WHEELING & DEALING
Virtual Outsourcing
By Jean-Marc Levy

First published in HRO Today (May 2003)
 

Can new artificial intelligence technologies replace traditional outsourcers?

Remember Eliza? If you are old enough and have some interest in computers or artificial intelligence, you may remember the computer program developed in the sixties by an M.I.T. scientist and named after the Pygmalion character. The Eliza program allowed individuals to “converse” with a computer program that seemed to respond to them intelligently, in context, and with a great deal of empathy. While it was able to fool people into thinking they were interacting with a human being, Eliza was not a truly intelligent program and basically consisted of a computer analyzer that converted “input” sentences into “output” sentences by following a simple script.

Forty-years later, Eliza’s children and grand-children have come a long way.  Earlier this year,  LiveWire Logic, a North Carolina start-up founded by engineers specializing in computational linguistics, artificial intelligence, natural language understanding and processing, and machine learning, raised a third round of venture capital financing from Gray Ventures and Research Triangle Ventures. LiveWire’s main product, RealDialog, allows its users to develop intelligent virtual agents that offer cost-effective online customer service by providing immediate answers to customer inquiries through interactive text-based conversations. LiveWire believes that over time, RealDialog agents reduce the stress on all forms of customer support touch points. Initially though, the channel seeing the most significant impact is email support, with some LiveWire customers having seen a payback as short as four months from cost reductions in that channel alone.

At this point, LiveWire has positioned RealDialog as complementary to existing CRM solutions, allowing human representatives to focus on more unique or challenging (and presumably profitable) calls, while virtual agents handle the bulk of repetitive support requests and questions. Currently, most customers are using RealDialog in customer-service applications or internal support applications for customer service representatives, but LiveWire is also talking with prospects about Help Desk applications and HR & Benefits applications. LiveWire has also experimented with voice input, and as voice recognition technology continues to improve over time, it is perfectly conceivable to envision a future in which virtual agents handle not only web-based support but phone support as well, providing a cost effective scalable customer service solution that’s always available, always accurate, and can conduct tens of thousands of simultaneous conversations. Something to think about for all providers of CRM and customer service outsourced solutions.


NOTABLE TRANSACTIONS

Could a spring thaw be under way? As I indicated last month in this column, the first few weeks of 2003 saw venture capitalists and private equity investors cautiously return to the human capital management space, and investing in a broad cross-section of HCM businesses. This early trend seemed to continue through the first quarter and early spring, and several more HR and HCM businesses were able to secure financing in that period. The types of businesses being funded continued to bridge a broad spectrum of HCM functions, illustrating the continuing long-term appeal of the HCM space as a whole. Businesses who raised capital ranged from Element K, the provider of e-learning solutions for information technology and business skills and HealthMarket, a provider of consumer driven health plans for small and mid-sized businesses, to Time Industrial, a Canadian provider of outsourced services for managing capital projects at large energy, oil and gas, chemical and plastics plant sites. The money was raised from a diverse group of investors such as billion-dollar funds EdgeStone Capital and Allied Capital, and early stage internet and technology investor Mosaic Venture.

While we are definitely nowhere near the flood of capital investment of the late 90’s, these early thawing signs continue to be encouraging for companies hoping to access the private capital market in the next 12 to 18 months.