Acquisition Predictions

Article Featured Image
After my recent article on CRM consolidation, I wasn't surprised to receive a considerable volume of inquiries all asking the same question: "What about my CRM vendor?" I can't predict the future or answer that question for each individual technology vendor, obviously (at least not with any accuracy). What I can do is describe a model that should help CRM magazine readers better understand where particular CRM vendors of choice fit in the market, and how they may be affected by the industry's continuing consolidation. Think of the CRM market as comprising, essentially, four groups of companies forming a pyramid. These groups are:
  • Leaders (acknowledged market leaders), which are Amdocs, Concerto Software, Microsoft, Oracle, SAP, and SAS;
  • Growth companies (potential market leaders rapidly and successfully expanding their businesses), which are RightNow Technologies, Salesforce.com, Unica, and Witness Systems;
  • Fallen stars (past growth companies that either didn't succeed in achieving true market leadership or fell from it), which are Apropos, ATG, Broadvision, Chordiant, eGain, Onyx, Selectica, and Vignette; and
  • Emerging companies (new entrants that are not yet established enough to be called growth companies, but have the potential to be so), which are Coremetrics, Exact Target, Omniture, PAR3, Pragmatech, and Siperian. Acquirers in the market are the leaders and growth companies, although the profiles of the types of acquisitions they make differ greatly. Leaders (like Oracle) usually conduct major acquisitions, while growth companies are more likely to make smaller acquisitions (like RightNow's recent acquisition of Convergent Voice). The reasons? Leaders are seeking to consolidate and reinforce their position, while growth companies seek to enhance their growth without the disruption that major acquisitions entail. Fallen stars and emerging companies more typically represent those companies likely to be acquired in these transactions (although leaders do also acquire growth companies, particularly when they either complement or threaten their existing business). Fallen stars are most often acquired for their customer base; emerging companies are acquired for their technology. If you apply this logic to your vendor, expect that if you're working with a leader or a growth company, it may make acquisitions, but isn't likely to be acquired. If it does, (as sometimes happens with growth companies--Oracle's acquisition of ProfitLogic is an example), it is likely being acquired for its potential, and is unlikely to cease to exist any time in the near future. On the other hand, if your vendor of choice is either a fallen star or an emerging company, you might want to protect your investment. The risk is particularly acute for fallen stars, because they are most often acquired for their customer base, not for their technology. Here are some thoughts about how industry consolidation will shake out, even if the details don't match (I'm all but certain they won't). Sage Software acquires FrontRange SMBs, quite simply, shouldn't be buying directly from CRM vendors, they should buy through their local resellers. These two companies own the reseller channel (not withstanding Microsoft), and by combining forces they'd be stronger together. Oracle acquires Chordiant This is more of a traditional Oracle deal--cheap price, strong, if dated, technology, and a decent customer base. The Siebel deal would get more attention, but Chordiant (or others like Onyx) would be both easier and more profitable. It would pay for Oracle to shop more in the fallen stars section, if it wants to. Of course, this list is subject to change on practically a daily basis. Please visit http://reservoirpartners.typepad.com for continuing coverage. Chris Selland is a principal analyst at Covington Associates, a specialty investment banking firm. Contact him at cselland@covingtonassociates.com
    CRM Covers
    for qualified subscribers
    Subscribe Now Current Issue Past Issues
  • Related Articles

    The More CRM Changes, the More It Stays the Same

    A new Gartner study finds the state of CRM in 2000 can predict its look in 2020.

    Chordiant Keeps People in the Contact Center Equation

    With the release of Recommendation Advisor 6.1, the company strikes a balance between human decision-making and technology.

    Buyer's Guide Companies Mentioned