In the Middle of the Action
The midsize enterprise or "mid-market" has been widely regarded as the hot spot of CRM for years now. It only stands to reason--small companies lack the money and in many cases the scope to justify the investment, while the problem with the class of Fortune 500/1000 companies is that, well, there's only so many of them. In between lies a large field of companies with both the means and the motivation to advance their business through CRM practices and technology.
One of the main motivations for the mid-market is that despite a (relatively) humble size, many have world-class problems. "They have the same processes: they're smaller, not simpler," says George Ahn, general manager of mid-market products for Siebel Systems.
Many companies find mid-market clients attractive to work with because they tend to have a much shorter decision-making cycle. "Another advantage the mid-market has [over large enterprise] is the opportunity to implement total CRM, tie up the whole organization and present the right information to the right people at the right time," says Kevin Corcoran, Onyx's chief marketing officer of product software. Larger enterprises, which have been broken down into dozens of autonomous divisions, can be much more difficult to unify behind the notion of the singular view of the customer.
If the presence of Siebel in the mid-market surprises you, brace yourself--ERP giant SAP is now doing a brisk business in CRM for the lower end of the marketplace. Patrick Hickey, director of solutions for small and midsize business at SAP, says the company sold CRM capabilities into about 120 customers with annual revenues under $200 million last year, and with 39 percent of SAP's customers considered midsize, expect the company to target even more as time goes on.
But if the mid-market has been hot for years, how can it still be hot? "We overestimate the amount of technology that's truly been implemented," observes Yankee Group analyst Sheryl Kingstone. "There's still a lot of room for penetration, still a lot of room for adoption."
Although many mid-market CRM vendors speak as though they assume their clients will always average 20 percent growth, the recent cooling of the economy may curb enthusiasm somewhat. "CRM is discretionary--I can continue to do business and delay this, [depending on] the industry I'm operating in," says Forrester Research Principal Analyst Bob Chatham. "[CRM vendors] are going to have to get a lot better at quantifying benefits...a lot has been built on 'trust me, this is going to make you more efficient.'"
One final thought: When considering the mid-market pitch of a CRM vendor, keep in mind that not all mid-markets are created alike. Among the companies interviewed for this article alone, definitions of the mid-market ranged anywhere from an upper bound of $200 million to $2 billion in annual revenues.
One of the flagships of enterprise CRM is staking claim to the mid-market and is trying to shake a reputation for complex, involved rollout cycles as a result. "In the mid-market you need quick return on investment, and they're usually more cost-sensitive," says Siebel's Ahn. "They have a higher sensitivity to an out-of-the-box solution that's up and running quickly."
Siebel's MidMarket Edition is built on the same basic architecture as Siebel's core offering (although a Unix server is not available. See "It's a Microsoft World?," this article). Some of the customization tools are removed, and analysts indicate that the pricing is roughly half that of the enterprise product.
In keeping with the fast deployment theme, Siebel has already rolled out prepackaged vertical configurations for the financial services and insurance industries and believes its experience in the enterprise makes it easy for smaller companies to attain true enterprise integration. "We have pre-built a tremendous number of connectors to the typical mid-market back office," Ahn says, citing packages such as Great Plains, Solomon and Lawson. "It's not plug and play, but it's pretty darn close." Coming next for Siebel MidMarket: wider international language support and a boost to the analytics functionality included in the suite, in keeping with one of the hottest industry trends.
Although Neteos is a small company with just over 50 employees, CEO Mike Chuli has built his Waltham, Mass.-based team from the ranks of established CRM vendors. Interact Commerce has been a popular target, losing Bill Varga (vice president of sales at Neteos, who left a similar position at Interact) and Kevin Carson (executive vice president at Neteos, formerly president of SalesLogix/Interact).
Chuli says that a flexible infrastructure is the key to successful CRM. "CRM is not about getting it perfect, it's about getting it better one day at a time." Neteos includes a customization tool known as Design studio which allows integrators and customers to reshape the rules and procedures that govern the CRM system--and by extension their business--using what the company claims is an interface simple enough to eliminate the need for IT intervention. Changes made in Design studio are deployed across all of the available interfaces, including wireless devices, without extra effort.
After previewing the product with "charter" customers in 2000, the company began full rollouts to the general public in January, and Chuli says that the Design studio adoption is a sign that his company made the right call on customization. "We find clients working with Design studio on a monthly basis, and that is a huge element to what's happening in the mid-market. It's people making the transition from entrepreneur to enterprise-class."
Neteos, which has to date focused on a fully hosted Internet solution, is planning to open up an internally hosted version of the product for enterprises that prefer to manage their own systems. According to Chuli, the hosted edition averages $125 per user per month.
Data synchronization has long been one of the make-or-break technologies behind a successful CRM implementation. Rather than build a new sync technology, Minneapolis, Minn.-based Worldtrak decided to go with the proven technology of Microsoft Exchange and began building a CRM system around the Microsoft Outlook e-mail/personal productivity application.
Senior Vice President of Sales and Marketing Dan Metzger says Worldtrak knows the reason CRM implementations have often failed. "User resistance, more than anything. We felt it was important to build account, contact and CRM functionality within a metaphor most people know, understand and like to work with."
