Item 1. Business
ITEM 1.
BUSINESS
Overview
eGain automates customer engagement with an AI knowledge hub SaaS solution. We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff. True to our mantra of AX + BX + CX = DX™, our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX). Many global brands use eGain to improve experience and reduce costs. We are headquartered in the Sunnyvale, California, United States. We also operate in the United Kingdom and India.
Industry Background
Introduction
According to Gartner Research, a majority of contact center agents are not satisfied with their desktop tools. Our assessment, based on more than two decades of serving clients is that good contact center agents ignore most information piled on their screens across multiple windows and tabs when they are interacting with customers. They focus on the customer conversation. Meanwhile, businesses expect agents to remember and refresh growing knowhow that is needed to answer customer questions across complex, expanding product portfolios and compliance-heavy processes, and then recall relevant knowhow contextually in the moment of truth – when the customer is on the line. In addition, this is expected of an entry-level workforce that is not well-paid, routinely replaced, and globally dispersed – mainly for cost reasons. This knowledge and guidance gap for agents in the flow of their work explains Gartner Research’s top technology recommendation for customer service and support leaders since 2022: invest in knowledge management tools.
AI Economy Demands Modern Knowledge Management
In a world selling commoditized, yet complex products to time-strapped customers, smart tools must automate the routine and augment the interesting across agent, business and customer support tasks. This need has been amplified by the disruption of traditional work models by COVID-19. Businesses realize that they need to invest in tools that can guide agents and customers with trusted answers, ensuring customer satisfaction and compliance. Recently we have seen the generative AI surprises pop up across businesses as businesses jumped into generative AI without solving the foundational knowledge needed to provide trusted input content to generative AI. Not surprisingly, businesses are quickly seeking modern knowledge management solutions.
AI Knowledge for Customer Engagement
To automate customer engagement, generative AI needs trusted content from a knowledge hub that ensures correct, compliant content is served with adequate controls. A knowledge hub can be built and maintained with much less time and cost using AI. It is a perfect technology intersection where AI needs knowledge and knowledge can be built easier with AI.
Contact Centers are a Brand Battleground
Contact centers offer significant opportunities to realize the transformation potential of generative AI. According to Forrester Research, there were 17 million contact center agents in 2023, with 71% of contact centers looking to hire more. Time-starved customers consuming complex products and grappling with extreme choices generate stubbornly high levels of customer contact. They need quick, correct, and assured help. The business impact of applying AI at scale on contact center operations can save the global economy hundreds of billions of dollars annually.
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Customer Engagement Automation is a Large, Growing Market
Businesses continue to invest in digital transformation, especially in customer engagement. To further reduce cost and improve experience, businesses want to harness AI knowledge to automate customer service via omnichannel, conversational interfaces. According to McKinsey, the aggregate cost of customer operations in the global economy is $1.5 trillion. They anticipate that businesses could reduce this cost by 35% using AI. Given these potential savings, the associated market opportunity for SaaS solutions is huge. According to a recent Gartner Research prediction, by 2025, 100% of all virtual customer assistant and virtual agent assistant projects that are not integrated with a modern knowledge management system will fail to meet their experience improvement and operational cost-reduction goals.
The eGain Approach and Benefits
What Customers Want
We believe customer service queries fall into three categories: informational, transactional, and situational. Any given customer contact can morph across these categories as the conversation develops. Tools must orchestrate customer contact with context —accounting for machine-human hand-offs (mixed-initiative interaction), channel switching, multimodal interaction, and conversational pause-and-resume. During these interactions, customers increasingly want trusted answers and guidance.
The eGain Solution is Comprehensive
eGain offers a comprehensive, unified solution organized into three hubs—eGain Knowledge Hub™, eGain Conversation Hub™, and eGain Analytics Hub™, to automate, augment and orchestrate digital-first customer engagement. We believe our feature-rich portfolio of applications empowers businesses to connect, solve, and optimize agent, business, and customer experience.
Solve with eGain Knowledge Hub
Our Knowledge Hub helps businesses to centralize knowledge, policies, procedures, situational expertise, and best-practices, while delivering guided, personalized, and trusted answers to customers, agents, and field staff. We believe our guided knowledge and virtual assistance applications ensure that all agents easily resolve customer queries, regardless of product or procedure.
