Who's Hot and Who's Not?
It's December again--the month that finds most everyone reflecting on the past year and hoping to hear predictions for the year ahead. In keeping with the spirit of the season, I thought it would be fun to get some frank opinions from a few of my analyst contacts regarding who's hot who's not, and what's on the horizon for 2001.
Below, Michael Maoz of Gartner Group, Chris Selland of Yankee Group and Liz Shahnam of META Group, give their candid takes on happenings for the CRM industry during 2000, as well as their best guesses as to what will happen in the months to come. (Note: Many of the analyst firms don't actively cover lower-tier CRM solutions. Where analysts have responded with "no comment," they have done so because they'd prefer not to speculate on an area they don't cover.)
For the upper tier, which CRM companies were the biggest winners during 2000 and why?
Maoz/Gartner: Siebel. It added 3,000 employees, won several $10 to $50-million deals, and made savvy acquisitions of OnLink, OnTarget, Janna Systems and OpenSite.
Selland/Yankee: Siebel. It cemented and reinforced its clear lead in the marketplace. Surveys we conducted with CRMCommunity.com showed Siebel being considered in at least 50 to 60 percent of deals, far ahead of all competitors.
Shahnam/META: Siebel. The company truly understands that CRM is not just about one technology domain, but rather a combination of what we call operational, collaborative and analytical technologies. It doesn't have everything right by a long shot, but it's moving in the right direction and definitely "gets it."
For the middle tier, which CRM companies were the biggest winners?
Maoz/Gartner: Janna Systems. Tiny ($16 million) Canadian vendor out-performs 800-pound gorilla (Siebel) in target market (institutional brokers) and gets purchased for $1 billion--the largest software acquisition in the history of Canada.
Selland/Yankee: Octane. $3.2 billion for a $3 million company is pretty impressive!
Shahnam/META: Onyx and Pivotal. They survived the mid-tier "feeding frenzy" by delivering or having visions of delivering a technology ecosystem in a more prepackaged way that's more appropriate for mid-market end users than what other vendors are offering.
For the lower tier, which CRM companies were the biggest winners?
Maoz/Gartner: Interact Commerce Corporation. The company bought back ACT! and launched Interact.com.
Selland/Yankee: Interact Commerce Corporation. Like Siebel, they cemented its No. 1 position, albeit not as strongly. The company has succeeded where many others have failed over the years--low-end CRM is a brutally competitive marketplace.
Shahnam/META: No comment on this one.
For the upper tier, which CRM companies were the biggest losers in 2000 and why?
Maoz/Gartner: SAP. It lost focus with mySAP.com and struggled to get CRM products deployed and to convince the market of its value proposition.
Selland/Yankee: Vantive (PeopleSoft). It basically fell off the map, although PeopleSoft is giving it another try. We'll see.
Shahnam/META: Baan & SAP. Baan failed to execute on every intention. It failed to be visionary and see the future of a single customer experience, which is where things are heading. SAP finally had to admit that it couldn't build it from scratch and is now trying the partnership route (with Nortel/Clarify).
For the middle tier, which CRM companies were the biggest losers?
Maoz/Gartner: Saratoga Systems. It lost most of its senior management, sales staff and CTO. Its Internet products were delayed, and its installed base began defecting in significant numbers.
Selland/Yankee: Onyx. It lost its leadership to Pivotal (although it's still a horse race). The company's technology needs an update, and it's no longer a "favorite child" of Microsoft, who is also having issues of its own.
Shahnam/META: Groupware-only solutions. They're not getting much attention these days.
For the lower tier, which CRM companies were the biggest losers?
Maoz/Gartner: No comment.
Selland/Yankee: FrontRange (formerly GoldMine)--huh?!
Shahnam/META: No comment.
2001: The Likely Dominators
For the upper tier, what's your best guess in terms of who will dominate by the end of 2001 and why?
Maoz/Gartner: Siebel. For all the reasons I already mentioned.
Selland/Yankee: Siebel. Although its seeing heavy competition from the new-breed eCRM leaders like Kana and E.piphany.
