Amazon Hand-Picks Startek in Apparent Bid to Expand CRM Capabilities

For BPO companies that have been working hard to strategically position themselves as customer experience providers, that work seems to have paid off big time.

Global e-commerce giant Amazon has been taking notes on the BPO industry and has decided to buy into US BPO provider Startek in a big way, showing real confidence in the industry.

Last week, Startek released a regulatory filing that detailed an expansion of its existing relationship with an Amazon subsidiary. The development gives Amazon an option to buy 4 million Startek shares – one fifth of what is available. However, those shares will only become available to Amazon if it generates US$600 million in commercial services for the BPO over an eight-year period.

“Amazon have done their due diligence and are choosing their suppliers very wisely, because they have that kind of leverage,” said a Startek client.

Both Startek and Amazon were not available for comment, stating that the only information they were providing right now was in their public 8-K regulatory filing.

Automatic Value Boost

It’s unclear if Amazon has engaged Startek as a provider prior to the filing; however, there is little doubt that the company has a clear level of confidence that has likely been gained through a direct relationship.

Whatever the case, Startek has automatically become a more valuable company – the news immediately boosted Startek’s stock price from US$10.33 to a high of US$13.55 and is sitting at around US$11.50 at the time of publishing.

It’s almost as if Amazon is looking to get a piece of that, capitalizing on the option to buy the higher-value shares at a lower price – US$9.96 per share, as per the new agreement – providing that the US$600 million service quota is filled. Amazon is going to spend that money anyway, so if it watches the stock price closely, it could influence the price and benefit even more from the low strike price.

Besides the clear value for Amazon, Startek has proved itself in the market as a reputable BPO, turning things around significantly in the last few years.

“Startek has had steady revenue growth since 2013, which is a great opportunity for any potential buyer who is looking to get involved in the outsourced contact center space, so, if Amazon is planning to do that, it doesn’t surprise me that the company chose Startek as a way in,” said Peter Ryan from Ryan Strategic Advisory. “The fact that Startek has also been active in customer experience, with their own acquisition of Ideal Dialogue, plays nicely into what Amazon will get from buying into the company.”

Client Impacts

Focusing on the client side, we managed to track down a Startek customer in the United States to offer their perspective. At this time, the company and the spokesperson preferred to stay anonymous.

“Although I haven’t yet heard anything from Startek about it, the way I see our relationship with them is if it’s good for Startek I think it’s probably good for us,” said the client. “Generally, we want to make sure Startek is solvent and performing well, so if this is a good financial tool for them to potentially solve some equity issues and increase their customer base, I don’t see it being a negative for us.”

While the client in question is not a particularly large one, they have had a stable relationship with Startek, so as long as this doesn’t impact their geographies, or Amazon’s huge size doesn’t create any type of upheaval, they don’t expect any real impact to their service, at least in the short term.

A New Wave of Mega BPO Deals?

In terms of whether Amazon will itself move into providing its own BPO and call enter services, Ryan believes it’s still too early to say, but commented on how diversified the company is.

“The opportunity to get into a growing area of customer experience management is probably very important for Amazon,” he said. “For an organization that prides itself on accessibility and speedy delivery, the focus on customer experience is a priority for Amazon, so picking up a stake in Startek, with access to Ideal Dialogue, provides them with a level of science behind the interaction whether it’s voice or non-voice.”

“Amazon have done their due diligence and are choosing their suppliers very wisely, because they have that kind of leverage,” said Startek’s client. “From a competitive standpoint, it’s a huge landing for Startek to secure a deal this big, because it’s a cut-throat business.”

Whatever the landscape begins to look like after this deal, it shows that even the biggest companies in the world are becoming confident in showing support for the BPO industry, which can only be a good thing for the sector.