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The State of the CRM Market
The most successful customers will leverage the industry's foundation.
Posted May 1, 2006
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The CRM market, like most of the tech market, has undergone significant change since the dotcom boom of the late 1990s. Consolidation and acquisition have been the buzzwords of late, leaving consumers with even more questions as to what product is the best fit for their organizations. CRM vendors can be classified in one of three market segments: small office, midmarket, and enterprise. Products like Best Software's ACT! and FrontRange Solutions' GoldMine are the clear market leaders in the small-office market. Typically, small-office customers have fewer than 25 CRM users and are looking for a low-cost, highly configurable contact and activity manager for their users. Users are especially loyal to these products because of their ease of use, integration with Microsoft Outlook, and ability to be customized by the end user. Unfortunately, these solutions do not scale well as the organization grows, and synchronization across users continues to be a challenge. The midmarket is marked by a bitter battle between the hosted giant Salesforce.com, battle-tried veterans like SalesLogix and Onyx Software, and a relative newcomer to the market, Microsoft Dynamics CRM. Salesforce continues to grow in market share, because of ease of use and customization, rapid implementation, and hosted offering, making it simple for organizations to get up and running with minimal IT investment. SalesLogix continues to hold market share, because it is the natural transition from ACT! for network CRM. Onyx continues to grow market share in the upper part of the midmarket with its enterprise suite of Employee CRM, Customer Self-Service Portals, and Partner Relationship Management, which is paired with best-of-breed partnerships. These partnerships include embedded reporting and analytics from Cognos and Knowledgebase.net support solutions. Microsoft is eager to own a large share of this market. The recent release of Microsoft Dynamics CRM 3.0, with its native Outlook client, extensive integration with Microsoft Office, enhanced customization options, and expanded sales, marketing, and service features, is enticing users to take a second look. These players own the lion's share of the growing midmarket, having eliminated many of the smaller players through market perseverance or acquisition.
The enterprise market has been most affected by the acquisition of both PeopleSoft and Siebel by Oracle. Many customers with significant investments in each of the three platforms are proceeding with caution until there is a clearer product strategy from Oracle regarding which product--or products--will survive the acquisition. This consolidation has enticed the more traditional midmarket players like Salesforce, Onyx, and Microsoft to target the PeopleSoft and Oracle customer base with extremely attractive competitive conversion offers. This has led to increased competition from Baan and SAP AG at the higher end of the market. Many believe that consolidation in the CRM market was inevitable, given the changes in IT spending since the dotcom days. Few predicted that newcomers like Microsoft and Salesforce, or veterans like Onyx and ACT!, would continue to grow their market share in this mature space. It seems inevitable that as CRM consumers continue to demand a product with more features and customization options at a lower cost, we will see some commoditization of CRM. In addition, there are likely to be some acquisitions, particularly in the midmarket. However, the customers with the most successful CRM investments are those who not only understand that business strategy drives truly effective CRM, but also leverage the CRM foundation to grow their client relationships. About the Author Richard Smith is vice president and CRM practice director, and a founding partner of Green Beacon Solutions. He received a BS in business management and computer science from the Boston College Carroll School of Management. Please visit www.greenbeacon.com
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