Breaking From Tradition
Once upon a time countless regional midmarket systems integrators (SIs) had a virtual lock on a segment that enterprise vendors mostly ignored. But unlike characters in fairy tales, today many SIs are not living happily ever after.
Enterprise CRM vendors looking for new revenue opportunities have recognized the untapped potential in the midmarket, and are relentlessly pursuing it. They are offering not only software, but also integration and consulting services through their own services organizations or through partners who also once focused almost exclusively on the enterprise market. Even some of the larger midmarket vendors that partner with traditional midmarket SIs are now offering services to new and existing customers.
And the emergence of hosted CRM offerings has made the midmarket even more complex. ASPs have introduced integration tools of their own or through partnerships with other vendors and SIs.
There is, however, a happy ending: Midmarket customers now have infinitely more options as these vendors and integrators clamor to serve them.
Vendors Eye the SI Pie
Perhaps the greatest impact on midmarket systems integrators has been the competition with vendors. Instead of peaceful coexistence, SI firms are now battling with vendors over contracts. In fact, vendors like Siebel Systems have gotten so deep into the services sector that their services revenue well surpasses license sales.
For example, the biggest competitor of Green Beacon Solutions, a midmarket CRM consultancy that specializes in Onyx Software and Microsoft CRM implementations, is Onyx. "We see a fifty-fifty win rate between us and Onyx," says Ben Holtz, CEO of Green Beacon, "but we would like to set up a more formal relationship, so that we do not compete as much in the upper midmarket space."
Holtz's win rate jibes with a recent Gartner estimate that 50 percent of midmarket companies will seek integration and other professional services help from their CRM vendor of choice.
Although boosting revenues is one reason for vendors getting into the integration game, customer demand has played a part, says Bill Henry, vice president of strategy at PeopleSoft Global Services: "Talking to customers in today's environment, there is a low tolerance for risk. They really want single-vendor accountability--just one hand to shake for software, implementations, and integration."
According to Henry, vendors getting into the SI market have to know other vendors' software to truly create integrated CRM systems. The fact is, very few companies are going to run one vendor's software exclusively. PeopleSoft's approach has been "introducing direct plug-ins to other solutions on a quarterly basis," Henry says.
Enterprise Vendors Use SIs as Keys to the Midmarket
While some vendors like PeopleSoft are looking to handle all the systems integration needs of their customers, other CRM vendors are working with SI firms to gain entry to the midmarket.
In Oracle's quest to move downstream, for example, it has partnered with several midmarket SIs to customize its CRM offerings to the needs of midmarket customers. To ensure success Oracle maintains a close relationship with those SIs. "It is a very collaborative effort with Oracle throughout the whole process, from sales to implementation," says Joel Patterson, a founding partner of consulting firm Lucidity, which implements Oracle for midmarket companies.
Additionally, Oracle's midmarket partners allow the company to better serve verticals, as well as offer a more compelling price, says Rauline Ochs, group vice president for the North American division, alliances and channels, at Oracle. "We are always looking for ways to extend the product and make implementations faster, easier, and more streamlined for our midmarket customers," she says.
Enterprise vendors streamlining their offerings for the midmarket are a good fit with those customers' needs. Midmarket customers usually just need one or two CRM components to integrate with legacy systems, and not always a complete CRM overhaul, Patterson says. "From an integration standpoint, they are typically integrating between ERP, HR, and call-handling platforms, ensuring that the CRM data is available in every interface," he says.
Another enterprise vendor, SAP AG, has been targeting the midmarket with its SAP Business One suite of applications. Recently, SAP announced that it has been establishing a large partner network to provide even more customization of Business One for the midmarket. "With the SAP Business One Solution Partner Program, we are partnering with solution providers to offer our customers more choices and additional value from their IT investments," says Hans-Juergen Uhink, senior vice president, global field SMB, at SAP.
One of SAP's partners is OneTrak LLC, which offers OneTrak CRM, a CRM solution that the firm integrates with SAP Business One. Consisting of multiple CRM modules and enhanced features, including advanced marketing and vertical industry capabilities, OneTrak CRM and SAP Business One aim to provide customers with a CRM solution that is more customized than any out-of-the-box midmarket CRM suite, says Phil Haine, president of OneTrak. "With additional CRM capabilities for SAP Business One, our customers can now leverage existing information to generate new business opportunities, giving them a competitive advantage in the small- and midsize-business market that they previously did not have," he says. "This partner program will allow us to continue delivering innovative solutions that our small- and midsize-business customers demand."
PeopleSoft has been able to make significant headway into the midmarket through its acquisition of J.D. Edwards, PeopleSoft's Henry says. "Their services guys have taught us how to get midmarket companies up and running very quickly," he says. One example is Formax, a slicing and forming machinery manufacturer for the food industry. Henry says that PeopleSoft Global Services was able to go in and implement a completely integrated CRM system for Formax in about nine months.
The Hosted Angle
Traditional enterprise CRM vendors are moving downstream and into SI waters, while hosted CRM providers are also changing the way midmarket companies buy and integrate CRM with other systems.
ASPs like NetSuite and ACCPAC's online CRM solutions include front- and back-office functionality as part of the hosted suite, so integration is nearly eliminated. "From a single ASP provider, companies can achieve a greater level of front- to back-office process integration, for example, [from] getting the sales quote to getting the cash for the order," says Wendy Close, a research director with Gartner.
Even with the advanced integration, these and other ASPs have been partnering with SI firms to offer customized, vertically focused applications that are well integrated and quickly deployed.
Hosted CRM provider Salesnet, for example, has partnered with AptSoft to integrate its CRM suite with more than 200 various sales, marketing, and back-office applications from other vendors, according to Mike Doyle, Salesnet chairman and CEO. Similarly, Salesforce.com has partnered with several vendors to provide its sforce integration-as-service toolkit for companies to integrate Salesforce.com with existing applications.
"They are both pretty strong platforms," says Sheryl Kingstone, CRM program manager at the Yankee Group. "They are perfect for those one-off, highly specified applications that no one but that particular company would build."
Another approach ASPs are taking to expand both their SI partnerships and midmarket reach is through private-label programs. Salesnet, for example, offers its solution in a private-label format to integrators and other small software firms that can use the CRM suite as a base for more targeted, industry-specific offerings. NetSuite has a similar program, where integrators use NetSuite's CRM product as a base to create more customized hosted applications.
Zach Nelson, CEO of NetSuite, says these kinds of business alliances benefit everyone: "We get revenue and penetration into new areas, while the integrator receives an ongoing percentage of the NetSuite subscription revenue." Customers are also well-served, he adds, because they get an end-to-end solution customized for their vertical or niche business at a much lower cost point than if they were to license individual applications and pay a systems integrator to put it all together for them and maintain the system. "These types of partnerships are great for both sides."
Contact News Editor Martin Schneider at mschneider@destinationCRM.com
SI Snapshot: Wise Solutions
Wise Solutions, a provider of application installation and management software and services, uses Salesnet as its CRM system, and uses Salesnet's Web Services application-programming interfaces (APIs) to link its homegrown quote system to the CRM system.
Ray Eifler, director of IT at Wise, says the major benefit is scalability: "We could probably process about two dozen orders in a day before integrating with Salesnet," he says. "Now we could do 2,000 a day in theory--we have really increased our capacity by a multiple of 20."
Eifler also says that sales agents are benefiting from the integrated system because they do not need to work within it as much as before. "The amount of time sales agents need to be playing in the system as opposed to selling has been cut in half," he says.
Wise is planning to integrate its technology support system, marketing automation program, and a master history into the Salesnet system. --M.S.