The customer experience (CX) industry is in a state of flux. Wall Street whispers about the looming threat of AI, fretting over the potential for automated chatbots to decimate business models. TTEC, a veteran of the CX landscape, navigates this turbulent sea with a seemingly paradoxical approach: doubling down on offshore expansion amidst AI-fueled uncertainty. But what if this isn't a contradiction, but a shrewdly calculated maneuver, a silent chess move designed to secure long-term dominance?

Digging into TTEC's Q1 2024 earnings call transcript, a subtle yet significant trend emerges - a strategic offshore expansion that flies under the radar. While Ken Tuchman, TTEC's Chairman and CEO, acknowledges the industry's transformation, he confidently asserts that AI is not the doomsday device many fear, but a catalyst for diversification and new opportunities. The key, it seems, lies in recognizing the nuances of AI's impact, distinguishing between simple transactions readily automated and high-value interactions demanding human expertise.

This is where TTEC's offshore strategy shines. Their focus, particularly within the Engage segment, is on leveraging new geographies to attract clients seeking cost-effective, high-quality CX solutions. As Shelly Swanback, President of TTEC and CEO of TTEC Engage, points out, two-thirds of their new client business in Q1 2024 is designated for offshore delivery, predominantly in newly established locations. This isn't simply shifting existing onshore work, but capturing entirely new business, attracted by the economic advantage and talent pool of these emerging regions.

This approach addresses a crucial concern: AI's potential to cannibalize onshore volumes. TTEC astutely targets clients with offshore needs, building a robust offshore pipeline that has grown over 35% year-over-year. This allows them to tap into the vast untapped potential of the CX market, estimated at a staggering $400 billion, with only a quarter currently outsourced.

Further solidifying their position, TTEC leverages a substantial portion of their onshore business in regulated industries like financial services and healthcare. This work, by its very nature, requires licensing and onshore presence, insulating it from the potential impact of AI-driven automation. This creates a stable foundation for revenue, allowing them to aggressively pursue offshore growth without compromising their existing base.

The Numbers Speak for Themselves

The numbers tell a compelling story. TTEC aims to achieve 35% offshore revenue by the end of 2024, a notable increase from the 30% they exited 2023 with. This signifies a deliberate and consistent shift towards a more geographically diversified model.

Furthermore, their focus on strategic growth accounts, enterprise clients with multi-geo requirements and potential for significant expansion, paints a picture of carefully planned, long-term growth. These new clients, while taking time to fully ramp up, offer substantial future revenue streams.

A Two-Pronged Approach: Embracing AI and Offshore Efficiency

Here's the intriguing hypothesis: Could TTEC be using this transition year to quietly build a profit fortress, leveraging offshore efficiencies to weather the AI storm and emerge as a leaner, more profitable leader? While Wall Street fixates on AI's immediate impact, TTEC strategically positions itself for a future where both human and AI-driven interactions play crucial roles.

Consider this: TTEC's digital segment is already witnessing double-digit growth, driven by clients seeking cloud migration and AI integration. This trend, coupled with their aggressive offshore expansion in Engage, suggests a two-pronged approach: capitalizing on AI-driven digital transformation while simultaneously building a cost-effective, geographically diverse delivery engine for high-value human interactions.

Dividend Reduction: A Strategic Move for Long-Term Growth?

The dividend reduction, while initially unsettling for some investors, might be a shrewd move in this context. It allows TTEC to prioritize debt reduction associated with strategic acquisitions and further invest in their AI ecosystem. This reinforces their commitment to long-term growth and innovation, signaling confidence in their ability to not just survive but thrive in the AI-powered future.

TTEC: A History of Adaptation and Innovation

Here's a fun fact: TTEC's roots go back to the early days of the telecommunications boom in 1982. They were pioneers in the call center industry, navigating multiple technological revolutions, from voicemail and email to the internet and cloud. This historical context offers a reassuring perspective - TTEC has repeatedly adapted and thrived amidst disruptive changes, making their current strategic moves appear less like a desperate gamble and more like a calculated maneuver from a seasoned player.

Charting a Course for Global CX Dominance

While Wall Street wrestles with the uncertainty of AI, TTEC's covert offshore strategy may be the key to unlocking a future of sustained profitability and market leadership. They are not merely reacting to AI's arrival but actively shaping a future where human expertise and AI-enabled efficiency work in concert. Their silent moves may well be setting the stage for a resounding checkmate in the global CX arena.

"Key Takeaways: * TTEC is aggressively expanding its offshore presence, targeting clients seeking cost-effective CX solutions. * They are leveraging AI to augment human interactions and drive efficiency, rather than solely focusing on automation. * TTEC is strategically positioned in regulated industries, providing a stable revenue base amidst AI disruption. * The dividend reduction allows for increased investment in AI and strategic acquisitions. * TTEC has a long history of adapting and thriving through technological revolutions."

Fun Fact

TTEC was one of the first companies to embrace the concept of "homesourcing," allowing agents to work from home, back in the 1990s. This forward-thinking approach demonstrated their early recognition of the potential of remote work and flexible work models.