Andy Lee didn’t like a customer service experience and decided to do something about it.
And did he ever.
In 1999, he started customer service company Alorica Inc. in Irvine, which reported $2.4 billion in sales and more than 100,000 employees for the year ended June 30.
Its sales have climbed 290% in the past two years, making it the fastest-growing large private company on the Business Journal’s annual list. It edged Allied Universal, where sales skyrocketed to $4.88 billion, a 288% spurt.
Alorica’s growth came mainly through two large acquisitions in the past two years.
“Our acquisitions have been fairly large,” Chairman and Chief Executive Lee said in a phone interview. “That’s not normal in our industry. It can be very challenging.”
‘Insanely Great’
Alorica is in an industry commonly known as outsourced call centers—the company uses the term “customer engagement centers.”
It calls itself the largest provider of “customer experience solutions” in the U.S. and the third largest worldwide. The slogan on its website is “Insanely Great Customer Interactions.” The site features a counter listing more than 639 million customer interactions this year to date, or about 6,390 per employee.
One of its key selling points is the ability to connect with customers, not just by phone, but also by email, video chat, text message or social media. It said its other advantages include scalability and the ability to quickly ramp up. The company also works with systems that use robotics.
It has 400 clients in the healthcare industry, its biggest, out of 600 overall. It said half of the 50 largest healthcare companies in the U.S. are in that number.
It hires specialists, such as thousands of licensed pharmacists and technicians, to staff two nondispensing “pharmacy centers” that provide advice. It services pharmacy benefits managers from 34 sites in two countries.
Alorica’s next biggest industries are retail, technology and media. It pursues not just a portion of a customer’s business, but its entire line. Among clients have been major firms, such as Costco Wholesale Corp. and American Express Co.
A little over half of its employees are based in the U.S., where it has more than 100 offices. It has operations in 15 other countries, including China, Australia, the Philippines, Europe and Latin America. Alorica’s “customer engagement centers” range from 200 to 1,500 employees. Six thousand employees work out of their homes.
Formative Years
Lee, who has a degree in business and finance from the University of Southern California, comes from an entrepreneurial family. His parents began Advanced Membrane Technology Inc., an industrial membrane manufacturer where he worked.
In the 1990s, he learned firsthand about call centers while working to improve customer service as an executive at CTX Data Services, a unit of computer maker CTX International. When the parent company experienced problems, Lee purchased the unit’s call center assets.
He built one of the first cloud-based software-as-a-service customer contact-management applications, and the platform eventually became the foundation of Alorica, which is derived from the Latin word “service provided by a knight.”
Big Deals
While revenue steadily climbed, its biggest acquisitions have come in the past two years.
In 2015, it paid $275 million to buy the agent services business of Omaha-based West Corp. West’s 2016 annual report provided details on the sold unit: $586 million in revenue in 2014 and $23.8 million in income, about a 4% profit margin.
The deal helped Alorica double annual sales to about $1.2 billion and companywide employment to 48,000.
Last year, it doubled revenue again when it acquired Expert Global Solutions in Plano, Texas. Alorica declined to discuss the purchase price, except to say it was a stock purchase and that Lee is the majority shareholder.
Expert Global shareholders will continue to have a “meaningful minority” stake. It was a portfolio company of One Equity Partners, a middle-market private equity firm spun out from JPMorgan and now with more than $4.3 billion under management.
A testament to Alorica’s credibility was the number of prominent banks that lined up to expand the company term loan and revolving credit facility to $1.1 billion at the time of the acquisition: Credit Suisse AG, Bank of America Merrill Lynch, Bank of the West, BNP Paribas and Wells Fargo & Co.
More Buys Ahead
When combining two large companies, Lee said his executives have a mandate to focus on what’s best for clients. He said he wants to build a “unified culture” that captures the best practices. Before he purchases a firm, he asks, “Is it a culture that we feel like would adapt well?”
Alorica will continue to make buys based on what clients need in certain geographies, Lee said.
“Our industry is extremely fragmented, and nobody really has more than 10% of the global market. When you look at the industry with that fragmentation, it needs to be consolidated to some extent.”
Only about a tenth of a percent of its employees currently work at its Irvine headquarters; it plans to expand that by a little over a third in areas like finance, tech and marketing.
State Disincentives
Lee is critical of the new $15-an-hour minimum wage in California.
“Coastal communities have different economic structures than inland,” he said. “While $15 may be applicable to San Francisco, it doesn’t apply to inland areas.”
He tried to speak with California politicians, who he said told him “nothing could be done” to prevent the higher minimum wage.
“There will be repercussions, unintended consequences that are unfortunate,” he said. “What the state is doing is creating incentives to leave.”
Call centers are sometimes known for low pay and high turnover. Alorica rates 2.4 out of 5 stars as a place to work on employee-review website Glassdoor.com. The company, in a statement about the rating, said, “We’re not perfect and are always looking for ways to improve. We’ve created multiple programs throughout the enterprise to drive employee satisfaction and growth, community involvement and philanthropic initiatives.”
Kudos
Alorica cites many plaudits on its website—inclusion in the “leaders” category on Gartner’s 2016 Magic Quadrant Report and being named an industry leader by Everest Group in the 2017 PEAK Matrix for healthcare contact center outsourcing.
Lee said his employees responded well to recent hurricanes Harvey and Irma, which shut down about a dozen company sites, affecting 10,000 employees in Texas, Florida and the Caribbean.
“We were able to reach out to everybody, calling each individual, to make sure their families are safe,” Lee said, adding that none of Alorica’s employees was seriously injured.
Its employment base around the world and its nonprofit arm jumped into action to raise $150,000 for affected employees.
“While the hurricanes have been extremely tragic, it was also an opportunity to see how much heart our people have,” Lee said. “This is something I’m most proud of.”
