Logo
BodyBGTop
Many Happy Returns?
With their acquisitions of Clarify and Vantive, Nortel and PeopleSoft dive into uncharted waters.
For the rest of the January 2000 issue of CRM magazine please click here
Page 1



Few who follow the CRM industry were surprised when they heard the news that Vantive, the number- three CRM vendor, would be sold to ERP stalwart PeopleSoft for $433 million. After months of bruising managerial upheaval, rumored low morale and rising red ink at Vantive, it was just a matter of time before the other shoe dropped.

Many were surprised, however, when less than a week later, communications networking giant Nortel Networks announced that it would acquire the number two player in the CRM space, Clarify, for more than $2 billion. Clarify, with its rock-solid management team and dominance in call center applications, seemed well positioned to go it alone.

But going it alone may be an outdated concept in the rapidly evolving CRM industry. Both of these acquisitions are part of what some see as the inevitable consolidation of CRM technologies and philosophies into bigger, more comprehensive business/technology systems that could include ERP and CRM functionality and possibly hardware. While both Nortel and PeopleSoft bring strengths to the deals that on paper point toward this workable consolidation, the uncertain nature of the current CRM industry make success anything but a given.

"The CRM space is not well-defined at all right now, and it's hard to see that it is going to get cleared up anytime soon," says Barry Trailer, a CRM consultant and vice president of sales for SalesWare.com.

Please Clarify
Of the two deals, analysts see the Nortel/Clarify merger as the stronger of the two. "Nortel is buying Clarify's call center application, which very nicely fills out their offering," says Peggy Menconi, research director, CRM, AMR Research.

According to Eric Carrasquilla, senior marketing manager at Nortel, the company's strategy in buying Clarify is based on a bigger picture of the future of the CRM industry, one which involves both hardware and software. "If you look at where the market is going, the battlefield is not front and back office as you move out into the Internet. Software is only part of the equation," he says. "If you don't have infrastructure, you crash and burn."

The combination of infrastructure and software broadens Nortel's networking offerings and, says CRM consultant Jim Dickie, "brands" customers as well. "If you look at the whole communications industry, the problem is how do I tie somebody in and lock them in as a customer. Because of the ubiquity of communication services, I can change vendors with a simple `yes'. Diversifying the services customers get from companies like Nortel may make it more difficult to change providers."

The ability to brand customers is obviously a valuable one to Nortel, which paid what some consider an astronomical sum for Clarify. But as Trailer points out, for Nortel, Clarify's $2.1 billion price tag is pocket change. "It's a big deal to Clarify, but that's nothing to Nortel," says Trailer. "Yes, it's a big number, but not when you are talking about a phone company."

According to Carrasquilla, in financial terms Nortel sees the deal as neutral by 2000, and accreted from there on. "It's going to be like the Louisiana Purchase," he adds. "In a few years, they won't believe the deal Nortel got."

Power to the PeopleSoft?
The Vantive/PeopleSoft merger may face a rockier road to fruition. A joke making the rounds these days describes the union as "two losers dating each other because neither one wanted to stay home from the dance." While this uncharitable description might exaggerate the case, the two companies do bring certain baggage to the table. "Both of these companies have challenges, and I don't see how this deal reduces those challenges," says Trailer.v "ERP companies in general are not doing as well as they have in the past in regard to growth rates," says Menconi. "And with Vantive, something was bound to happen. Their market capitalization has been depressed."

By purchasing Vantive, PeopleSoft hopes to tie front office CRM technologies to its own back office ERP applications. "This is the whole strategy of putting a 360-degree view of the customer online," says Vantive CEO Tom Thomas. "The strategy involves having an integrated front/back office solution from PeopleSoft."

As revenues stagnate for many ERP vendors, strategies of this type become more and more common. "If you add up the ERP vendors, there's a boat load of them," says Dickie. "If you don't have a broader product line, you're not going to be a player."

But because both Vantive and PeopleSoft have recently experienced lean times, and more importantly, because the CRM and ERP markets are at best unpredictable, some speculate that the chances of the union successfully broadening its product line anytime soon are slim. "ERP has problems right now, and CRM is ill-defined at best," says Trailer. "It is hard to imagine that this is going to get cleared up anytime soon."

In the short run, both mergers mean more opportunity for established CRM vendors like Siebel that can take advantage of confused transitional environments at Vantive and Clarify. Long-term, however, the hardware/software or ERP/CRM strategies of Nortel, PeopleSoft and others may pay off. Says Menconi, "Once they get their products out there, they will start nipping away at Siebel's dominance.


Notable Quotable

"I want to be damaged by technological failure. I want to be on a plane with my Palm VII portable e-mailer on my way to Bill Gates' house or in a hospital in a ward that is computerized. I want it to happen to me, Baby. I want to be there when it all goes bad. When the clock stops, the rain goes bad, it's all going to be great for me. I'll be loading the arks."

Carrie Fisher, as quoted in Talk ma gazine on where she would be New Year's Eve.

Page 1
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/.
Search
Popular Articles
 

BodyBGRight
Home | Get CRM Magazine | CRM eWeekly | CRM Topic Centers | CRM Industry Solutions | CRM News | Viewpoints | Web Events | Events Calendar
DestinationCRM.com RSS Feeds RSS Feeds | About destinationCRM | Advertise | Getting Covered | Report Problems | Contact Us