If SalesLogix wanted to exit the millennium with a bang, it succeeded. In December of last year, the midmarket vendor shook up the CRM world with two major announcements. Not only was it acquiring ACT!-providing immediate access to an established base of more than 3 million users and returning the product to its original creator, Pat Sullivan-but it also introduced Interact.com, an interactive application service that some analysts have touted as the new benchmark for the CRM industry.
Writer Ginger Kernachan Cooper spoke with SalesLogix president and CEO Pat Sullivan just hours after these announcements were made. In the interview that follows, he discusses his company's new direction and the implications for the CRM world.
SMA: When did you begin to seriously consider buying ACT! from Symantec, and what were your reasons?
Pat Sullivan: We began thinking about it in May 1999, and we had several reasons. First, we were building a new product, Interact, which is a Web-based application service, and we wanted access to an existing user base. Acquiring ACT! enabled us to avoid spending hundreds of millions on advertising for our new product. It gave us instant access to a huge community of users who needed the capabilities we were producing.
Second, more than 60 percent of SalesLogix customers are companies that upgrade from ACT!. So we saw a big opportunity in terms of providing a natural upgrade path for millions of ACT! users.
Approximately 45 percent of those responding to SalesLogix ads were prospects who really needed ACT!, not SalesLogix. We didn't have a low-end product that met their needs, so we used valuable sales time pointing them toward contact managers. In that light, we felt that acquiring a low-end solution would give us more bang for our buck from our advertising dollars while also enabling us to use our selling time more effectively.
Finally, we saw that the acquisition made sense from Symantec's perspective. When John Thompson became Symantec's new CEO, he refocused the company on its core business-security products and applications. Obviously, ACT! wasn't in that arena so it wasn't getting its due attention. In fact, it's amazing to me that ACT! did as well as it did during the past several years, given that Symantec did minimal advertising for it and didn't introduce new versions quickly. There were only about 40 people on ACT!'s development team-a number that's practically unheard of for a product generating $35 million a year. Despite these factors, the product continued to have strong sales, meaning the strength of the product and brand were still there. I also had numerous people saying to me, "I'm an ACT! user. Why isn't Symantec doing anything with this product?"
SMA: What about those who say you just wanted your baby back?
PS: I'm hearing that a lot, but it really had little to do with my decision. Since I created ACT!, there was certainly an affinity there. But I approached the decision from the stance of whether or not it made good business sense. I have a very objective board, and we all agreed that the acquisition was a strategically smart thing to do.
SMA: How receptive were Symantec executives to your proposal?
PS: Given that ACT! no longer represented a strategic direction, they were very open to the idea of its being acquired. That said, they didn't let go easily. The negotiations were a bit like pulling teeth. Symantec had time on their side-they were sitting on an asset that generated lots of cash, so the need to sell wasn't that urgent. We approached them in May, and we would have preferred for the whole process to have wrapped up much more quickly than it did.
Also, Symantec wanted to entertain several offers, so we competed against other suitors. In September, this actually gave us quite a scare. I got word one day from several sources-including a number of ACT! certified consultants and someone associated with another potential ACT! buyer-that the deal was done. They said the product had already sold to another company, and for 24 terrible hours, I was unable to reach anyone at Symantec who could confirm or deny this. During that 24 hours, my heart sank. It was an awful feeling. Fortunately, the rumor wasn't true.
On another note, we had one big factor playing in our favor. John Thompson knew that users were very loyal to ACT!. He worried that if he sold it to someone who didn't understand users on the low end of the market, he would be blamed for the product's demise. Since I created ACT!, he was very receptive to my buying it back.
SMA: Are you bringing over Symantec's ACT! development team?
PS: Yes. I expect to get almost all of them. We will have a development facility in Northern California and a tech support facility in Eugene, Ore., so we're not forcing anyone to move to Scottsdale.
SMA: You said Symantec did minimal marketing for ACT!. Will you be more aggressive about courting users of other well-known contact managers?
PS: Absolutely and always. Maximizer has changed hands a couple of times and has not moved forward particularly well. Goldmine has recently changed hands, so I think we may see some opportunities arising from that. Our introduction of Interact gives users of other products a compelling reason to switch to us rather than upgrade their current products. We will aggressively pursue those users.
SMA: Do you envision ACT! eventually becoming the base module of SalesLogix, or will the two products remain separate?
PS: They will stay separate. Brands mean something, and it's very hard to make a brand mean something other than what it already represents. ACT! is a great product for salespeople to get started with. It's easy to use, and it's geared to individuals. SalesLogix is a midmarket product that's more robust and that's focused on groups of users. We're positioning Interact as a powerful application for those wanting to run sales and CRM applications strictly on the Web. Our strategy is a multi-brand one, which I firmly believe is the most effective way to go.
