It's been a little more than a year since The Dialog Corporation was formed from the purchase of Knight Ridder Information by MAID. It's been a year with a lot of changes and upheaval—we've seen pricing changes and customer backlash, management and employee changes, a move of the U.S. headquarters, growth of existing products and forays into new Internet initiatives, subsidiaries offered for sale (CARL/Uncover), mounting pressure from financial analysts, and a disappointing stock price. Company executives have endured grueling trips back and forth "across the pond," and around the globe, as they worked to integrate the merged companies, move forward to meet stiff challenges to their core business, and mount an Internet strategy. Now, the company has released a bevy of announcements that show careful study and strategic planning, and the fruits of product development initiatives—and probably some astute strategic financial repositioning.
|Special Report on Customer Service Staffing
One question in many customers' minds this past year has been about the quality of staffing and customer support, especially with the move of the U.S. headquarters and subsequent loss of employees. In an exclusive interview with IT, a company representative said that the consolidation of staff and resources has led to greater efficiencies. Dialog's operational goal was and still is to answer at least 80 percent of customer service calls within 30 seconds—and this continues to be met. The U.S. office receives about 600 calls per day, which is the same as before.
The customer service offices in Philadelphia and Mountain View, California had previously used "universal agents" to answer calls. These front-line agents were basically just traffic cops routing calls, and none of them had MLS degrees. With the consolidation of the offices at Cary, North Carolina, this is no longer being done. The customer services department is now called the Knowledge Center and has three types of staff. The Product Support Specialists answer all calls first, helping with search assistance, training registration, document delivery, password issues, etc. There are 14 people now in this category, 12 of them with MLS degrees. To answer questions beyond this group, there are five people in a Technical Support Group, and 16 people who are Subject Specialists, in areas such as business, science, and intellectual property. Of these 16 employees, only two transferred and the remaining 14 were newly hired in Cary.
So, here are the final numbers: Before, there were 60 customer service staff, of whom eight were managers and nine were "universal agents," leaving 43 who really answered calls. Now there are 35 who answer calls, plus four managers. Only 10 customer service employees accepted the transfer from Philadelphia and Mountain View to Cary. The company reports it has benefited from the strong labor pool in the Cary area, and the presence of the nearby universities. Many of the new hires are longtime Dialog searchers. So, the corporate goals of saving money and greater efficiencies have been met, but searchers will have to decide if their service needs are being met. If you have gripes, speak up!
The company has announced a "strategic realignment of its existing operations into three newly formed divisions" to provide a greater focus for its Web-based activities. The three new divisions are: 1) Information Services, 2) Web Solutions and Internet Software, and 3) eCommerce (business-to-business).
The Information Services Division (ISD) consists of Dialog's core online service businesses, DataStar, DIALOG, and MAID. ISD will develop and expand the range of interfaces and products for information professionals and end users, and provide intranet solutions. The division has just released its new Intranet Toolkit, which will let information professionals build customized searches for end users. (Watch for details here soon.) ISD will be headed by Jason Molle and Ciaran Morton, both formerly senior vice presidents. Jason Molle is now president of the Americas, and Ciaran Morton takes over as president of Europe, Middle East, Africa and Asia.
The Web Solutions and Internet Software Division will focus on Dialog's knowledge management solutions leveraging InfoSort, the company's proprietary indexing system, and the Muscat intelligent search engine technologies. The Division will license these search technologies for use in Web-based corporate solutions, such as its recently debuted LiveIntranet product. Dan Wagner, CEO of Dialog, indicated that there has been a lot of interest by companies in licensing the technologies. The division will also pursue special projects and contracts, such as those recently secured by Dialog from the U.K. Government's Department of Trade and Industry and the British Broadcasting Corporation (BBC). The company is currently recruiting for someone to head the division, and it is likely to be an external appointment.
The company is currently developing a Web search service, geared exclusively for businesses, which will enable Internet users to use Dialog's professional search capabilities. The company believes the advantages offered will be a considerable improvement over existing Web search engines. Wagner indicated the service would allow searching of Web resources and Dialog databases, and would include Boolean capabilities and a "find more like this" feature. No date has been set, but Wagner said it would be released sometime in 1999.
The third division, the eCommerce Division, will focus on Dialog's growing eCommerce activities aimed at the corporate and professional marketplace. The company plans to roll out OfficeShopper (http://www.officeshopper.com) beyond the U.K. to the business community worldwide, hoping to leverage Dialog's customer base. Interestingly, Planet Retail, which was a consumer retail comparison shopping product launched last summer with plans to add a corporate focus, was not mentioned in their plans.
