Head in the cloud: Interactive ramps up software offerings

Interactive Intelligence Group Inc. will plow further into cloud-based computing with a new set of services the Indianapolis-based tech firm unveiled Tuesday morning during its annual conference.

Called PureCloud, the latest product takes the software developer another step beyond the physical call centers on which Interactive originally based its business. Its existing cloud services use remote servers to store, manage and process data for call centers.

PureCloud, which CEO Don Brown unveiled Tuesday to a room of hundreds at the Indiana Convention Center, is designed for quick deployment of networks, wide scalability and reliability. For example, Brown said, customers still would be able to operate PureCloud if an Internet connection were lost.

The company partnered with Amazon Web Services—the online retailer’s pay-per-use cloud service—to offer its new software suite.

The product stems largely from software developed by Raleigh, N.C.-based OrgSpan, which Interactive acquired in April after a long-time relationship between the two companies. OrgSpan, founded by a former Interactive engineer, used Amazon to deliver its services.

Brown pointed to Amazon’s ability to better handle large, sudden floods of traffic or data use.

“We decided that would be the same sort of approach that would be handy for a customer-service organization, that in the face of some disaster might take a flood of interaction,” he said. “And so we took the exact same approach in building [PureCloud].”

Tuesday’s announcement digs Interactive deeper into cloud software. The firm, now with about 2,000 employees worldwide, began by setting up corporate call centers on site for customers.

Brown noted several times during his presentation that its existing services weren't going away. But cloud solutions have great potential for growth.

Cloud-based orders for Interactive's software rose 165 percent in the first quarter. They accounted for 59 percent of orders. And individual sales grew in size to an average of $935,000 each, up from $788,000 a year earlier.

Analysts at Raymond James & Associates Inc. have rallied around Interactive’s broader business model shift to the cloud. The company could face competition from a similar software package by Avaya, but it is too early to know how stiff the challenge will be.

“Overall, Interactive should grow at a very meaningful top-line growth rate for a number of years to come, given its innovative all-in-one software-based contact center solution and leadership in cloud-based deployments,” analysts wrote in a report issued Monday. “But margins will continue to be pressured by an increasing mix of cloud and forward investments in sales, marketing, and infrastructure.”

The transition to the cloud has been awkward, as it changed the firm's sales model. Previously, customers paid upfront for on-site setup. But cloud customers pay subscriptions, which causes revenue to come in more gradually.

The shift caused Interactive's profit to plunge in 2012 before it picked back up in 2013. Wall Street rewarded Interactive handsomely for its performance as share values roughly doubled in value during the year.

However, the firm's stock price plunged in May after Interactive missed analysts’ projections and reported a net loss for the quarter. Management blamed the loss on the shift to the cloud and its new sales model.

Brown sees the shift as a must, because the entire software industry is moving into cloud computing.

“We decided we’re either going to get out of this business,” he said Tuesday, “or we’re going to double down.”