Connect with eGain Conversation Hub
Our Conversation Hub offers comprehensive, scalable capabilities for digital-first, omnichannel interaction management within a modern, purpose-built desktop. Rich applications, powered by our Knowledge and AI capabilities (from our Knowledge Hub), proactively guide agents to efficiently interact with customers using chatbots, messaging applications, short message service (SMS), chat, email, social media, phone, video, fax, and letter.
Optimize with eGain Analytics Hub
Our Analytics Hub enables clients to measure, manage and optimize their omnichannel service operations and knowledge. In addition, embedded AI and Machine Learning (ML) helps clients generate product improvement and customer insights, while spotting opportunities to improve experience and automate processes.
Open, Secure APIs and Third-Party Connectors Deliver Quick Value
Our open, secure platform APIs enable clients and partners to extend and enhance our solutions and to integrate with enterprise assets to enable a single view of the customer. Pre-built integrations include connectors to Adobe, Apple Business Chat, Avaya, Amazon Connect, Cisco, Five9, Google Dialogflow, Genesys, Talkdesk, IBM Watson, Microsoft Dynamics, Microsoft SharePoint, Microsoft Teams, Salesforce, SAP, ServiceNow, and Zendesk. We offer a novel
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“Bring Your Own” composable architecture to plug external bots, messaging channels, and third-party agent desktops to compose differentiated customer experiences.
Compelling Benefits
Our solution delivers quick value, easy innovation, and big business impact. Specifically, we help businesses:
o Enhance customer experience with digital-first, omnichannel service, powered by AI knowledge.
o Reduce operating costs with self-service automation, improved agent productivity and time-to-competence.
o Ensure compliance with regulations, policies, procedures, and best practices.
o Deliver insights to improve service, enhance products and design new offerings .
Competitive Strengths
Composable Platform with Rich APIs, Events, and UX Widgets
The eGain solution is a comprehensive omnichannel solution for the customer engagement market, with AI and knowledge applications at its core. We unlock the full power of our cloud platform with extensive APIs on a composable architecture, served via a developer portal to enable knowledge everywhere to power omnichannel customer and employee experiences.
Enterprise-Grade, Secure Cloud Service with Differentiated Offerings
Our cloud offering is secure, scalable, and offers unique capabilities. With respect to security and certification, we offer SOC2, PCI, HIPAA, FedRAMP, and GDPR certification. We are also approved as a supplier on Crown Commercial Service’s (CCS) G-Cloud Framework in the UK market. The Internal Revenue Service uses our solutions served from the eGain Cloud.
Transformative Value at Scale Across Diversified Customer Base
Our solution delivers transformative value at scale. We believe that our understanding of the customer need and our ability to fulfill it with enterprise-grade capability is unmatched. Our clients range from over a hundred thousand users at a healthcare client using our solution on a 24x7 basis to a Property and Casualty (P&C) insurer with fifteen thousand contact center advisors and thirty-thousand field agents.
Market-leading Innovation with a Risk-free Trial Model
To de-risk customer decisions, we offer a unique Innovation in 30 Days ™ program—a 30-day guided production pilot in the eGain Cloud – at no cost and with no strings attached. Businesses can experience our product with their data, content, and process in a production setting.
Direct Go-to-market Strategy, Complemented by a Growing Partner Ecosystem
We take our solutions to market through a direct sales model, primarily in North America and Western Europe. We complement direct sales with resell partnerships. We also partner with System Integrators and boutique consultants.
Customers
We mostly sell to large enterprises, which we define as businesses with over a billion dollars in annual revenue or government organizations. Over 82% of our annual recurring cloud revenue for the fiscal year ended June 30, 2024 (which we refer to as fiscal year 2024) came from such large enterprises.
For fiscal year 2024, North America (NA) and combined Europe, Middle East, and Africa (EMEA) revenue accounted for 78% and 22% of total revenue.
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One of our largest customers, who is also our partner, accounted for 18% of total revenue in fiscal year 2024.
Competition
We compete with application software providers, including LivePerson, Inc., NICE, Ltd., and Verint Systems Inc. In addition, we occasionally compete with some of our platform partners where some of our product capabilities overlap, including Five9, Genesys, Microsoft, Salesforce, and ServiceNow.
