In the last week of March, Teleperformance made two significant announcements. The first was the planned acquisition of 100% of Majorel shares for a total consideration of €3bn, including €1bn of Teleperformance shares in exchange. The transaction will create a company with $12bn in annual revenue (end of 2023 estimate). The second statement came during the Q1 results, where the company assessed that "there is a potential to automate 20-30% of its volumes over [the next] 3 years."

The two events might not have a direct connection, but they both highlight the way in which the CX services market is evolving. In this blog, I summarize the benefits that Majorel brings and look at the broader impacts of automation and generative AI technology on the CX services market.

Majorel brings major injection of EMEA talent

The initial reaction to the planned deal is that it goes against Teleperformance’s previously declared M&A strategy, that it is a defensive reaction to Concentrix's plans to combine with Webhelp, and that adding CX services employee scale is illogical because ChatGPT exists. However, such observations are inconsistent with the market trend for CX services consolidation over the last few years.

Many of the latest CXS deals have had a sizable growth effect on delivery scale:

• Sitel’s (now Foundever) acquisition of SYKES in 2021, added ~61k employees
• TELUS International acquired crowdsource data annotation business Lionbridge AI in 2021, which currently claims ~1m gig workers
• The Konecta-Comdata merger, finalized in 2023, combined to reach ~130k employees
• The above-mentioned planned acquisition of Webhelp will add to Concentrix ~120k employees.

When the Majorel deal finalizes in Q4 2023 or Q1 2024, Teleperformance will exceed ~500k employees but still below TCS (~615k) and Accenture (~738k).

Majorel's talent is particularly valuable in Europe, with its highly sought-after German-speaking scale, French offshore capacity, and 25 multilingual hubs in cities such as Berlin, Dublin, Maastricht, Lisbon, Barcelona, and Tbilisi. The demand for nearshore German-speaking support has driven much of the recent new site launches and M&A activity in Southeast Europe and also Turkey, which is a focus for Majorel.

Majorel's sizable European onshore and nearshore delivery is further boosted by its African market presence and delivery network. The company operates in established outsourcing centers such as Casablanca and Cairo but also Togo, Senegal, Côte d'Ivoire, and has recently grown its delivery from Ghana and Kenya. Multiple countries in Africa have the potential to become the next big delivery centers for CX and BPS. Teleperformance's investments follow this logic, with the company expecting to have ~40k people on the continent after the deal.

This active diversification of the global delivery network is backed by increasing cost pressures on clients, the persistent talent shortage, and the fundamental need for de-risking and hedging against growing external factors such as environmental and political disruptions. All major CX services players have adopted this approach, including Majorel, which added capacity in locations such as Suriname and Colombia.

Majorel's domain expertise

Majorel brings several specialized services and domain capabilities that target high-growth segments in CX services:

• Bank account portability offerings, platform, and clients in German-speaking markets, France, and, most recently, Ireland. This capability is high on the list of European banks as they face higher interest rates, customer migration for higher yield deposits, and challenges from neobanks
• MajUP, a dedicated startup accelerator, offers a custom support model, pricing structure, and delivery format for new brands in Europe
• A developed trust and safety and content moderation practice with localized delivery, marquee client base, and moderation IP
• Consulting and CX technology delivery unified under the Majorel X brand with ~650 resources in 15 countries. Majorel X provides CX consulting and design, customer journey mapping and strategy, CX application and platform development, and content creation services
• Automation and AI development in Majorel's RPA factory in Dublin. An example of development is the cognitive virtual assistant MAIA with self-learning functionalities, an NLU engine, interactions memory, service, and technical panels
• Experience in selected verticals, such as luxury goods and automotive. A further benefit Majorel brings is that among its ~500 clients are those operating in China, where the company supports multinational brands, including in automotive.

For Teleperformance, these digital capabilities can be integrated into its own portfolio of CX platforms, tools, and transformation practice TAP and cross-sold to enterprise clients. For example, Teleperformance's offerings can target Majorel's flagship travel clients for agent training in GDS and real-time interaction augmentation. Integrating front and back-end tools and operating models with subprocess vertical-level expertise is becoming a key enabler for organizations to achieve cost take-out and revenue increase.

And as expected, the combined company will bring cost optimization opportunities in systems, licenses, property, managerial, and administrative. Teleperformance estimates the run rate cost synergy potential at €100-150m.

What about ChatGPT?

When AI first emerged as a viable CX technology a few years ago, a common industry concern was its disruptive effect. Since then, CX services providers and clients have adopted AI, while the overall market has expanded. Generative AI is not new for CX services players, but its recent emergence in the public spotlight brings renewed focus on the role of human-delivered CX support. The reality is that a lot is unknown in the long term (three to five years).

In the last few years, the adoption of conversational AI and large language models in CX operations has shown:

• Better intent recognition and language pattern categorization
• Significant improvement in automated conversation building
• Enhanced agent productivity, for example, by autocompleting certain tasks
• Application of agent learning with benefits in speed-to-proficiency and accuracy.

Another clear development is that more and more users, especially new customer demographics, are more receptive to interacting with bots. ChatGPT had ~100m uses in January 2023.

However, these technology advancements do not point to a drop in support volumes but rather their replacement. The rationale is:

• Voice will remain, for a while, the preferred channel for certain types of customer interactions in conversations related to money, health, or highly sensitive and urgent issues. NLU and generative AI apply to text only. The likelihood is that for this status quo to change, it will require massive technological progress (e.g., in quantum computing)
• Feeding the LLM algorithm with up-to-date and accurate data to answer highly dynamic CX processes requires a lot of human supervision and checks. Given the potential risks, brands are likely to apply it to a narrow range of more repetitive customer-facing processes, leaving the bulk of interactions to humans or hybrid human-machine support
• Human engagement and contextual empathy are key in different CX processes and irreplaceable in sales, retention, win-backs, and collections. These revenue generation processes are among the fastest-growing outsourcing needs
• Data ownership barriers and the regulatory environment can potentially limit the application of unsupervised AI in CX.

Other factors that favor outsourcing providers are: their role in the ecosystem as administrators of mass customer interactions and CX data across clients and industries; the scale of the contact center agent population who can work alongside the algorithms; and providers' experience in CX automation design and implementation.

Other macro trends are also driving CX services demand, including the closure of physical stores and debranching, shifts to subscription models, and the rise of experiential shopping, to name a few.

When will AI disrupt CX?

From the perspective of the current state of generative AI, the Teleperformance acquisition of Majorel and the previous examples of CX consolidation are more strategic enhancements of domain capabilities and less a reaction to expected volume automation. After the transaction completes, the company will reveal its new four-year growth plan.

Still, AI has a very tangible potential to disrupt CX services in many unexpected ways. Accent neutralization software (e.g., Sanas) and synthetic voice (e.g., ElevenLabs) could make delivery borderless; conversational bots could evolve into personalized brand representatives with social functions (in the vein of Replika); AI-generated video content can revolutionize self-service (e.g., RunwayML); and leaps in agent efficiency through AI augmentation could reduce the operations required to handle existing volumes. When these evolutions materialize, CX services vendors and contact center agents will have to adopt new roles; for example, AI whisperers and trainers, language interface designers, or online brand ambassadors and concierges.