Paramus N.J.-based NICE Systems surprised the contact center industry by entering into a definite agreement to acquire Sandy, Utah-based inContact for $940 million. 

So what was surprising? Not the size of the deal: cloud-based-anything companies tend to value high. Not even the acquisition itself: The industry has been awaiting consolidation that would finally marry contact center app providers like NICE with the hardware vendors like inContact.

The surprising part was that an application provider acquired a hardware vendor — and not the other way around.

"I have to admit, I didn't see that coming," Ken Landoline, principal analyst at Ovum, who is based in the Bay Area, told "I had been expecting that an infrastructure provider would be the one to make the first move to acquire an applications provider."

"It shows the power of NICE in this space."

A Sign of Things to Come

It also suggests that more deals will be coming — from either direction, he said.

The need for tighter integration between these two separate but highly-related and inter-dependent pieces of the contact center ecosystem has been clear for some time.

For example, analytics applications that can smartly route calls to certain call center agents, while widely touted among industry vendors as possible, in fact can be very difficult. "I think maybe two percent to three percent of the market vendors can do this very well," Aviad Abiri, vice president of portfolio sales enablement at NICE, told CMSWire.

More often than not the functionality is very rudimentary. By acquiring inContact and integrating it with NICE's family of products — especially its deep analytics bench — the company expects to infuse very sophisticated functionality to the process. 

Such functionality could be around a fuller understanding of the customer journey, Abiri said, or the agent herself. The possibilities are surprising wide in both areas. For example, Abiri noted that some agents have better soft skill sets in certain areas or tend to work better at a certain time of day. He describes a scenario in which a particularly valuable — and possibly cranky — customer is routed to this soothing and smart agent.

Landoline sees other opportunities, such as NICE's work in customer verification,  being applied to the contact center through this acquisition.

Where NICE Excels

Analytics has been one area NICE has been building out, possibly in anticipation of such a deal.

At the start of the year, it acquired Nexidia

, a provider of interaction analytics for $135 million. Based in Atlanta, Nexidia has been an industry leader for years, dating back to when Georgia Institute of Technology researchers began experimenting with phonetic indexing and related search — functionality that went on to become the core underpinning of Nexidia's analytics products. By the time NICE acquired Nexidia it had built up a sophisticated portfolio of patents ranging from phonetic information compression to applying phonetic search to very large sets of data.

NICE has made its own advancements as well. About two years ago, it rolled out a voice-based real-time authentication solution.

In NICE's version of the product — there are competitors in this space although arguably one could say this is not an easy technology to crack — the system creates a voice print from previous calls so users do not have to set up their own profiles.

To the Cloud!

And now NICE will be embedding all this functionality at the hardware-level of the contact center so its customers can skip the costly and time-consuming integration and implementation projects. (More or less — if the history of technology tells us anything it is that nothing is as simply as it looks to be).

Even better, NICE will be bringing this integrated piece to the cloud. This is an area NICE has been moving towards but until this deal it could not legitimately say it was a cloud-based contact center service provider.

A Small Bite

The only hitch to this otherwise industry-shaking event is that inContact owns a fairly small percentage of the contact center market, Landoline said. "It is big in the cloud, yes, but it is not an Avaya, for example."

Avaya, of course, has a strong and deep footprint in the contact center. What it doesn't have, according to Landoline, are the financial resources to make a similar deal. NICE is paying for inContact partly in cash. The $940 valuation translates into a $14 per share price point, with the remainder to be financed with $475 million in debt. It is, according to Abiri, NICE's largest acquisition in its corporate history.

But NICE likes inContact's relatively small size and presence in the market, he adds, as it will help NICE move downmarket to target smaller and midsized clients.

The bigger play, though — the merging of apps with hardware for a seamless contact center — is what NICE clearly is targeting and, presumably, on which it is betting the house.

Either way, it is a big, big step for NICE.

"It is one thing to offer applications in the cloud but quite other thing to be a cloud-based contact service provider with integrated applications," Abiri said.