The 2006 Market Leaders, Part 1
Categories and criteria CRM magazine's fifth annual Market Leader awards feature some enhancements over previous years. The biggest enhancement is in the consultancies category, where we exchanged the company direction criterion for the ability to execute criterion. As we've done in the past, we name one winner and four leaders (listed alphabetically) in each category, using a proprietary selection formula. The overall award rating is based on a composite score of CRM revenues; year-over-year revenue growth; and analyst ratings for customer satisfaction, depth of functionality, and company direction. We also cite companies in each category that are worth watching for their potential to appear on their respective market's leaderboard next year.
Click here to view the Market Leaders chart.
Enterprise Suite CRM
Consolidation continues to shake up the enterprise suite CRM space: Infor announced its intent to acquire SSA Global Technologies (which had acquired Epiphany), and M2M Holdings moved to grab Onyx Software (at press time neither deal had been completed). Oracle, however, obviously made the most notable acquisition, acquiring rival Siebel Systems. Because Oracle hasn't come to market with a product integrating Oracle, PeopleSoft, and Siebel functionality, and because it is continuing to develop, support, and sell PeopleSoft and Siebel products, we're evaluating each entity separately. That, however, will change once Fusion becomes a reality, opening the gate for new additions to the leaderboard.
Although Amdocs's CRM functionality is weaker in analytics and marketing compared with some of its competitors, no player on our enterprise leaderboard has a tighter grip on a particular vertical than Amdocs (2005's winner) has on telecommunications. The telecom specialist continues to broaden its vertical depth, unveiling three new solutions targeting financial services companies. Amdocs's "strategy recognizes the importance of improving the end-user customer experience through aligning end-to-end processes beyond service, sales, and marketing to include billing and ordering," says Bill Band, a principal analyst at Forrester Research. But while Amdocs's FY 2005 revenues grew an impressive 14.9 percent, hitting the $2 billion mark, its smaller CRM software market share compared with some of its competitors' share bumped it out of the top spot.
Oracle is making good on its promise to continue supporting and developing PeopleSoft product lines, unveiling the first product of the PeopleSoft Enterprise Release 9 suite in June. The uncertainty surrounding what PeopleSoft functionality will make its way into Oracle's Fusion CRM applications strategy may explain PeopleSoft's disappointing direction score of 2.6. But Martin Schneider, senior enterprise software analyst at The 451 Group, says that "analytics and other hot areas were on tap for development, and Oracle should keep this up, as it benefits Fusion in the long run."
Salesforce.com's average seat size is substantially smaller than some of its competitors, but the company's subscription-based online delivery model is picking up steam with larger organizations. Despite getting hit with a few service outage blows and analysts' reluctance to give Salesforce.com an impressive functionality score, the company's category leading marks in company direction (4.1) and customer satisfaction (4.3) allowed the two-time Enterprise Suite CRM One to Watch to become a top-five leader. "Salesforce accurately identified cost and risk as the major drivers of on-demand computing many years ago, and Oracle and SAP are slowly bending to the gravitational field set up by on-demand and Salesforce," says Denis Pombriant, founder and managing principal of Beagle Research Group.
SAP may appear to be the category winner, retaining the top spot in Gartner's "Market Share: CRM Software Worldwide, 2005," with $1.47 billion, representing a 19.6 percent year-over-year growth increase. But SAP had huge drops in satisfaction scores (from 3.8 to 2.9) and direction (from 4.3 to 3.4). "SAP is growing its CRM business aggressively, but we still don't see new live deployments keeping pace with the competition," says Rob Bois, a research director at AMR Research. "This year's addition of CRM on-demand will help accelerate customer adoption, especially as the functionality footprint fills out."
Following last year's slip from the top spot, Oracle-owned Siebel Systems makes a perhaps surprising return to the top spot. Its functionality remains impressive, earning a score of 4.6. And Siebel outperformed both its parent company and Oracle-acquired PeopleSoft in company direction. Even so, it did pull in a less impressive direction score of 3.4, attributable to factors like what some may characterize as the disappearance of Siebel CRM OnDemand and uncertainty surrounding what specific elements of Siebel CRM will be included in Fusion applications. It's hard to predict how many Siebel customers will gravitate toward Fusion, but the size of Siebel's customer base is hard to ignore, as is its 2005 CRM software revenue of $966.1 million, according
to Gartner. --Coreen Bailor
One to Watch
Since July 2005 Oracle has moved to acquire more than a dozen companies. With so much acquired technology, particularly functionality from its takeovers of Siebel and PeopleSoft, which itself acquired JD Edwards, analysts hit Oracle with less-than-stellar scores of 3.1 for direction and 2.8 for satisfaction. "Oracle has big plans and a far-reaching vision with Fusion, and a lot of disparate yet deep functionality to integrate," Schneider says. --C.B.