Worldtrak had to gut the core of Outlook to tie it into a true relational database back-end (Microsoft SQL Server), and has opted to build the marketing, customer support and channel interaction portions of the product in a Web interface rather than an Outlook add-on.
Historically, CRM packages built on systems like Exchange and Lotus Notes have met with only niche success, but Metzger says the time has come. "There aren't many business applications that are deployed universally in an organization, but almost every organization has e-mail."
Depending on the number of modules selected, a Worldtrak system costs between $1,500 and $2,000 per seat. Worldtrak currently serves customers such as Austin, Texas-based consultancy Knowledge Capital Group and Internet daycare monitoring service ParentWatch of New York City.
Although Metzger was unwilling to concede any flaw in his company's architecture, the wisdom of an Outlook-based CRM system might be called into question based on the flaws that continue to be exposed in the Microsoft Office automation system. Already, 2001 has seen the release of the "Anna Kournikova" and "Naked Wife" Outlook worm attacks. It was even discovered that a specially formatted vCard (a digital standard used to exchange contact information in e-mail) could also exploit Outlook to perform a variety of malicious actions on a computer. Many of these attacks replicate by sending an infected e-mail to the entire Outlook contact database. It is not a major stretch to imagine that any CRM data available to Outlook could similarly be transmitted by such an attack.
Onyx's Kevin Corcoran says the message from the mid-market is concise and clear--they want to grow. "It's all top-line growth now--grow the company, get revenues, differentiate and create a sense of unique experience for a client." That obsession led Onyx to the January 2001 acquisition of business strategy consultancy RevenueLab, where Corcoran was chief executive.
Corcoran believes this is helping midsize companies focus not just on technology, but on a business process-based approach to CRM. Obviously, he feels the inclusion of RevenueLab's experience will play a major role in how Onyx sells and implements CRM. "We can go into an organization and get them to get their arms around the issue first, then build sales and marketing processes to support that and hopefully differentiate themselves," he says.
In addition to up-front process consulting, Onyx plans to enhance its CRM analytics capabilities. "They need to spend more time strategizing with customers and less time generating numbers to analyze," he says.
In December 2000, Onyx unveiled a developer's preview version of its software designed to run on a Unix and Oracle database system, which is expected to be available to the public this summer. Corcoran says the company's commitment to the Microsoft platform remains strong, however.
Since late 2000, Onyx has closed transactions with a number of customers, including CAD software developer Ansys of Canonsburg, Penn., and the Seattle Mariners baseball team.
The formation of Interact Commerce (formerly SalesLogix) in the late '90s by ACT! titan Pat Sullivan was arguably the moment the spotlight focused on mid-market CRM--a sign that this was, indeed, where the action would be in the years to come.
Interact says it is resisting the urge to cut back customization in favor of pre-fab solutions. "We've done 3400 actual installs out there, and we find mid-market companies want to be customized to their business," says Samm Distasio, vice president of product marketing.
Interact, whose name change was largely motivated to promote of the company's all-Web interact.com CRM solution, has retreated significantly from that Internet-only focus. Like many of its peers, the company has now focused a great deal of effort building multiple points of access to data: client-based, browser-based, and now wireless. The company has very deliberately rolled all of those technologies into the core product rather than doling them out as value-added services.
"If you nickel-and-dime people based on access, you find people tend to select one [method]," says Michael Simpson, the company's chief marketing officer. "We believe the number one objective is high user adoption, so if you allow all those things to be available at the single-user price, they can use whatever they have access to." As proof, he offers Interact customer Arbill, a Philadelphia-based manufacturer of personal protection and safety equipment and clothing, which Simpson claims managed to nearly double its sales call volume by deploying a wireless client at an affordable price.
The other major focus for Interact in the upcoming year is the SalesLogix Configuration Engine, based on technology the company acquired in a 1999 purchase of sales force automation vendor Enact and has, until now, sold as a stand-alone configurator system. Integrated with Microsoft Commerce Server, the configuration engine allows companies to visually build configuration criteria that can interact with and be aware of CRM processes and data.
Bob Runge, chief marketing officer of Pivotal, talks like a man who loves selling to mid-market clients. "These companies are a lot more nimble, innovative and agile than the big Fortune 500 guys," he says. "They tend to have less politics, they tend to be easier to unify departmentally, and they respond much more positively to our value proposition around speed, cost and safety than the big guys that have to figure out how to keep a shop full of programmers busy."
Runge says that integration is in--not only in process, but in technology. Aside from the company's focus on delivering a complete CRM application solution on a unified Microsoft technology platform, "the big development over the last year has been the delivery of a completely XML-based 3-tier architecture." The XML data exchange standard is expected to be critical to the next-generation of cross-enterprise process integration. The new architecture will also "give business people, mere mortals, the ability to establish business rules at the application server that drive behavior and workflow."
Pivotal is also devoting a substantial amount of research to designing profiled interfaces for the CRM applications, so different classes of users see the right functionality for their position. "We've spent a lot of time on information that reflects that particular user's environment, needs, requirements or specific instructions. We're trying to make the experience and interactivity more relevant to a particular user context," he says.