Struggling CRM provider Wheelhouse Corp. is exiting the managed professional services business and instead focusing on becoming a software company.
Wheelhouse, which billed itself as a marketing technology solutions provider, works with Fortune 1000 companies to deploy and manage CRM systems. The company's shift away from this area to become a pure software provider is an attempt to gain much-needed funding by distancing itself from the ASP and hosted services business that has been lagging for the past year.
Although Wheelhouse did not provide hosting to its customers, its business model was complex and often lumped in with ASPs. Its business model was capital consumptive, because it comprised three different models: research and development, infrastructure, and services, industry observers say.
Based in Burlington, Mass., Wheelhouse has struggled to get financing, and sources estimate the company has burned through more than $70 million in cash since it was established in 1999. Wheelhouse would not comment.
The privately held company initially raised more than $60 million in funding from a variety of investors, including Charles River Ventures, Integral Capital Partners, Kleiner Perkins Caulfield & Byers, Amerindo Investment Advisors, Chase H&Q, CXO Media Inc., Oracle Corp., Partech International, RSA Security, Inc., Silicon Valley Bank, and Sumitomo Corp. of America.
In February Wheelhouse debuted its first software product, CRM Director, middleware for linking CRM systems together. Wheelhouse founder, Chairman, and Chief Executive Frank Ingari said at the time of the announcement that the company had planned to get into software since its inception.
Ingari, a former Lotus Development Corp. marketing executive and later chief executive of Shiva Corp., has publicly admitted that it has been a tough environment for getting funding. And the tough times have taken a toll at Wheelhouse. The company had more than 300 workers in 2001, but now has about 30 workers.
However, Wheelhouse may be in the right place at the right time. Market researcher Meta Group predicts that by 2003 90 percent of those currently offering management service provider services will offer both MSP and managed services, perhaps not directly through their own channels, but by partnering with other organizations that need to add management to their service offerings to differentiate themselves.
"While both MSP and managed service offerings will continue to grow, managed services offerings and adoption will grow faster than MSP services, adding 100 to 200 new vendors a year through 2004," Meta analyst Corey Ferengul says.