Midmarket Suite CRM
Many midmarket companies, those with revenues spanning $100 million to $1 billion, continue to suffer integration nightmares. Not surprisingly, midmarket CRM vendors spent the past year broadening their suite capabilities through building, buying, and partnering, and strengthening integration capabilities with other business applications like ERP and financials. They also continued efforts to capture their share of the on-demand market. But competition for the midmarket is growing increasingly fierce: CDC's Pivotal, Onyx Software, and Oracle's PeopleSoft are absent from this year's midmarket list, yet not due to technology holes--analysts awarded each with strong functionality scores. Instead, weak company direction averages held them back.
With its 2005 release of Microsoft Dynamics CRM 3.0, featuring new capabilities like marketing functionality and a partner-hosted option, and its plans to deliver a Microsoft-hosted installment of Dynamics CRM, Microsoft reclaimed its spot as a midmarket leader. Despite unveiling its recharged CRM offering, however, Redmond's software monster's late entrance into the CRM space might reflect its functionality limitations compared with some of its competitors' products: The company pulled a functionality score of 2.9. Dynamics is, however, "particularly attractive to midsize companies that have already standardized on a Microsoft stack that includes SQL Server, Exchange, Outlook, and the .NET framework for development," says George Goodall, research analyst at Info-Tech Research Group.
NetSuite has a unique story that's attractive to smaller businesses: integrated front-office CRM, back-office ERP, and e-commerce capabilities available on a single platform via SaaS. "NetSuite is now playing to its biggest strengths," says Laurie McCabe, vice president of SMB insights and business solutions at AMI-Partners. The company's all-in-one approach is reflected in its solid scores for satisfaction (3.8) and direction (3.7), which helped secure NetSuite's position as a midmarket leader for the first time. The firm's CRM capabilities, however, are sometimes regarded as not as deep as some of its competitors.
The crux of RightNow Technologies' functionality is its customer service and support capabilities, with its weaker branches stemming from sales and marketing capabilities. But its acquisition of on-demand sales workflow automation vendor Salesnet "gives it some needed SFA muscle," says Martin Schneider, senior enterprise software analyst at The 451 Group. Liz Herbert, senior analyst at Forrester Research, adds that RightNow "provides flexible deployment and pricing options, allowing customers to choose between hosted and on-premise, and allowing them to select a payment option independent of their deployment choice."
With its core strength in enterprise-grade business apps that some argue are too complex and pricey for smaller budgets, SAP isn't your conventional midmarket vendor. But SAP continues its push to reshape this view with small and midsize enterprise (SME)--specific products like SAP Business One and mySAP All-in-One solutions, and the recent addition of SAP CRM on-demand solutions. But SAP must focus on continued functionality improvements to overcome its late foray into the price-light delivery model. Still, SAP's might is undeniable.
On-demand specialist Salesforce.com, while continuing its efforts to court enterprise-size organizations, maintains its top midmarket seed. "Its subscribers find the user interface to be intuitive and easy to navigate with little or no training," Herbert says. And, despite heavily publicized instances of outages of its on-demand services, the company managed to reel in a satisfaction score of 4. Salesforce.com's weakest point showing continues to be its functionality mark, down from last year's 3.75 to 3.4. But the company is continuing to focus on strengthening features, and deepening integration and customization capabilities with releases like AppExchange, its on-demand development platform. --C.B.
Ones to Watch
We're highlighting two companies to watch, each with a similar issue: clarity. Oracle CEO Larry Ellison has noted that Siebel Systems's CRM on-demand product was one of the most attractive assets of the acquisition. But some analysts are unclear on how Oracle is positioning the Siebel on-demand offering, which ultimately damaged Siebel's direction score (2.3). This, along with another substandard score (2.5 for satisfaction), helped knock Siebel off the leader's list.
