Mike,
I believe this is the first time I've experienced your Gorilla-speak unleashed. It's quite something to witness. :o)
I can definitely see you've done your homework on the subject. Regarding the CLFY/VNTV/SEBL situation, your observation is correct about SEBL's dominance. However, it's difficult to assess the true strength of competitors in a particular gorilla game because players like SEBL often are made up of various business entities. For now, I don't have a sophisticated technique to break it into pieces. I assume guidance from management or from the analysts who have had contact with them would allow us to discern that value.
<<In the mean time, Vantive decided it wanted to be more well rounded, deciding to compete in Siebel's market. But it didn't work out.>>
Also, it seems to make sense to me that better-capitalized competitors, coming from "the top down" have better success at market penetration, rather than from "the bottom up," such as in the manner Vantive approached SEBL's market.
The numbers seem to speak for themselves, based on how much capital the investing public has plowed into the companies' values (this is of course post-victory): SEBL has a market cap of $5.2 billion, and VNTV $262 million. Depending on how far back the conflict occurred (I'm new to this game so I don't know), as far back as early 1998, even if you halved SEBL's market cap and doubled VNTV's, it would still seem evident that one was coming from a position of strength, and the other, from less strength.
Regarding Clarify, here's an interview posted on AOL. It has some insights from CEO's perspective as to where he thinks the market may be headed. Enjoy:
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June 16, 1999
Based in San Jose, California, Clarify Inc. (Nasdaq: CLFY) is one of the world's largest office software providers. The company focuses on developing applications for the front office of the enterprise, providing solutions that help companies manage their relationships with their customers. We talked with president and CEO Anthony Zingale about the front office marketplace, the importance of customer service to e-businesses of the future, and where his company is headed.
TMF: How are things going in America's front office right now?
Zingale: The front office market is exploding. The growth rates are anywhere from 50% to 60% compounded annually. Front office means any application that touches the customer -- sales, marketing, customer service, sales service, certainly people's websites for self-service and self-sales. So the market is exploding. One of the biggest reasons it's exploding is companies, independent of the vertical market they participate in, understand and are investing in customer interactions and, therefore, customer retention as a primary revenue producer for the firm.
TMF: How important do you think customer service is going to be, especially for an Internet company, in deciding whether that company is a success or not five or ten years down the road?
Zingale: Ten years -- you know, who can say that far. But certainly in the next two to three years for sure, customer service is an absolute fundamental. The feeling that we have at Clarify is if you're putting in place a customer service operation -- be it over the Web, or over the phone, or a hybrid, or what we call a mixed media environment -- and if you're just aimed to satisfy customers, you're blowing it.
Customer satisfaction is history. That's nice, but that's not the game. The game in terms of differentiating one's value proposition is about customer dazzlement, be it an Internet company, a telecommunications service provider, a retailer, you name it. In any business, customer dazzlement is going to be the key to have them keep coming back again and again and again and buy new products and services from that company.
TMF: How big of a threat is Oracle (Nasdaq: ORCL) and its fast-growing customer relationship management (CRM) software unit to your business?
Zingale: Oracle has made, in my opinion, a number of very wild claims, most recently yesterday on their [fiscal Q4] financial conference call. I think it's good clarification, no pun intended, that the CRM market, or the front office marketplace, is an absolute strategic need in the customer base for enterprise applications. In fact, according to Oracle, it's going to be the great savior from a growth point of view for their company.
Now, I find it interesting to note how Oracle is counting the revenues to get them into the number two position in the market, which we believe is the position Clarify currently occupies. We see them infrequently in the sales cycles we conduct every quarter. We have seen them, [but] they never make the short list from a vendor perspective and really suffer from lacking product capabilities. And most importantly, since their business is most about referenceable customers -- customers that have implemented and deployed these solutions and return real business results to the use of the systems -- Oracle has none.
TMF: Your products are all about customer service. What does Clarify do to attract and retain its customers to keep them from going to another provider like Oracle?
Zingale: In the end, it's about producing the business results that the customer originally intended when he purchased the solution. The solution is more than the software. The software comes together with professional services, either from Clarify or from one of our system integrator partners like Ernst & Young or Anderson Consulting. [That] fills out the solution, then really implements it into play.
