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Battle for Dominance
The enterprise CRM suite landscape is changing, led largerly by efforts in integration.
For the rest of the September 2002 issue of CRM magazine please click here
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The balance of market share power is shifting. And, finally, a vendor other than Siebel Systems Inc. is beginning to emerge on CRM market share reports. To be sure, Siebel maintains a commanding lead in the CRM sector with 18 percent market share, but SAP AG is quickly catching up, according to AMR Research. AMR analysts estimate that by the end of this year SAP will have captured 8 percent of the CRM market, representing an impressive 6 percent market share leap in only two years. Siebel is expected to only edge up one percentage point during this time, moving from 17 percent in 2000 to its current 18 percent market share. What propelled SAP away from some of its CRM rivals, which are still stuck at 2 percent market share? If you ask SAP executives they will say it is the company's strong focus on application integration--a focus that is catching on among competitors. Some analysts agree, saying that in 2002 features and functionality--a quality widely ascribed to by Siebel solutions--took a back seat to integration. "We recognize that integration is the thorniest problem that end-users face," says Joanie Rufo, a research director at AMR Research. The biggest thorns in customers' sides tend to be the time and costs associated with integration. Disparate solutions that do not talk to each other force customers to spend time and money creating patches to get them to communicate. Problems constantly surface with this type of patchwork, which tends to make the process more cumbersome. ERP vendors claim their history in back-office applications makes choosing them a logical choice, as their CRM solutions will naturally fit well with their back-office applications. This integration push on behalf of the ERP vendors is influencing the balance of market share power among the top-five enterprise CRM suite vendors. Siebel With more than 4,000 customers--more than 700 of which are engaged in a Siebel 7 implementation--and anticipated revenue of $2.19 billion in 2002, Siebel maintains a commanding lead in CRM market share. However, executives at the company realize they cannot ignore the integration craze. "Customers can connect to whatever ERP vendor they have right now [using Siebel connectors]. The issue is the prohibitive cost of connecting it all and maintaining it," says Peter McCullagh, vice president of CRM strategies at Siebel.
That is why Siebel is developing what it calls its Universal Application Network (UAN), a connecting module that integrates disparate back-office applications to Siebel solutions for less money and effort than previous Siebel methods. "The UAN provides a freeway system that allows you to hook everything to it. So you end up with one set of connectors for integration," McCullagh says. "Siebel has taken a fairly aggressive approach to integration. The Universal Application Network is a more processed-based approach to integration rather than point-to-point," AMR's Rufo says. "UAN delivers a framework that would allow a company to leave all systems intact and leverage a hub that would allow for faster integration. At this point in time it's still a vision. In theory it recognizes that companies don't have one ERP system, customer management system, and SCM system. They can have multiple versions of each. It's a valid recognition of the problems customers are facing." SAP SAP has the most impressive CRM revenue growth of the top-five CRM suite vendors, with a 138 percent climb in 2001 and an estimated 87 percent jump for 2002. With CRM-generated revenue projected to be $998 million this year, the German software company has moved from fifth place in 2000 to a comfortably cushioned second place. Rufo suggests SAP's success and momentum are largely due to the release of its mySAP CRM version 3.0 last September, which was widely touted for its integration capabilities. "SAP started shipping its version 3.0 product, its first truly competitive application that ties into existing products used by its massive install-base. We've heard over and over again that integration is more important than functionality. That's the benefit that all ERP players have in terms of back office and front office," Rufo says. As CRM functionality expands out to partners, integration will only get more complicated and costly. Many companies support open standards like J2EE, SOAP, and XML, but open standards must penetrate farther than the application layer, says Michael Park, vice president of global product marketing for SAP. "Nowadays, as things are progressing to external partners...the goal is to achieve integrated business processes. That's what drives value for them," Park says. A new version of the mySAP CRM is slated for release this month, which include upgrades like mobile and wireless capabilities. PeopleSoft PeopleSoft's CRM revenue ramp up from $240 million in 2000 to $369 million in 2002 is not as impressive as SAP's growth. However, Chief Executive Craig Conway questions SAP's gains, saying SAP's CRM sales are inflated by being bundled with other products. Although Conway disputes SAP's numbers, he shares the stance that ERP vendors have an advantage integrating CRM into back-office applications. "Not only do enterprise software vendors have to have a suite, they have to understand how the back office works and how it integrates. Companies that have experience on the ERP side are better positioned to succeed in CRM. SAP and PeopleSoft are the only two vendors that get that," says Joe Davis, general manager of CRM at PeopleSoft. After PeopleSoft reworked its product line to include the software it obtained from the Vantive acquisition, it released PeopleSoft 8 CRM late last year. Davis, who joined PeopleSoft in June, replaces the former senior vice president and CRM general manager, Stan Swete, who