Bertelsmann, the parent company of Arvato CRM Solutions, has announced plans to combine Arvato CRM with the CX services business of the Pan-African Saham Group. The joint venture will have 50/50 ownership, with ~ €1.2bn combined annual revenues and ~48k employees in 25 countries. The deal is expected to close in January 2019.

Saham Group & partnership history

Founded in 1995 in Casablanca, parent group Saham has operations in 27 countries in Africa and the Middle East in real estate, healthcare, education, and outsourcing. In 1999, Saham created Phone Group, focused on CX services for the French-speaking markets, and in 2004 partnered with Arvato CRM. The company has nine contact centers in Casablanca and Marrakech, Morocco; two sites in Dakar, Senegal; one site in Lomé, Togo; and one center in Abidjan, Ivory Coast.

Saham has additional CXS businesses in Egypt and Qatar (Ecco Outsourcing, added in 2015) and in Saudi Arabia (Pioneers Outsourcing, added in December 2017). In total, the group adds ~14k employees in seven countries supporting nine languages.

Global presence & expansion plans

The new, as yet unnamed, provider will have a sizable delivery presence in EMEA:

• 25k employees in ten European countries: Germany, France, Spain, Portugal, Ireland, the Netherlands, Poland, Romania, Georgia, and Estonia. Arvato CRM’s U.K. business will remain part of Bertelsmann
• 14k employees in MEA countries: Egypt, Morocco, Senegal, Ivory Coast, Togo, Qatar, and Saudi Arabia
• 9k employees in Asia (India, the Philippines, Malaysia), and the Americas (U.S., Canada, Mexico, Peru, Colombia). 

Its clients are in sectors including telecoms and high-tech, BFSI, automotive OEMs, retail, CPG, and consumer electronics, social media, travel, transport, and hospitality.

Under the deal, Bertelsmann will receive an undisclosed payment and will appoint a new CEO, Thomas Mackenbrock, who says that the company will be debt-free and has plans to expand its regional footprint further and increase its focus on digital services.

The Middle East & Africa offering growth opportunities

Over the last three years, the Middle East and Africa have seen increased demand for outsourced CX, both in the domestic and offshore markets. The drivers behind it are diverse:

• More stable political environment in Egypt and Tunisia allowing increased offshoring by multinational providers (e.g. Convergys) and domestic players (e.g. Raya Contact Center, Xceed)
• Renewed efforts to promote South Africa for support to new markets such as the U.S. and Australia (e.g. WNS, Merchants)
• Cost pressures in the Gulf countries to outsource front office work benefiting multinationals (e.g. TCS, Sutherland, Aegis, Intelenet)
• Economic growth creating demand for first-time outsourcing, primarily by telecom clients in Sub-Saharan Africa, creating need for onshore centers (e.g. iSON BPO, PCCI)
• Expanding English and French offshore work from African destinations such as Nigeria, Cameroon, Madagascar, and Mauritius (e.g. Intelcia, Tek Experts).

The new Arvato-Saham company is well positioned to leverage several of these trends and benefit from demand for domestic, nearshore, and offshore CX services.

The growing attraction of CX services

This transaction is the latest in a series this year that typify the consolidation drive and industry investments happening in the CX services market. Bertelsmann was considering the full sale of Arvato CRM to direct competitors, but the creation of a joint venture shows a level of confidence in the positive trends in the market.

Global CX services are gradually shifting towards higher-value, more complex customer interactions and more digitally-focused contracts. Commercial models in the industry are evolving from per FTE pricing and labor-arbitrage, to outcome-based and gainshare requirements where providers are supporting the digital transformation and CX strategy of clients. One of the effects of this will be further consolidation of providers in 2019.