Migrate or Merge?
It's an all-too-common scenario these days: A vendor is going under. Should its main competitor buy the company assets, or simply try to attract the failing firm's clients to its own solution?
Users of a soon-to-be extinct solution may see higher service fees if they stay with the product once a merger is complete, and may see high implementation costs if they switch to a solution that doesn't offer a migration plan. Companies that simply sit it out and continue to operate on the original product may find themselves with serious maintenance problems if the vendor's solution is not picked up and serviced by another vendor.
Nowadays, many CRM vendors are finding it wiser to offer a planned migration platform from an expired solution to their own. Take the case of beleaguered CRM provider Xchange. When the company went out of business this past winter, several companies, including Unica, Eloqua, and SAS, began heavily courting Xchange's customers.
Carol Meyers, vice president of marketing at Unica, says that Xchange's product did not offer any additional functionality or value to that already offered in Unica's Affinium suite, and that key personnel responsible for developing the product left the company by the time it was for sale, thus an acquisition simply didn't make sense over creating a migration plan.
Amdocs, which bought Xchange's assets, says, however, that the acquisition will be a great benefit to its business. "The Xchange products complement the Amdocs ClarifyCRM application suite, enhancing our capabilities," says Peter Hurst, vice president of marketing for Amdocs ClarifyCRM.
But some analysts say vendors face several risks whether they buy or spend resources creating a migration plan. "From a vendor perspective, why buy an install base if you can steal it?" says Erin Kinikin, vice president and research leader at Giga/Forrester Research. "Companies often buy troubled software companies for their install base, in the hopes that they can migrate the customer to their equivalent product and then sell add-on offerings. The problem is that just because you bought the company doesn't mean you can keep the customers."
In the best-case scenario, according to Kinikin, customers often stay on their current product, requiring support in return for maintenance fees. "Any type of migration to a new architecture usually prompts customers to go through a more extensive evaluation process, forcing the acquiring company to 're-win' the customer--and opening the door for other vendors," she adds.
Karen Smith, a research director at Aberdeen Group, also says there is no clear answer in this type of situation. "While many CRM vendors offer similar value propositions, not all CRM business solutions are created equal," she says. "It is important to establish if acquiring the company and its solutions will create long-term advantage for the company and its customers, or if it makes more sense to develop a migration strategy for customers of troubled companies.
"Much depends upon the alignment of the technologies, as well as the customer requirements and future expectations," Smith says. "What is important is to respond to the needs of the customers who are looking for ways to continue to maximize return on existing IT investments."