Shahnam/META: Siebel, of course, but also the call center-centric guys like Nortel. Despite some significant functionality challenges with its sales automation stuff, Nortel really understands multichannel, integrated capabilities that are important as call centers evolve into customer interaction centers. Siebel also has good functionality here (some components, in fact, licensed from Quintus), but the continued implementation difficulties experienced by users could stymie Siebel's success.
For the middle tier, who will dominate by year-end 2001?
Maoz/Gartner: This will be a year of consolidation, so it's hard to say. Saratoga, Pivotal, Interact Commerce, Onyx and Remedy--if this were musical chairs, there are only three chairs for the five vendors.
Selland/Yankee: Pivotal. I like its "eBusiness Relationship Management" positioning--best hybrid of CRM and e-commerce that I've seen.
Shahnam/META: E.piphany. Its made some significant acquisitions in each domain of the technology ecosystem (potentially pushing it into the upper tier next year). Once it gets Octane and Rightpoint truly integrated, I think the company will really be a dominant, full-bodied multichannel application.
For the lower tier, who will dominate by year-end 2001?
Maoz/Gartner: No comment.
Selland/Yankee: Interact. Although it faces a big challenge from Siebel as it moves downmarket and starts integrating acquired technologies (On-Link, Janna).
Shahnam/META: No comment.
Which vendors do you consider to be some of the best-kept secrets in the industry--those with little name/marketshare, but that offer strong products and should be on short lists?
• Avantgo (Web-based content delivery)
• Unica (data mining)
• Informatica (analytical applications)
• Delano Technologies (e-mail, chat)
• Talisma (e-service)
• Primus (problem resolution)
• Quintus. Building a solid base of products with Mustang and Acuity acquisitions. Strong technology and improving marketing.
• eCRM ASPs such as eAssist, eConvergent and eSupportNow. Companies will need these capabilities increasingly, and many will prefer to rent rather than buy due to rapid technology changes.
• Oracle. Maybe. For Oracle, it's now or never. It must start shipping real product soon, however.
• Epicor. If it can get its marketing act together, the company has a great integrated front/back office offering for the mid-market and could finally present a real challenge to Pivotal and Onyx.
• Cisco. The quiet giant of CRM. So far, it has been content to provide background technologies, but could emerge as a monster in this marketplace very quickly.
• YOUcentric (formerly SalesVision). It has actually written its application as pre-canned components or "Lego pieces," so implementing YOUcentric becomes an exercise in assembly--picking and choosing the components that will meet the business need and essentially snapping them into the "Lego board." Our clients who are using YOUcentric are pleased with it.
• BEA systems. It is actually creating the framework (or a Lego board) that has some of the business capability--such as personalization, profiling and the like--built in.
• Unica. It is a marketing application that provides operational and analytical marketing. It has tremendous capabilities and our clients who are using it are also very happy.
• Brightware. One of the few remaining "unaligned" e-service vendors who really "gets" how to apply service.
• Primus. Help desk vendor applying its version of internal customer support to external customers.
The Big Event
What single event most impacted the CRM industry during 2000 and how?
Maoz/Gartner: The dot com to dot bomb meltdown this spring jolted businesses from their "Ethernet" high and brought them to the reality that the Web was not everything. At the end of the day, the Internet is a unique opportunity to reach and satisfy customers, but without the CRM tools to identify customers, remember customers and prioritize customers (consistent with activities and promises made on the other channels), it doesn't work. We also have the Y2K fizzle to thank. It unleashed resources and budget to address CRM issues, and these investments will continue at a 38 percent CAGR through 2005.
Selland/Yankee: E.piphany's $3.2 billion offer for Octane finally woke the investment community (and the general press) up in a big way to the significance of this market.
Shahnam/META: I'd point to two trends, more so than to specific events. First is the big fish gobbling up the little fish. Second, the "e-only" vendors acquiring core functionality to expand their channels and their capabilities. The big picture? All the important vendors are now realizing that CRM is not just about a single domain--not just about sales or marketing, for instance--but about creating an integrated environment where the customer life cycle is substantiated. Purchasers who believe the integrated environment is important, but who have the real fear of having to integrate multiple vendors, are finding real value in these core applications' being pre-integrated.
