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A Slow Q1 for Customer Service Software
Low revenue, customer adoption, and product-activity levels indicate a loss of short-term momentum in a long line of steady growth.
Posted May 29, 2006
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Cross- channel and life cycle customer service has slowed down in the first quarter of 2006 after a strong Q4 2005, according to a recent report by the Patricia Seybold Group. With a low level of product activity, flat company performance in terms of revenue, and a deceleration of customer growth, the study indicates that the industry as a whole has been in a period of intermission. Although the numbers for this quarter might appear to signify a downturn, Mitch Kramer, Seybold Group analyst and author of "State of the Market: A Quiet First Quarter in 2006," says, "Most first quarters in the software industry are generally slow. Software companies scramble to make their number by the end of the year, and at the same time their customers scramble to spend all the money they've allocated in their budget by the end of the year. So fourth quarter is always frantic and, by comparison, first quarter seems quiet." The report studied the leading cross- channel, life cycle product offerings and their vendors to gain a broad view of the current state of the market. Looking in depth at ATG, eGain, InStranet, KANA, Knova, and Rightnow CRM, the study found little activity and moderate gains across the board for the past few months. One significant development was ATG's introduction of SaaS versions of its existing products for e-commerce, self-service, and assisted service. Even though customer acquisition declined for the company this quarter, Kramer sees the adoption of software-as-a-service a profitable one, and a move that is very much commiserate with the current movement in the market. "It is definitely a trend," he says. "It gives customers a choice to start small and then grow into the software." In fact, every vendor mentioned in the study, except InStranet, has come out with a SaaS option within the past year. The report indicates a future marked by cautious optimism for cross- channel, life cycle customer service. "A year ago the space wasn't as solid. It wasn't as clear exactly what was going to happen with the companies," Kramer says. Now, he explains the vendors are becoming much more solid through "good customer growth." The report's findings show an expanding market grounded in strong and stable companies.
Kramer does, however, cite one possible big threat to the industry: Portals offered by major software vendors that have the same kind of capabilities as best-of-breed customer service software. "This is not a major threat right now, because the portal vendors don't recognize they can use their software for these applications, but customers are usually pretty innovative and they can figure it out," he says. Kramer warns that if the portal vendors do become competition, the customer service software providers "will really have to do something different." Related articles: On the Scene: Mapping CRM's Growth Path Cross Channel Capabilities Are Still Siloed
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