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CRM-derella Story
Is the overlooked low-end market viable? More and more CRM vendors seem to think it is.
For the rest of the December 1999 issue of CRM magazine please click here
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The low-end market is the red-headed stepchild of the CRM world. Routinely overshadowed by the high end's blinding dollar signs and the midmarket's shiny potential, the low end-which in 1998 accounted for just 5 percent of the total CRM market-is synonymous with small profits, unsophisticated contact managers and back-wall booths at DCI.

However, this unflattering perception may be changing. The ability to provide millions of small businesses with sales and marketing automation solutions via the Web at rock-bottom prices has sparked new interest in the low end. Several companies are now aggressively staking out this market with Web-hosted, basic function offerings designed specifically for the needs of small companies with small budgets. In doing so, they are laying the groundwork for what some suggest could be a CRM Cinderella story. "There is huge potential in the small market," says Jim Dickie, a CRM consultant and partner with CSO Forum in Colorado. "Smaller organizations have the same needs as big ones. They have no IT departments, but they want the same CRM tools that bigger companies are using. Hosted applications are a great way to get some of these tools at a really good price."

Be My Guest
Web hosting deserves credit for any new interest in the low end. This technology makes it possible to deliver CRM applications to small companies via secured Web sites. With Web hosting, there is no need for an IT department, just a modem and a browser and you are good to go-for a fraction of the cost of running the applications in-house.

Most agree that Web hosting holds the key for unlocking the vast potential of the low-end market, but just how huge this potential is remains anybody's guess. In the past, the small-business market has proven so unglamorous and unpromising that the CRM chattering classes at many of the major consulting groups haven't bothered to numerically speculate on its promise.

But that hasn't stopped certain vendors from making their own predictions. One such company is The Great Elk, a New Zealand-based CRM solutions provider that boasts such customers as 3M, Fuji, Xerox and Eli Lilly. The Great Elk believes so strongly in the potential of the low-end market that it has gone so far as to establish a Web-based subscription service called Splash-Net, which will provide CRM solutions via the Web for $49.95 per user, per month.

According to Warren Tobin, The Great Elk's chief operating officer, the low-end market's potential is huge. "All of this research is purely ours," he says, "but we think it could be worth $10 billion in five years. There are over 23 million small businesses in the United states with fewer than 100 employees. They are responsible for nearly half the GDP. Multiply that by a $50 subscription rate, and you understand why we started Splash-Net."

Win, Show or Place?
Despite a general lack of interest in the low-end market by many vendors, Splash-Net will face competition from both new and established vendors in this space. The small market is typically defined as companies with less than $30 million in annual revenues and under 100 employees. Traditionally, these companies have turned to basic contact-management programs like Microsoft Outlook, or Symantec's ACT! to meet their CRM needs. The theory is that with hosted CRM applications, low-end customers can upgrade to slightly more sophisticated CRM systems, but still stay within their budgets. As reported in the November edition of SMA, Upshot.com has partnered with Intuit to offer just such an application for $1 per day, a price even lower than Splash-Net's.

At this point, no one can say with any certainty that small businesses with small sales forces actually need or want anything more sophisticated than ACT!. Keenly aware of this risk, both Splash-Net and Upshot.com are offering bare-bones solutions that can be enhanced later for more money. "We have kept it very simple, but still deliver the things with maximum benefit," says Tobin. "The first stage is to get them a database. When they want to move to a bigger system they can.


Another wild card in the rush for the low-end market is the role of established mid and high-end vendors. While Web-hosting may seem tailor-made for small market providers and their customers, its potential has not escaped the notice of some of the biggest players in the industry. Siebel now offers its applications through USInternetworking. And in a branding exercise earlier this year, the company actually gave away a stripped down version of Siebel Sales to anyone who wanted it. "The big threat is Siebel," says Judy Hodges, product manager at International Data Corporation. "They made it very easy for everyone to use their product."

In the middle market, IBM hosts SalesLogix's solutions. Lurking in the lower half of the middle market is GoldMine, which already provides highly respected, affordable CRM applications for businesses of all sizes. While these companies offer products designed for larger enterprises, with their experience and deep pockets, they could theoretically make short work of both Upshot.com and Splash-Net if the small market does actually reach Tobin's predicted $10 billion level.

With so many factors at play, it remains to be seen if the rush for the low-end market will become a Cinderella story or a cautionary tale. All do agree on one thing: the low end's big potential. Says Hodges, "That market has robust opportunities. Hosted applications give small businesses a way to gain a better understanding of their customer via traditional technologies. And it is affordable-these businesses are very cost-conscious."

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To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
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