In addition, this division will license the procurement software on which OfficeShopper is based to other organizations wanting to develop their own eCommerce businesses. According to the company, considerable interest has already been expressed by a number of existing major customers of Dialog. The division will also provide an outsourcing service, offering a total package of creation, management, maintenance, and hosting to enable businesses worldwide to create storefronts on the Internet. Andre Brown, currently director of e-commerce and special projects for Dialog, has been named chief executive officer of the eCommerce Division.
Focus and Visibility
Commenting on the divisional realignment, the chief operating officer of Dialog, Patrick Sommers, said: "As our Internet activities have continued to grow, we have been examining the best way to structure the Group to ensure that we retain the focus on our core information services business, while at the same time fully capitalizing on the enormous potential of our proprietary Internet technologies and e-commerce innovations. By creating a three-divisional structure, with dedicated management teams and tightly controlled budgets for each, we can ensure that a greater focus is brought to bear on all aspects of our business. This structure will also allow for greater visibility and clarity for our shareholders in terms of the progress and prospects for our business."
According to the company, further details on the restructuring and the financial reporting model to be adopted as a result will be provided to shareholders at the time of Dialog's end-of-year results announcement on March 18, 1999.
While Wagner termed the changes "purely an operational matter" and the goal simply to streamline functions, perhaps the key to understanding the "realignment" is the separation of the core online business from the other two Web-focused businesses…and the separation of budgets. It is likely that Dialog needed to appease the analysts and its shareholders by making these changes. It also looks like preparation for a spin-off or a buyout—but… which division? Perhaps the current meteoric rise of Internet company IPOs has Dialog longing for a bigger slice of Internet profits. Could Microsoft—or other super-buyers…be checking out this newly decked-out Web-centric business? When questioned on this, Wagner indicated that the company was looking at and considering all available options, and that they would seize "any opportunities to enhance the bottom line for shareholders." Wagner also told Dow Jones Newswires in an interview that "while information services currently represent most of Dialog 's revenue, he anticipates that within the next five years the new divisions could contribute equally."
Board and Management Changes
The company also reported that Derek Smith, Executive Vice President and Graham Burrows, joint chief technology officer, have resigned from the board, and are leaving the company. Smith had been based in London, but had traveled extensively over the past two years. A company spokesperson said that he had worked hard through the acquisition and had been "fantastic for the company," but that it was a very heavy and demanding schedule and the travels took him away from his family. Dan Wagner, CEO of Dialog, commented that Smith had "played a significant role in the development and growth of the company" and had made "an important contribution as the liaison with our content providers."
Burrows was appointed to the board in October 1998, but had been a consultant to Dialog before that. Wagner said: "I would like to thank Graham Burrows for his work as joint chief technology officer, and his dedication in helping to establish our global technology team. With the restructuring of our technology team in place, Graham has achieved his objectives and taken the decision to move on to new challenges." Stephen Maller remains as the sole chief technology officer, based in London.
The company also announced that Ean Brown takes on the role of senior vice president, business affairs and content, assuming additional responsibility for relations with information providers.
Sale of Carl/Uncover
Dialog also announced the sale of The CARL Corporation ("CARL") and The UnCover Company ("UnCover") to Ward Shaw, CARL's chairman and CEO, for $2.25 million, of which $1 million is cash, with the balance payable through a loan note by January 2001. The cash proceeds of the disposal will be reinvested in the Dialog business.
CARL and UnCover were acquired as part of the acquisition of Knight-Ridder Information, Inc. in November 1997. CARL, which provides library automation systems, and UnCover, which provides document delivery, current awareness and journal management services, were never really seen as parts of the core business, and had been offered for sale for the past year—though reportedly at a considerably higher price than the final sale amount.
A Dialog spokesperson commented that Shaw has been running the business effectively for years and is committed to its growth. While there had reportedly been other interested parties, Shaw was "the right buyer for the service." Shaw indicated that it was a "win-win situation," and that they had a really good working relationship with Dialog.
Shaw emphasized the benefits to CARL's library system customers. "We have always partnered with visionary libraries. CARL's independence will re-energize these partnerships. We have the financing we need behind us and we are not strapped for cash. The new ownership structure assures CARL and UnCover control of its destiny." He added, "Our goal is to create a structure in which the employees participate in the profits. I can't imagine a better group of people to go forward with this enterprise."
Deal with CompuServe in Germany
Dialog also announced that it was providing a faster and more user-friendly interface to CompuServe Germany. The deal is with CompuServe Interactive Services Deutschland GmbH & Co KG, a joint venture of Bertelsmann Inc. (http://www.bertelsmann.de) and America Online Inc. (http://www.aol.com) and features an enhanced business information service for CompuServe Web customers in Germany. DataStar will continue to supply the service with customized news and business information. According to a Dialog spokesperson, CompuServe has specific content agreements for the regional markets that they serve. For example, Knowledge Index from Dialog is no longer available on CompuServe's U.S. service.