SMA: You now have ACT! for the low end and SalesLogix for the midmarket. With Interact in the picture, will you be going after the upper tier?
PS: We won't directly pursue that market segment, but, for a couple of reasons, I believe many of these companies will come to us. My experience has been that as you capture mid-size companies, big companies get jealous. They see smaller companies using lots of cool sales applications while they're still paying Big 5 firms millions of dollars just to talk about CRM. So they end up purchasing midmarket products and
deploying them. SalesLogix, and I'm sure other midmarket CRM vendors, have benefited from this.
Also, I believe that software is rapidly becoming a service-something you subscribe to or rent as opposed to something you license or buy. As this trend gains momentum, our ability to build enterprise-like functionality into Web-based applications is inherent and also phenomenal. The initial release of Interact will be powerful. A large enterprise can certainly use it-the architecture is designed to support millions of users simultaneously on the Web. I'm talking huge Sun servers, huge Oracle databases, big Microsoft NT application servers, millions of pages served daily. So the scale with which we are building Interact from Day 1-because of the fact that we've got 3 million ACT! users to support-is enormous. Could Interact serve a 5,000-person sales force at a Fortune 500 company? You bet.
SMA: Scalability is a factor for large companies, but functionality is the real differentiator. Will you be able to provide functionality that gives companies like Siebel a run for their money?
PS: In terms of the core elements that sales and customer support organizations need, absolutely. But Siebel touts that they have 117 modules and I believe that 114 of those are things that people never want to use. So will we have 117 modules? God, I hope not. If that's what someone wants to buy, more power to them. Let them buy it. But in terms of software and solutions that sales, marketing and customer support organizations actually use to solve real problems, Interact will work. In fact, it will be an absolute killer app in those terms.
SMA: What's your marketing strategy for Interact?
PS: Initially, we will target ACT! and SalesLogix users. Then we will go after the Palm Network community and expand from there. For companies wanting to use nothing more than thin client browsers to gain certain sales capabilities, Interact provides a solution. A whole market is developing along those lines, so we will go after that market as well.
I really believe we have an extremely compelling story with Interact because it's so tightly integrated. I'm very much reminded of the early days of ACT!. At that time, most contact managers were written in dBase, so they all had a similar look and feel. Recently I met with people from one of the large portal companies, and they demonstrated their technology to me. As I was watching, my mind was screaming out, "This is dBase! This is just like dBase all over again!" Light bulbs went off-I realized that Interact versus other CRM products was just like ACT! versus dBase. If you look at the so-called Internet applications today, there is some neat stuff, but it's not well integrated. Even if you look at Palm 7-which I think is one of the coolest devices ever built-none of the various applications are integrated. What we're building is totally integrated, and it provides a whole new way of selling. Salespeople who disconnect from the Web still need access to their data, and Interact makes that possible.
SMA: Can people purchase Interact as a standalone product, or do they have to purchase ACT! or SalesLogix to access it?
PS: They can do either, but, of course, they'll greatly extend their use of Interact if they purchase one of our other products. Not surprisingly, we'll do bundled incentives to encourage this.
SMA: On a personal note, do you feel like you're experiencing the comeback of Pat Sullivan?
PS: I don't feel like I ever left. I also don't feel like SalesLogix has gotten its due, given all that we've accomplished. We've passed Pivotal in terms of revenue, and we've been growing at 150 percent year over year. But we haven't gotten as much press, largely because we serve the lower end of the marketplace.
That said, in terms of introducing Interact and acquiring ACT!-in those terms, yeah, I'd say I'm back. SalesLogix is now more on the map than it has ever been. As for Interact, we want to be the largest provider of this new breed of software. We've introduced a killer app, and I believe that the way in which we've done it will be difficult for other vendors to match.
SMA: Where is all of this heading?
PS: The strategy we've embarked upon will ultimately make us the largest vendor in this space. Because of our acquisition, we now have several million users to market to. With ACT!, SalesLogix and Interact under one roof, we also have the means by which to own the low end up through the rest of the marketplace. So where are we headed? By the end of the next decade, I aim to have the most customers, the most users and the biggest franchise in the industry. We've followed the Microsoft business model-low cost, fast implementation and going after the masses-and at the end of the day, I firmly believe that model will make us not only win, but win big.
Alienation...is not only the result of social systems, be they capitalist or socialist, but of the very nature of technology: the new means of communication accentuate and strengthen noncommunication.
Claude Levi-strauss (1967)