Our target market is highly competitive and some of our competitors may have longer operating histories, greater economies of scale, greater financial resources, greater engineering and technical resources, greater sales and marketing resources, stronger strategic partnerships and distribution channels, larger user bases, products and services with different functions, and feature sets and greater brand recognition than we have. We believe the principal competitive factors in our market include the following:
o proven track record of customer success;
o speed and ease of implementation;
o quick value realization;
o rich product functionality;
o strong analyst ratings;
o strong customer references;
o financial stability and viability of the vendor;
o strong product adoption;
o ease of use and rates of user adoption;
o low total cost of ownership and demonstrable cost-effective benefits for customers;
o performance, security, scalability, flexibility and reliability of the service;
o ease of integration with existing applications;
o quality of customer support;
o availability and quality of implementation, consulting and training services; and
o vendor reputation and brand awareness.
Growth Strategy
We are investing in multiple programs to accelerate growth.
Advance Product and Platform Leadership
Innovation is in our DNA. We are investing actively in experimenting with, enhancing, and applying AI technologies to accelerate and automate tasks in the knowledge management and customer engagement lifecycle. In addition, we are expanding our platform connectivity to CRM, CCaaS, UCaaS, and CMS platforms with enhanced APIs and connectors.
Invest in Direct Sales and Marketing
We design and execute scalable and personalized marketing programs to boost brand awareness, based on client success, product leadership and no-risk trial offers. To complement our marketing investment, we have built and trained a field sales team to maintain high-touch presence in target accounts.
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Develop New Partner Relationships
We are developing new partnerships with complementary platform providers (with large customer bases) to enhance their proposition with our Knowledge-powered customer engagement capabilities. At the same time, we are investing in delivery partnerships to scale our delivery capabilities.
Land and Expand in the Enterprise
With the sustained progress we have made in customer success, we see a replicable pattern emerging: land enterprise logos with a small footprint in one business unit, demonstrate business value, and then expand in the enterprise. We believe we are increasing the value of investment in eGain for our clients by deeply integrating our capabilities via our enhanced APIs with enterprise assets like enterprise collaboration platforms, CRM systems, transaction and billing, and content sources.
Selectively Pursue Acquisitions
From time to time, we pursue inorganic strategies to strengthen our product portfolio. As opportunities arise, we look for strategic acquisitions we believe will deliver compelling value faster than organic options.
Sales and Marketing
Sales Strategy
Our sales strategy is to pursue targeted accounts, mostly B2C (Business-to-Consumer) enterprises and consumer-centric government agencies, through a combination of our direct sales force and partners. These enterprises typically have thousands of customer service agents in their contact centers. Our direct sales force is organized into teams that include field sales representatives and sales consultants. Our direct sales force is complemented by lead generation representatives and sales development representatives. We also complement our direct effort with sales alliances.
Marketing and Partner Strategy
Our marketing strategy is to build our brand around the following pillars: thought leadership, product leadership, and customer advocacy. We have a long track record of thought leadership in this market. Our popular “Knowledge Management for Dummies” publication, for example, enjoys thousands of digital downloads and physical distribution in our target community. Recently, we published a revised edition of this pioneering work with generative AI updates, including relevant AI-powered product info, customer case studies, and best-practices.
Our partners help extend the breadth and depth of our product offerings, drive market awareness, and augment our professional service capabilities. We believe these relationships are important to delivering successful integrated products and services to our customers. Our partner portal, eGain Econet™, provides comprehensive sales support and services information for partners.
Subscription Services
Our subscription services provide customers with access to our software on a cloud-based platform that we manage and offer on a subscription basis. These subscription services allow our customers to easily consume our product innovation without dealing with infrastructure, installation and ongoing administration. We generally offer these services through a 36-month contract, with pricing based on the number of agents or self-service sessions.
Professional Services
Our worldwide professional services organization provides consulting, implementation, training, and managed services to deliver business value, drive customer success and build customer loyalty.
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o Consulting and Implementation Services . Our offering includes rapid implementation services, platform-based solution extension, and systems integration services. Our consultants work with customers to understand their requirements, analyze their business needs, and implement effective solutions. We provide these services independently or in partnership with distribution partners who have developed expertise on our platform.
o Training Services. We provide comprehensive training options to customers and partners. Training programs are offered either online (remote training) or in-person at the customer site. We also offer complementary e-learning through our eGain University education portal to our customers and partners.
o Managed Services. We provide a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company.
Customer Support
We offer 24/7 customer support via online and phone channels worldwide under support agreements. Our customer support centers are in the United States, the United Kingdom, and India.