Predictions for the Year Ahead
What are your predictions for the CRM market during 2001?
Maoz/Gartner: I've covered them in my above statements (midmarket consolidation, increasing investments in CRM).
Selland/Yankee: First, growth in the CRM market will not decline but will moderate--the growth rates we've been seeing will lessen somewhat, which is not bad news but a sign of a market that is starting to mature. This will also encourage even more M&A activity as the big get bigger and the small get bought--another natural evolution as the market matures. Finally, we will see more rapid emergence of hosted CRM as companies recognize that technology complexity is causing owning the technology to be less beneficial than renting it on a continually upgraded and integrated basis.
Shahnam/META: For the back office vendors (such as PeopleSoft, SAP and Oracle) who have been struggling with front-office capabilities, 2001 will be a make-or-break year. I think they will figure out that their core competencies are different, and they will continue to buy piece parts and to integrate.
Also, the e-only vendors that don't expand channel support will be bought, go bankrupt or build some seriously strong partnerships involving heavy integration. We will finally see that the Web is not the only channel in town.
Finally, end-user companies will start to see that e-business initiatives without a CRM component (meaning those just focused on commerce) will fail. CRM will become part of every business's e-commerce initiative.
Give me a wildcard prediction--one that's not officially put forth by your firm but that represents a personal best guess for the coming year.
Maoz/Gartner: Content and personalization providers will merge, and in turn they will be acquired by the large CRM players. Expect Siebel, Oracle and Nortel to do the buying. Also, the sell-side e-commerce vendors will either expand their CRM capabilities or weaken to the point that they are acquisition targets.
Selland/Yankee: The chickens (or promises) come home to roost and CRM begins to look more and more like ERP--a technology category that has overpromised and underdelivered. This is already happening since many CRM companies are now shying away from the term and using more generic terms such as e-Business, but while companies can run, they can't hide. Eventually the winners will be those who are most successful in making their customers successful. For the rest, a shakeout looms, albeit one that will make the whole market stronger.
Shahnam/META: Big vendors like SAP and Siebel, who get so fat that they're not able to react quickly to market change, will struggle. I put Siebel in my winner category, but I feel that if it continues to get fatter (capability-wise), it's going to be more difficult for the company to react as quickly as some of the upstarts, and that could be damaging. Right now, Siebel applications are getting increasingly painful to implement. Siebel needs to learn from those who have come before, like SAP--it needs to make the stuff easier to implement.
I also think there will be an uprising on the part of end-user companies. They no longer want to have a systems integrator living on their site for three years to get a system up and running. They want the vendors to provide integration increasingly canned. While they will be willing to pay for some services, they won't be willing anymore for the vendor to become part of their team for the next millennium.
Finally, I think that the personalization and profiling guys who are very sexy right now, such as Vignette and Broadvision, will have to improve their business/CRM personality. It's beyond partnership for these guys. They will fail unless they move beyond single-function capability and start to offer better integration and application- or business-level capabilities.
On a personal note, 2000 has been an eventful year for me, as well. Several other well-meaning professionals in Atlanta and I formed a nonpartisan group--CRMSouthEast--aimed at providing education and networking opportunities for the Southeast business community (you can visit our Web site at www.crmse.org). Our inaugural meeting in May drew 150 people, and with our second meeting in August, we outgrew the meeting facility and had to move to larger quarters. By the time this prints, we will have held our November 8 meeting and are expecting around 200 attendees--not bad for a fledgling group and a good sign of the growing importance of CRM as a business initiative!
Finally, I should note that this will be my last column for a few months, as I'll be taking a maternity sabbatical. My three-and-a-half-year-old son is eagerly awaiting the arrival of his new brother, due on December 7, so the new year will find us off to a busy start. Here's hoping all of you have a successful and prosperous year in 2001!