The 2003 Market Leaders (Part 2)
Analytics Has Come of Age
The past year saw analytics grow from a hot trend to a must-have solution for many corporations, as analysts lauded predictive analytics as the savior of CRM. Accordingly, revenues and customer wins abounded for several analytics companies, some large, some small. In a year during which most applications companies were seeing huge drops in license revenues, the analytics market is one of the few on an upswing.
The out and out market leader in analytics is SAS Institute, a company that has paved the way for the mainstream acceptance and adoption of analytics. With revenues of $1.2 billion, SAS is the Siebel Systems of the analytics market. SAS acquired Verbind last November to better tackle the real-time analysis needs of its customers, and started getting more vertically focused in recent months, offering products aimed at the financial services and consumer packaged goods/retail sectors.
"The acquisition of Verbind adds event-based marketing features, which is greatly complimentary to the analysis of historical data that SAS's software offers," says Bob Blumstein, research director for CRM analytics and marketing applications at IDC.
Gareth Herschel, research director at Gartner, agrees: "SAS has a long, proven track record with a very loyal customer base. They are positioned for even more growth in the future."
Following close on the heels of SAS is another business intelligence giant, Teradata, the data warehousing and analytics division of NCR. Although Teradata may not be a pure business intelligence vendor, its analytics has been helping to drive the division's 7 percent revenue growth and top-line annual revenue of $1.2 billion.
Teradata includes analytics in its CRM offering, which it calls Customer Relationship Optimization. According to Herschel, Teradata packages its applications in a way that is very attractive to the business user, which has helped its market position.
Although the big guys have a strong handle on the analytics market, they do not totally dominate. Smaller, rapidly growing analysis-tools firms like Cognos have been eating market share while seeing double-digit revenue growth. For the many companies that already have intricate CRM solutions in place, Cognos helps add the analytics features needed without having to start from scratch with a new marketing suite, according to Herschel.
Among Cognos' product offerings is a metrics manager, which is a set of dashboards that can go to almost any area of a company and derive key performance indicators, Blumstein says. "The concept is a good one: getting the right information to the right individual at the right time."
Offering solutions similar to cognos', Business Objects provides analytics tools rather than a complete suite of products. Its customer base is growing, and the company has seen double-digit revenue growth over the past several quarters. "Just like with Cognos, Business Objects is winning lots of customers who aren't looking for an out-of-the-box analytics solutions, only the key features their systems currently lack," Herschel says.
Finally E.piphany, like Teradata, has folded analytics into a more robust CRM suite. The company took a tumble financially due to the restructuring of its business model, but is showing modest growth and steady customer wins as it sets its sights on presenting a customer-centric solution that markets based on deep predictive analytics capabilities, which made E.piphany a standout in the first place.
"It is a wise risk to take. Since there is a lot of competition in the analytics market it makes sense to expand into other areas," Blumstein says. "But only time will tell if it was the right decision to make long term."
Analytics One to Watch: SPSS
SPSS has made a deeper commitment to providing analytics with its acquisition of Netgenesis this past year. While the company has yet to make a serious mark as an analytics provider, SPSS has all the applications needed to do so, Gartner's Gareth Herschel says. "The company has lots of potential," he says. "But they have struggled on how to position themselves and go to market." Once the company better integrates its customer base and better packages its applications in a way that is attractive to companies seeking analytics solutions, SPSS could be a major contender, Herschel says. "They're headed in the right direction, they just need to take a few more baby steps," he says.
In 2002 five leading CRM consultancies handled an estimated $8.825 billion in CRM contracts, and together controlled an estimated 43.3 percent share of the total market for CRM services, including consulting, implementation, training, support, and operations, according to market research firm IDC. These five market leaders are Accenture, IBM Business Consulting Services (BCS), Deloitte Consulting, EDS, and Cap Gemini Ernst & Young.
All five share an understanding that companies around the world continue to view customer interaction and care as a top concern that affects all aspects of their business. But they agree that CRM is not a magic bullet that will transform their customers' organizations and make them more customer responsive and, by extension, profitable businesses.
During the 1990s people saw CRM as largely an issue of selecting a software package. They didn't understand that CRM is a holistic business issue," says John Freeland, CRM managing partner for Accenture, which IDC pegged as the leading CRM consulting-services provider, with an estimated $3.1 billion in revenue and a 15.2 percent market share.