Sage Software continues to be a popular option for SMBs, Goodall says. But what bumped it to a One to Watch from having been a leader were its analyst averages of 2.7 for direction and 2.9 for customer satisfaction. Existing customers "may be confused by the distinctions between Sage's various products: SalesLogix, Sage CRM [formerly ACCPAC CRM], and SageCRM.com," Goodall says. But given each company's midmarket success, we have our eyes on Sage to see if it can return to next year's leaders list. --C.B.
Small Business Suite CRM
The space for small business CRM suites this year saw an intensification of what has gone before--on-demand continues to be the topic of conversation. There is debate over whether vertical specialization is best handled in-house or through partners: Sage and Salesforce.com prefer the latter route, while Maximizer and NetSuite are doing it themselves. There is no best answer beyond what's best for the individual vendor.
Mobility, important for SFA but a secondary consideration with CRM suites, has moved to the forefront. "This is the year for mobile," says Liz Herbert, senior analyst for Forrester Research. "Sage, Salesforce.com--everybody announced a mobile component if they didn't already have one."
The venerable parent of GoldMine slipped this year, mainly because of visibility; several panelists were wary of rating FrontRange's CRM play because they had not been briefed by the company recently enough. "FrontRange has a strong vision, but we haven't seen them come together to execute that vision," one analyst says. FrontRange remains popular for its GoldMine contact management/SFA product, and for its IPCC contact center utility. What FrontRange does, it does well. An analyst notes, "People move off of GoldMine because they've outgrown it, not because they're unhappy."
Many contenders in this segment grew their CRM suites from a background in SFA. NetSuite, however, developed from an accounting and ERP tradition. "NetSuite has gained considerable mind share among small companies exploring on-demand offerings," says George Goodall, research analyst for Info-Tech Research Group. "The combined CRM/ERP offering is particularly attractive to companies that want to reduce the overall complexity of their IT infrastructures." This is reflected in NetSuite's category-leading company direction score. Laurie McCabe, vice president of SMB insights and business solutions at AMI-Partners, remarks that while its wireless functions lag, "NetSuite is developing these capabilities in tandem with wireless solution vendors."
"Sage's strategy with partners and verticals is very different from other companies' [strategy]," Herbert says. "They make it easy to migrate products," and so does the clear upgrade path from ACT! to SageCRM to SalesLogix. But this hurts Sage's company direction in some analysts' eyes. "They have too many products," says Denis Pombriant, managing principal of Beagle Research. "Sage must skinny down." McCabe agrees that Sage is overextended. "They are supporting three CRM product lines and code bases, which is too costly over the long term."
Salesforce.com, last year's winner, slipped in 2006 largely due to widely publicized service outages, which reinforced old doubts about on-demand computing. The company continues to position itself as the right solution for small businesses as well as large enterprises, but most experts agree it is most appropriate for smaller businesses. "The greatest challenge faced by Salesforce.com is the scalability of both its technology platform and its service and support structure," Goodall says. McCabe adds, "They need a segue from Team Edition to Professional." Regardless, she says, "Salesforce.com has good functionality, and AppExchange is great for when a small business needs something extra."
This year's winner in the small business suite category is a small surprise: Maximizer led the pack both in customer satisfaction and depth of functionality, and appears to have come into its own. This is despite only recently adding an on-demand component and a shrinking-violet approach to self-promotion. Maximizer became the mouse that roared earlier this year, when it launched an aggressive pricing campaign along with Maximizer Team Pack. "Maximizer has really stepped up its PR and marketing efforts to get on the radar of more small businesses," McCabe says. "Its solutions combine strong functionality with ease of use, and they've done a good job adding mobile and wireless capabilities." The lack of a hosted option may limit Maximizer's market penetration, but the functionality is there. "Maximizer continues to study what small businesses are asking for," Herbert says. "It's a true, full CRM suite." --Marshall Lager
One to Watch
A One to Watch last year, Microsoft, continues to advance its CRM suite but has yet to make the splash the industry has been awaiting. "Microsoft is winning new clients with the Dynamics CRM 3.0 product," Goodall notes. "The stability and features have improved considerably from earlier versions." Microsoft Dynamics CRM is positioned primarily as a midmarket suite, but company officials are quick to point out its value to smaller companies as well. Since most of the working world runs on Microsoft technology, analysts believe the suite will keep up pressure on other CRM vendors. --M.L.
