel UK 41.2 43.0 65 20 10 5 1000+ 251-300

5 Prolog 35.0 32.2 50 10 10 25 5 501-700 501-700

6 Broadsystem 33.5 39.0 50 20 12 8 10 251-300

7 RHL 32.0 19.0 40 55 4 1 1000+ 701-1000

8 Inkfish

Call Centres 28.4 25.1 65 35 1000+ 1000+

9 Merchants 28.4 23.5 85 9 6 1000+ 1000+

10 Garlands

Call Centres 28.2 16.2 78 15 5 1 1 1000+ 1000+

11 LBM 23.7 12.1 25 75 1000+ 1000+

12 Arvato Servs UK 23.6 12.3 50 35 5 10 701-1000 701-1000

13 beCogent 17.1 13.1 72 28 1000+ 501-700

14 The Listening Co 13.5 14.1 35 60 5 501-700 501-700

15 CPM UK * 13.4 * * * * * 301-350 251-300

16 2Touch 13.0 13.0 29 13 54 4 501-700 501-700

17 Ant Marketing 12.0 11.0 10 90 701-1000 251-300

18 MGt 11.3 7.5 70 25 5 501-700 501-700

19 Spark Response 10.1 10.4 62 38 401-500 401-500

20 Dataforce 10.0 9.1 35 25 15 20 5 301-350 251-300

21 Telegen UK 9.0 6.4 5 95 251-300 251-300

22 Pell & Bales 8.3 6.9 2 83 10 5 151-200 <50

23 Ion Group 7.7 3.1 40 35 10 15 151-200 151-200

24 iSKY Europe 6.8 10.0 49 40 2 5 4 301-350 251-300

25 Chorus Direct 5.5 4.0 5 95 401-500 401-500

26 Navigator

Cust Mngt 5.2 4.8 60 30 10 101-150 51-100

27 Message Pad 5.1 5.2 90 7 3 101-150 <50

28 Direct Dialog 4.0 3.0 40 40 5 10 5 201-250 201-250

29 Kingston Comms 3.6 7.4 60 10 5 25 201-250 <50

30 The Tele-

marketing Co 2.8 2.8 100 151-200 151-200

31 Converso 2.8 0.0 45 55 151-200 151-200

32 BCC Mktg Services 1.7 1.4 5 95 101-150 51-100

33 Europa Comms 1.2 1.0 80 10 10 51-100 <50

34 Senior Response 0.7 0.5 2 98 <50 <50

35 Stormark 0.6 0.7 90 5 5 <50 <50

36 LVT Telemarketing 0.3 0.2 100 <50

* Sarbanes-Oxley ruling restricts us from publishing this figure.

Companies affected by Sarbanes-Oxley have been ranked according to their

2003 turnover.

FF = Fulfilment

Mngt = Management

PUBLIC SECTOR FOCUS

The Government spends a significant amount of money on outsourced contact centres and the COI has long been courted by the telemarketing industry. The Department of Education and Skills, for example, is Prolog's biggest client, while MM Teleperformance numbers the National Blood Service and UK Passport Service among its accounts.

But local government work is perhaps even more lucrative, as Vertex knows all too well. In 2003 it launched a dedicated product focusing on the public sector, called Citizen First. This is a combination of services and technologies aimed at helping local authorities communicate better with their communities and meet central government targets for electronic delivery of services.

A recent contract for Thurrock Council is worth a staggering £427 million over 15 years and embraces 10 council services, including customer service, procurement, human resources and administration.

The contract is structured as a public-private partnership and this is exactly the route Arvato has taken in a joint initiative with the East Riding of Yorkshire Council. The eight-year contract was announced in February this year and is worth up to £180m.

As Arvato sales director Phil Crossley explains: "About 600 East Riding employees will become Arvato employees and we'll take over a range of services from a new regional business centre." These include managing the customer service centres as well as payroll services, print and design and training.

The aim is to make Riding Council a centre of excellence in terms of its community and staff services. And the fact that a contact centre is at the heart of this ambition can only be a good sign.

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