elected to take a "career sabbatical." Davis says he is taking on a less technical role than his predecessor's. His primary function is to pound the pulpit and to increase industry awareness on PeopleSoft products--something AMR's Rufo says PeopleSoft has been lacking. Yet, she admits that you have to make sure your house is in order before you invite guests over. "From a functional standpoint, PeopleSoft has very good depth in terms of key CRM areas, but probably has the most work to do in terms of the breadth of their applications," Rufo says. She adds that the recent acquisitions of Annuncio and Cohera will help the company address those issues. Oracle Oracle, too, has its sights set on integration, but its efforts have not yielded growth like the top-three leaders. Once the number two CRM vendor, in 2000, with $297 million in CRM revenue, Oracle has dropped to fourth place this year, with an expected CRM revenue of $343 million. Oracle has two primary areas of focus. First is complete process automation across sell side, service, billing, procurement, and management applications--all of which rest in one shared, centralized database. This approach looks to blend ERP, CRM, and peripheral solutions with often-overlooked areas, such as contract management. The second area of focus is the company's integrated business intelligence, formerly Oracle's Daily Business Close. "We're trying to change our mentality around whether there's an ERP side of things and CRM side of things. Is collections a CRM and ERP product? But you're trying to manage your financial relationships with the customer. That's artificial. You're trying to manage your business and service your customer," says John Wookey, senior vice president of application development at Oracle. From a functional perspective, AMR's Rufo says, she likes what she sees in Oracle's approach. "Oracle has done a great deal of work from a development standpoint." However, she adds that the company has had a difficult time with its applications business. "Oracle has a single sales force for applications and database sales and I think that hurts the company. The applications sales force is responsible for selling Oracle e-business applications. That's a lot. They'd have more success with a separate sales organization that is trained and targeted on CRM. Otherwise, you're going to sell what you're most comfortable with." Amdocs Amdocs is doing things a little bit differently than its counterparts. While other vendors are getting more vertically focused, Amdocs, which traditionally has been focused on the telecommunications market, is looking to branch out into the mainstream after its acquisition of Clarify last year. "Amdocs had some activities in CRM, but they were partial solutions. [With Clarify], we can offer an end-to-end solution in CRM," says Dror Pockard, president of the Clarify division. Perhaps the acquisition will spark a much needed spike in sales, as it is the only member of the top-five CRM suite vendors expected to show a decline in CRM revenue over the past two years. AMR analysts expect Amdocs to report $160 million in CRM revenue by the end of the year--a 16 percent drop from 2000 sales levels. The Clarify products, set from a call center and field service perspective, are "functionally rich," Rufo says. But customers want more. The company aims to deliver. Pockard says the combined company is heavily focusing on improving features and functionality at a time when competitors are focused on integration. "Our focus now is around more sales functionality, more customer service functionality, globalization, and more analytical tools--everything that can help our clients obtain better ROI," Pockard says. Rufo maintains that Amdocs should address customer support issues common with an acquisition. Because Clarify's strength is in high-tech and manufacturing, "Amdocs needs to determine how it will support customers outside of telecommunications," she says. CRM Enterprise Vendor to Watch: Chordiant Although the next-largest enterprise CRM suite vendor by CRM revenue would be E.piphany, Joanie Rufo of AMR insists Chordiant Software Inc. is the most impressive company to watch, due to its SAP--like growth of almost 300 percent in only two years. Chordiant shares a similar portal approach to SAP, but for business-to-consumer companies. Chordiant aims to solve the integration issue by providing flexibility and adaptability to its customers with its Chordiant 5 Enterprise platform, based on J2EE open standards in a portal architecture. "Users are fed up and disinterested in enterprise applications, because they're not getting a return on their investment, nor the promises delivered," says Stephen Kelly, president and chief executive of Chordiant. "These single-solution, monolithic applications are hard-coded and inherently unsuitable for multichannel use. Once you change the application you start walking into the valley of death, because they don't provide the ability to change," he says. The company had a nine-quarter streak of meeting or beating analyst expectations, but was met with a reversal of fortune when it neglected to do so for the second quarter of this year. However, Rufo is still bullish on Chordiant's prospects. "Even though Chordiant had a hard second quarter, the company still has a lot of momentum in the market because of its laser focus on the markets it targets," Rufo says. One of Kelly's first acts as the newly appointed chief executive late last year was to bring in industry heavyweight Jeremy Coote as president of Americas operations at Chordiant. Coote was formerly vice president and general manager of North American operations for Siebel and was president at SAP America. Kelly is relying on Coote and his team to increase Chordiant's market share in the United States. "Some of the customers we'll be announcing over the next six months will be the biggest brand names in North America. By the end of next year more than 50 percent of our revenue will be from the U.S."
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