Sales Force Automation
SFA is a single category comprising many technologies: contact management, mobile data entry, compensation tracking, and guided selling tools, to name just a few. The need for SFA spans businesses of all sizes in all industries, but many customers don't want to overload on functionality just to get a good SFA package. It's because of this that many of our contestants are seen more often in smaller businesses. Companies have in some cases scaled back their implementations from suites of products that see limited use to SFA packages that are more focused on need. A developing area of SFA is sales compensation management, and whether this function will become an important criterion in the category next year or one of its own remains to be seen.
Entellium scored well in company direction, second only to Salesforce.com. "Entellium is holding course. It's a good strategic choice," says Liz Herbert, senior analyst for Forrester Research. "Entellium is doing the smart thing. It's a relatively late entry to the market that's trying to be the low-cost option," says Denis Pombriant, managing principal of Beagle Research. In addition, analysts like Entellium's usability, despite its low functionality rating. "Entellium has really carved out a niche in SFA with an intense focus on usability," says Rob Bois, a research director at AMR Research. "With the new [Windows Vista] client, Entellium has one of the more elegant user interfaces in the SaaS domain." Pombriant agrees, but warns, "This can only take them so far."
Just as with small business CRM suites, Maximizer Enterprise is a respected but unassuming product that has recently started to get its name out there. "Maximizer has been around for a long time, and has a large installed base, but their brand hasn't been as visible as many competitors," says Laurie McCabe, vice president of SMB insights and business solutions at AMI-Partners. "Maximizer has really stepped up its PR and marketing efforts to get on the radar of more small businesses." Still, it's less an SFA application than a CRM suite with excellent SFA functions. "Maximizer's real value is that it's an integrated suite," Herbert says.
ACT! helped create SFA, so it's no surprise that ACT! by Sage remains a force in the field. "It's a very interesting product and company at this point in time," Pombriant says. "ACT! is positioned as a contact manager, but ACT! for Workgroups has a lot of very impressive stuff." Analysts rate Sage's company direction well, both in general and specifically for ACT! However, Pombriant adds, "If I were running Sage I'd be collapsing products into a single code base--SageCRM."
This entry is a newly compound company, as RightNow Technologies acquired Salesnet in May 2006. "The core of RightNow Technologies' business is software for customer service. Its marketing and sales tools are secondary," says George Goodall, research analyst at Info-Tech Research Group. Bois agrees:"While RightNow cut its teeth in customer service, it has been broadening its footprint to compete more directly with Salesforce.com. RightNow's recent acquisition of Salesnet carved at least a year off the development cycle for its SFA application." He adds that RightNow's "flexible sales model that separates licensing and delivery model appeals to companies across size demographics." Analysts gave positive ratings to company direction. "Salesnet's acquisition by RightNow will be a good thing," Herbert says. "For now, though, enhancements aren't coming out fast enough."
Our winner this year again earns high ratings for functionality and company direction in this space. "Salesforce.com is showing very strong company direction," Pombriant says. "Salesforce.com understands that the on-demand race will be won by the company with the best integration strategy." Goodall notes, "Salesforce.com was an early innovator in the on-demand space and it has gathered a loyal cadre of customers." Despite its continued success, more than one panelist raised questions about customer loyalty. "I'm concerned about attrition; Salesforce.com only publishes the net gain in customers," Pombriant says. "This may mask some other aspect of customer satisfaction." McCabe adds, "It does seem like the customer churn is a bit higher than it should be--although it's very hard to figure out exactly how much churn they have. --M.L.
One to Watch
Oracle's acquisition of Siebel Systems in late 2005 did not remove the software company from play; to the contrary, Oracle is rebuilding much of its business model around Siebel products. Analysts insist that Siebel's depth of functionality in SFA is still unmatched. "If you look at Siebel alone, it had a lot of transition in a short period of time. It could take another year to see how it all sorts out," Pombriant says. "Oracle is pretty much letting Siebel people take the lead on most issues." He adds that despite a reputation for poor satisfaction, "Siebel customers are happy within its context--it's bigger and better than simply trying to install and run an off-the-shelf SFA product." --M.L.
End of Part 1. Click here to read Part 2.