Talisma Acquired by nGenera

What is nGenera and where did it come from?

That may be the question on many minds after today's announcement that the well-funded start-up has purchased Talisma Corp., one of the leading providers of customer interaction solutions. (Financial details of the deal were not disclosed.) NGenera, which describes itself as an on-demand platform for business innovation, is barely 18 months old, yet industry observers see the firm as an emerging player, one with an eye on creating what the company calls the "next-generation enterprise."

"They certainly have a vision and they are very quickly acting on that vision," says Chip Gliedman, principal analyst with Forrester Research. NGenera, born in January 2007 under the name BSG Alliance, has maintained growth through several smaller-scale acquisitions. The company rebranded itself under the nGenera name in late April.

NGenera will soon add Talisma's customer interaction management (CIM) software suite onto its platform, broadening the CIM offering with more Web 2.0 capabilities. Dan Vetras, chief executive officer of Bellevue, Wash.-based Talisma, says that the company was not under any financial burden, but that Talisma saw the opportunity for a significant expansion of its revenue stream as a result of the acquisition. In fact, he adds, not only will nGenera be retaining the entire Talisma workforce, but the unit will be remaining in Bellevue, and will soon be moving to an expanded headquarters there.

As for why Talisma, incorporated in 1999, opted to be bought rather than to go it alone or to pursue an initial public offering, Vetras acknowledges that other potential avenues were looked at, but that the nGenera acquisition offered the best and fastest means to extend Talisma's offerings to a wider client base.

Gliedman points out that the purchase by nGenera -- a company that seems to have come out of nowhere -- is surprising, but the consolidation in the industry is not. Gliedman notes the challenge facing online service companies in particular -- namely, the difficult task of integrating multiple contact channels in order to extend the CIM footprint. "It's become harder and harder to stake out territory that is predominantly in the e-service world," Gliedman says. "Talisma had to figure out how to play in the larger environment, which usually means an acquisition for products or features -- or merging and being acquired."

The "larger environment" is clearly nGenera's target, and to that end the rapidly expanding company offers a series of tools broken out into three segments: nGen Leadership, nGen Talent, and nGen Customer. According to an interview with Steve Papermaster, nGenera's cofounder, chairman, and chief executive officer, the company envisions itself as giving companies the tools to become "next-generation enterprises." Talisma's technology will be absorbed by the nGen Customer tools segment, which to date has focused heavily on "customer co-creation" and feedback. Prior to today's deal, nGenera's pre-acquisition customer interaction offerings had been varied:

• nGen Continuous Sensing, which the company says is designed to respond to positive and negative aspects of customer experience;
• nGen Customer Interaction Management, which encompasses multichannel correspondence of email, chat, voice, and SMS; and
• nGen Customer Experience Reinforcement, which is aimed to gauge customer behavior through analytics and subsequently reward behavior.

Talisma's suite of offerings consists of internal collaborative solutions such email management, chat, click-to-call, as well as Knowledgebase, a Web self-service solution. Gliedman points out, "They are getting a good scale of a proven suite of tools, without having to pay for the premium for larger companies and without having the maintenance requirement of a larger customer base."

A rundown of nGenera's short history -- according to the company's own timeline -- reveals a rapid escalation of deals:

• January 2007: BSG Alliance is formed.
• March 2007: Acquires Kalivo, maker of Web 2.0, on-demand collaboration software.
• May 2007: Raises $20 million from Silicon Valley venture-capital powerhouses Foundation Capital and Hummer Winblad Partners.
• May 2007: Acquires The Concours Group, a Houston-based research and executive education firm.
• October 2007: Acquires Houston-based Industrial Science, maker of business simulation software.
• December 2007: Acquires Toronto-based New Paradigm, including its flagship research projects Enterprise 2.0 and Talent 2.0.
• March 2008: Raises another $50 million in venture capital, from Oak Investment Partners, Foundation Capital, and Hummer Winblad.
• March 2008: Acquires Houston-based Iconixx Corp., a provider of compensation strategy and services.
• April 2008: BSG Alliance becomes nGenera Corp. and launches its integrated on-demand product suite.

"If you look at the background of nGenera's executives, these are seasoned executives from large companies with a great strategic view of the industry," offers John Ragsdale, vice president of research for the Service & Support Professionals Association. "They are moving the conversation away from 'feature/function checklist' and into 'corporate strategy' -- and how technology supports that corporate structure." As part of the March 2008 acquisition of New Paradigm, nGenera brought on board New Paradigm's Don Trapscott, the author of Wikinomics: How Mass Collaboration Changes Everything, to oversee the company's consulting wing -- giving nGenera what Ragsdale refers to as "the most amazing street cred ever."

But what does the acquisition mean for Talisma's competitors and the CIM segment of the CRM industry? Gliedman says that RightNow Technologies and LivePerson are fairly self-sufficient and safe in the marketplace. On the other hand, he adds, "Kana and eGain [Communications] are going to have to decide whether they are going to be good niche players, or if they will develop partnerships to broaden [their] suites and penetration in the market."

Gliedman says consolidation and integration is evident even with independent players, pointing to Kana's alliance with IBM and eGain's partnership with Cisco Systems. "Customer service was traditionally thought of as call center and e-service and CRM and sales force automation as separate areas," Gliedman says, putting things into perspective. "We have gotten to the point [where] we've brought them together to flow linearly."

Ragsdale says he's convinced that the acquisition is not based solely on market share -- and that the CRM industry could use a breath of fresh air. "What we've found is that companies are dying to innovate and they want to change -- but it's really hard, especially with large technology companies that operate in a different way," he says, adding that nGenera seems to have the experience and the drive to make that shift.

Where Talisma and nGenera may have once provided tools to complement big-player solutions from Oracle or SAP, Gliedman estimates that, in the future, the merged companies will see the big-name vendors as competitors. "In many cases, acquisitions actually increase the stability of a company being acquired rather than decrease it," Gliedman says. "I absolutely think that's the case here with Talisma. Now that it's part of a larger organization that seems to be dedicated to taking and expanding the product, I'd have to believe that it will add a sense of stability and remove a bit of the fear."

Ragsdale says he wouldn't be surprised to see additional acquisitions by nGenera in the near future, as the company looks to add the technological functions to complete its vision. "Wrapping services around a product suite that does collaborative innovation could be a really hot commoditization of the market -- not like anything we've seen before," he continues. "Our industry needs a good shot in the arm."

[Update: This article has been updated to include additional analyst perspectives.]

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