Freeland attributes Accenture's enduring success to the "cosourcing" approach the company takes with its clients. "We recognize that every organization views customer management, both from a sales and customer services perspective, as a source of competitive advantage," Freeland says. "And no organization is going to consider outsourcing that function. So we took this different approach to the market for handling business processes, where we put the clients in the driving seat in terms of customer strategies and oversight of business practices. Where we played a role is in helping them execute their agenda, and we priced it on a basis that was linked to business outcomes."
That focus on the business value is also driving the success of IBM BCS, which IDC estimates collected $2.95 billion in 2002 CRM revenues to take a 14.5 percent share of the market. IBM owes part of its success to the unparalleled breadth and depth of its consulting team. After its October 2002 acquisition of PricewaterhouseCoopers Consulting, IBM merged approximately 30,000 PwC employees and 30,000 IBM Business Innovation Services consultants to create IBM Business Consulting Services. The practice gained approximately 950 new clients globally during Q1 2003, including a complex, large-scale initiative under way at Avaya.
"Companies over the past few years have become educated about what's real [and] what's not with CRM," says Adam Klaber, global CRM leader for IBM BCS. "Today there's been a slowdown in the pace of change, because we have to spend a lot more time in planning the business case and measuring the ROI as the pressures of the overall economy sits on every company."
For that reason Klaber believes the depressed economic climate is a "healthy thing" for CRM. "This correction is good, because it gets everyone focused on the real business value," he says. "Many people ask me if CRM is dead, and I look at them and say, 'CRM is about companies becoming more effective helping their customers, and becoming more effective in their sales and marketing.' Those business goals will never go away."
Gerry Cunningham agrees. "We are beyond the hype of CRM being the [magic] bullet," says Cunningham, CRM practice leader for Deloitte, which IDC says has a 4.2 percent share of the CRM consulting market, with an estimated $860 million in 2002 revenues. Deloitte attributes this success in part to delivering a strong message to its CRM clients: Think first about how to make the most of the technology investments and business initiatives already in place.
"Most clients are now looking for an understanding of how the business flows," Cunningham says. "The opportunity out there is still very strong and it's about getting a better mix of technology and process to deal with more strategic issues....The goal is to have top- and bottom-line results that also take and improve customer interaction."
EDS also sees the opportunities in CRM. The company says it is committed to expanding its infrastructure, including its client contact centers, and plans a five-year, $100 million investment to further develop its technology, people, and processes. It also plans to grow its CRM staff by more than 1,300 practitioners over the next 12 months. EDS attributes its current market position to the fact that it has one of the largest pools of CRM resources in the industry. EDS states that its CRM revenue for 2002 was $3.2 billion across its strategic consulting, implementation, and outsourcing businesses--a 60 percent growth rate over 2001. However, IDC estimates that based on CRM consulting revenues alone, the company garnered $875 million.
Cap Gemini Ernst & Young has seen its own share of success, and points to its delivery track record and high level of customer satisfaction as the measures of its continued success in the CRM arena. --Connie Guglielmo
CRM Consultants One to Watch: Fujitsu
With its share of brand-name clients and global reach, Fujitsu Consulting promises to be a firm worth watching. In 2002 Fujitsu achieved a 4.9 percent share of the CRM services market, with an estimated $1 billion in revenues, according to IDC. In fact, revenue-wise it's already ahead of Deloitte, which IDC pegs at holding an estimated 4.2 percent market share, with an estimated $860 million in revenues.
Contact Center Outsourcing
Already saturated, the U.S. contact center outsourcing market is expected to see a paltry 1 percent compounded annual growth rate from 2001 to 2007, according to Brian Huff, lead analyst at Datamonitor. This sluggish growth, analysts say, is due not only to market saturation, but also to the high price of labor gnawing away at profits. In fact, published reports state that salaries alone represent 60 percent to 70 percent of all U.S. call center costs.
Even after building near-shore call centers in Canada and Latin America (where labor costs are lower than in the United States), U.S.--based call center firms are still feeling the competitive pressure from Indian outsourcers providing well-educated, English-speaking call center agents for as little as one sixth the cost of a U.S. agent's salary. "A $10,000 salary in India equals a $60,000 salary in the U.S.," says Venkat Tadanki, founder and vice president of sales and marketing at Daksh, an Indian outsourcer. According to Tadanki, 100 percent of Daksh's call center agents have college degrees, 29 percent of them have a master's degree, and all 1,700 employees speak English.
Yet the top five call center outsourcers wouldn't be leaders if they couldn't combat these offshore forces: Three of the top-five call center leaders respectably outpaced the sluggish U.S. outsourcing growth rates last year.
