Rapidly-growing Convergys now rules call-center industry

By Terry Kinney
Associated Press

CINCINNATI — Cell phone owners, cable television subscribers and even callers to a national telethon for victims of the 9/11 attacks have done business with Convergys Corp. but probably didn't even know it.

Convergys employees work at a call center at the company's headquarters in Cincinnati. A leader in the outsourced-billing and customer-care industry, the former Cincinnati Bell subsidiary recently won a seven-year, $280 million contract to handle human-resource work for the state of Florida. Associated Press

Convergys' 44,000 employees at 46 sites around the world even take orders for videos, exercise equipment or gadgets hawked on late-night infomercials. The company is also branching out into human resource services, recently landing a contract with the state of Florida to answer questions about benefits and other matters for employees and retirees.

Convergys, which started by providing billing and marketing services for Cincinnati Bell Telephone Co., processes nearly 40 percent of all U.S. cell phone bills, payments for about a third of the domestic cable TV market and six of the top 10 credit card issuers, company officials say. It makes more than 1.7 million contacts a day by phone or the Internet.

With its extensive reach, analysts are upbeat about the company.

"They were the first guys out, but that's not the only reason why they're on top," said Hampton Adams, an analyst with CIBC World Markets Corp. in San Francisco. "They've not only built their own systems, they've invested heavily in research and development and acquisitions over the years."

Tim Fuqua, who has worked at a call center in suburban Norwood for 6 1/2 years, likened Convergys to the Fuller Brush sales people who used to go house to house to see customers.

"This is a lot easier to be able to get in touch with clients," Fuqua said, explaining that he makes up to 100 calls a day for companies that hire Convergys to contact prospects by telephone.

Convergys' roots date to 1983, when then-parent Cincinnati Bell created a subsidiary, Cincinnati Bell Information Systems, to handle data processing and billing, and another subsidiary, MATRIXX, for direct marketing and customer care.

Using billing and customer care systems it created for their own use, the companies began providing those services to other telecommunications companies. Business boomed in the next decade until CBIS and MATRIXX represented about half of Cincinnati Bell's revenue.

The two subsidiaries were combined and spun off as Convergys in August 1998. It now operates out of sites in the United States, Canada, Latin America, Europe, Israel and Asia.

Convergys' biggest competitors for the estimated $21.5 billion that U.S. companies spend on billing, and the $125 billion spent on outsourced customer care, are Denver-based TeleTech; West Corp., of Omaha; and Sitel Corp., based in Baltimore.

Convergys produces 1.5 million bills a day for about 120 million subscribers to telephone, Internet, satellite and cable services. Clients include nearly 300 companies such as AT&T and the Baby Bells, American Express, Procter & Gamble, Toys 'R' Us and Wal-Mart.

Last year, Convergys had record earnings of $215.5 million on record revenues of $2.3 billion. Its most recent quarter was off slightly from a year ago, but net income was still $55.6 million on revenues of $561.2 million.

"When the economy does turn around, we think we are going to be very well positioned," said Randy Mysliviec, senior vice president for marketing.

Convergys has spent $450 million on research and development since 1998 and has 59 patents or patents pending for such things as performance monitoring, call transaction processing and electronic message management.

The company took a leap forward in August, landing a seven-year, $280 million contract to provide human resource services for the state of Florida. Starting in May, state employees' inquiries about jobs, benefits or other human resource questions will go to a Convergys representative, part of Florida's privatization of work formerly done by a state agency.

Although Convergys handles employee services for General Electric, Pfizer and other big companies, winning the Florida contract was a major coup.

"That opens the door to the other 49 states," Mysliviec said. "We think it was a real feather in our cap, a big step forward. It really put us on the map in a big way."

Kit Case, an analyst with SWS Securities in Dallas, agreed it was a big gain for Convergys.

"It makes sense that they're entering this field. This market is wide open," Case said. "They've also expanded internationally, where they can operate on an outsource or license basis. That allows them flexibility to fit any need in the international market."

The Florida Department of Management Services estimated the state would save $173 million during the life of its contract with Convergys, including some $65 million to $90 million it would take to replace outdated computer systems.

"One nice thing about our business, it's not limited to telecommunications," Mysliviec said. "We provide essential services as opposed to discretionary services. The exciting part is adding a third layer, employee care. The opportunity is huge."

Convergys also sees growth potential overseas, where it licenses its software to companies that prefer to handle their own customer care.

"We have lots of happy clients in outsourcing, but there is a large market outside the country for licensing," Mysliviec said. "It's a good business and it's growing. It produced more than $100 million last year."