Research and Development
The market for our products changes rapidly and is characterized by evolving industry standards, swift changes in customer requirements, and frequent product introductions.
We continuously analyze market and customer requirements and evaluate external technology that we believe will enhance our competitiveness, increase our lifetime customer value, and expand our target market. Our product roadmap effectively combines build, partner, and buy options.
Intellectual Property
We regard our intellectual property as critical to our success. We rely on intellectual property and other laws, in addition to confidentiality procedures and licensing arrangements, to protect the proprietary aspects of our technology and business.
As of June 30, 2024, we had 17 issued patents in the United States. Our issued U.S. patents expire at various times between 2028 and 2040.
We continually assess the strength of our intellectual property protection for those aspects of our technology that we believe constitute innovations providing significant competitive advantages. Future applications may or may not receive the issuance of valid patents or registered trademarks.
We routinely require our employees, customers, and potential business partners to enter into confidentiality and nondisclosure agreements before we disclose any sensitive aspects of our products, technology, or business plans. In addition, we require employees to agree to surrender to us any proprietary information, inventions or other intellectual property they generate or come to possess while employed by us. Despite our efforts to protect our proprietary rights through confidentiality and license agreements, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. These precautions may not prevent misappropriation or infringement of our intellectual property. In addition, some of our license agreements with certain customers and partners require us to place the source code for our products into escrow. These agreements typically provide that some party will have a limited, non-exclusive right to access and use this code as authorized by the license agreement if there is a bankruptcy proceeding instituted by or against us, or if we materially breach a contractual commitment to provide support and maintenance to the party.
Human Capital
Our key human capital management objectives are to attract, retain and develop the highest quality talent. To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay and benefits; enhance our culture through
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efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce. As of June 30, 2024, we had 544 employees, including 539 full-time employees, of which 195 were in product development, 229 in services and support, 64 in sales and marketing, and 56 in finance and administration.
None of our employees are covered by collective bargaining agreements. While we believe our relations with our employees are good, our future performance depends largely upon the continued service of our key technical, sales and marketing, and senior management personnel, none of whom are bound by employment agreements requiring service for a defined period of time.
Available Information
We were incorporated in Delaware in September 1997, and our website is located at www.egain.com. We make available free of charge on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
Information About Our Executive Officers
The following table sets forth information regarding eGain’s executive officers as of September 12, 2024:
Name
Age
Position
Ashutosh Roy
58
Chief Executive Officer and Chairman
Eric N. Smit
62
Chief Financial Officer
Promod Narang
66
Chief Technology Officer
Ashutosh Roy co-founded eGain and has served as Chief Executive Officer and a Director of eGain since September 1997 and as President since October 1, 2003. From May 1995 through April 1997, Mr. Roy served as Chairman of WhoWhere? Inc., an Internet-services company co-founded by Mr. Roy. From June 1994 to April 1995, Mr. Roy worked at Parsec Technologies, a call center company based in New Delhi, India, which he co-founded. From August 1988 to August 1992, Mr. Roy worked as a software engineer at Digital Equipment Corporation, a major company in the computer industry at the time . Mr. Roy holds a B.S. in Computer Science from the Indian Institute of Technology, New Delhi, a Master’s degree in Computer Science from Johns Hopkins University and a M.B.A. from Stanford University.
Eric N. Smit has served as Chief Financial Officer since August 2002. Prior to that, Mr. Smit served in a variety of roles at eGain, including Vice President, Operations from April 2001 to July 2002, Vice President, Finance and Administration from June 1999 to April 2001, and Director of Finance from June 1998 to June 1999. From December 1996 to May 1998, Mr. Smit served as Director of Finance for WhoWhere? Inc., an Internet services company. From April 1993 to November 1996, Mr. Smit served as Vice President of Operations and Chief Financial Officer of Velocity Incorporated, a software game developer and publishing company. Mr. Smit holds a Bachelor of Commerce in Accounting from Rhodes University, South Africa.
Promod Narang has served as Chief Technology Officer since November 2022. Mr. Narang joined eGain in October 1998 and served as Director of Engineering and from March 2000 to October 2022, he served as Senior Vice President of Products and Engineering prior to assuming his current position. Prior to joining eGain, Mr. Narang served as President of VMpro, a system software consulting company, from September 1987 to October 1998. Mr. Narang holds a Bachelor of Science in Computer Science from Wayne State University.
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