TeleTech gained a sizeable 11.1 percent year-over-year growth; Sitel and West edged up 6.2 and 5.2 percent, respectively; industry leader Convergys hasn't been as fortunate, dropping 1.5 percent in year-over-year revenue.
However, Convergys continues to dominate the market, with 48,000 employees in 48 customer contact centers data centers; its customer service agents manage more than 1.7 million customer interactions over the phone or the Internet daily. Convergys consistently scored the highest for customer satisfaction among the analysts CRM magazine polled, and attributes its success to its well-trained staff and leading-edge CRM technology.
EDS has traditionally been tightlipped about its success in customer care outsourcing, but is a surprising leader at number two. Its upsell and cross-sell abilities had lead it to an impressive 177 customer wins over the past four completed quarters, which soared past all its competitors. "Especially this year, a lot of folks that we've never seen before are looking to do cost reduction and increase revenue," says Kimela Cowan, director of the CRM Service Line at EDS.
Whether that upselling or cross-selling will happen domestically or offshore is up to the individual client, Cowan says. "Most of our clients have large business-to-business operations offshore," she says. "We have to understand the right solution for each client, and then deliver that from the right location."
TeleTech, one of only three members of the call center outsourcing billionaire's club, was the only vendor to show double-digit, year-over-year growth (11 percent). It also gained points because of its strength in customer satisfaction.
Sitel credits its recent growth in part to a return to a decentralized business model. The company also scored high with customer wins, tying TeleTech for second place in our analysts' customer satisfaction scores. This helped Sitel take the number four spot from West, despite West's slightly larger revenue numbers. West expects its 2002 acquisition of Tel Mark Sales and Dakotah Direct & Attention, and its recent acquisition of InterCall, to spur continued growth. --David Myron
Contact Centers One to Watch: S.R. Teleperformance
This year's one to watch is S.R. Teleperformance. The U.K. company could not provide 2002 revenue figures at press time, but it recorded $732 million in 2001, representing an impressive 49.3 percent one-year sales growth. It has 144 contact centers that operate 22,800 workstations in 29 countries. It may not have the strong revenue numbers of the top-five call center outsourcers, but last year S.R. Teleperformance had the fourth highest call center interactions worldwide, according to Brian Huff, lead analyst at Datamonitor. D.M.
Category to Watch: Channel Management/PRM
In the alphabet soup of technology acronyms PRM has quickly gone from What is it? to Must have it.
Maybe that's because partner relationship management, a subset of CRM that focuses on the indirect sales channel, is striking a chord with organizations looking to better manage their overall businesses, from customers to employees to partners.
According to AMR Research, the indirect sales channel, which includes dealers, agents, resellers, and brokers, represents between 40 and 70 percent of many companies' revenues. That means that getting a handle on the indirect channel can directly impact business. In fact, Gartner released a survey stating that PRM implementations produce the highest return on investment.
Released this past April, Gartner's email and phone survey of 343 North American sales organizations that had implemented sales applications asked respondents if they had received demonstrable ROI from their deployments. PRM scored the highest for sales deployments, with 66 percent of the respondents noting that they received demonstrable ROI from their PRM implementation. The second highest rating was incentive compensation management systems, with 55 percent.
There are many smaller, best-of-breed companies in the space, including ChannelWave, Comergent, and iMeditation. Larger CRM suite players have started jockeying for a piece of the PRM market. CRM heavyweights, including Onyx, Oracle, PeopleSoft, Pivotal, SAP, and Siebel, have all released partner products in the past year.
Industry watchers anticipate that as CRM suppliers further embrace the PRM market, their applications and suites will include additional, basic PRM features like a single set of channelwide business rules, personalized presentation of roles in both the sales and service channels, and integration of presales opportunities. So to maintain an advantage, PRM--only vendors will need to add new features, such as more flexibility in configuration, and enhancements in processing returns and managing warranty claims.
AMR Research predicts a melding where PRM vendors will seek CRM partners, such as Click Commerce's March acquisition of Allegis as a wholly owned subsidiary and CRM player Chordiant's purchase of PRM company On Demand more than a year ago.
Jim Dickie, a partner with CSO Insights, a Boulder, CO, benchmarking firm, says that to succeed PRM needs to concentrate more on helping create opportunities rather than just tracking the status of what is active in the channel pipeline.
"PRM is not exactly in its infancy, yet it still [has] more legs than other parts of CRM," says Denis Pombriant, vice president and research director of CRM for market researcher Aberdeen Group. "However, we may also discover that regardless of how important PRM is, it may be more of a feature within a suite, rather than a product in and of itself." --Lisa Picarille