So what keeps our customers coming back is the business results they see through the use of our software. An example of that is ADP (NYSE: AUD), the nation's largest financial services institution. They issue one of every four paychecks in the United States. They've been able to measure over an 18-month period a 1% increase in customer retention which has yielded $450 million of incremental revenue to the firm. That will keep them coming back.
TMF: What's the most challenging aspect of your business, or even the industry itself, for investors to understand?
Zingale: For investors, I think the most challenging aspect of our business to understand is the applications of the software. Certainly customer retention is a value proposition that is vertical market independent in that regard. We could go through every vertical market, be it high technology, retail, you name it.
I think what has happened over the last six months in particular is financial analysts and others have come to understand, with the increased focus on the front office market, just how very important and strategic it is to the buying constituencies in those vertical market companies I described. So, having broken through there, the next biggest challenge is how to differentiate the various players in this space. Clarify from Siebel (Nasdaq: SEBL). Siebel from Oracle. Clarify from a Web-only company like a Silknet (Nasdaq: SILK). That has become the bigger challenge.
I think the missionary work of "is this a real market with a real growth rate and is it here to stay" -- we're past that. Now, we're into what makes Clarify different and unique and valuable to its customers.
TMF: In the next few years, how do you expect the emerging technology of voice- over-IP (Internet protocol) to affect Clarify's business?
Zingale: I think it's something that's going to emerge. One of Clarify's major new product initiatives is something that we call eFrontOffice, which is an integrated suite of applications for all of the front office disciplines to capture every customer interaction independent of the medium it comes in over, be it over the phone, in person or over the Web. And we think voice-over-IP is going to be one of those fundamental technologies that can be a big accelerator to the ultimate delivery of eFrontOffice. So we are watching closely and obviously have a number of hooks into the telephony business. The people that are going to be providing that technology and are anxiously awaiting scalable, high-performance solutions in that space.
TMF: Where do you see the business going? How much of the front office applications market is going to combine?
Zingale: I think today, customers are in the throes of integrating multiple applications together. The tying, if you will, of a sales organization together with a service organization is [an area] where we have seen a lot of sales.
In Clarify's business model, two-thirds of our business is multiple application sales to our customers. So we're at the inflection point of companies wanting to unite all of those customer touch-points across the front office together in a way that the front office enterprise can personalize each and every interaction with the customer, independent if it's a service interaction or a sales interaction or a marketing interaction. To be able to do that across all different mediums, like I said earlier, not only over the phone and over the Web, but through all kinds of devices, be it personal digital assistants (PDA), Web TV, kiosks, you name it. To be able to capture all of those customer touch-points and customize a personal interaction with that customer based on the interaction history that they have had with that company.
Today, it's pretty much a siloed interaction model. Sales does the sales thing, marketing does the marketing thing, service does the service thing and there's little leverage to date in terms of deployed systems. And certainly as I said earlier, buoyed by the numbers I described in Clarify's business model, customers' intentions are to integrate those all together and leverage all of those touch-points together. So I think over the next three to four years we will see companies absolutely implement and deploy these systems that are able to leverage all of the customers' touches, if you will, into the company and leverage them. Be it for additional sales, customer dazzlement, you name it.
TMF: On a more personal level, what do you think was the most important skill set that you brought over from Cadence (NYSE: CDN) when you came on board a year ago?
Zingale: My career's been all about marketing and sales in particular. And certainly I had a really great teacher at Cadence Design Systems in Joe Costello, who sits on the Clarify board by the way.
When I came to Clarify, Clarify was a technology company. David Stamm, who's now our chairman of the board, was the founder and previous CEO. I worked with Dave way back at Intel (Nasdaq: INTC) when he was one of the chip designers on the x86. I was the product marketing manager on the x86 family of microprocessors.
This marketplace, given the high growth potential that it has, the competitive dynamics, the solution flavor to it -- meaning not just the software, but the software and services -- the number of partnerships required, the pace, the Internet speed-thing that feeds this market, it really is a huge marketing and sales challenge. Having great technology, meeting all of the applications -- very scalable, very high performance, that they really do what they say -- in my opinion is the ante to play. But to really accentuate Clarify's value proposition in the market place is a big marketing and sales challenge.
So, the biggest thing I think I brought to Clarify is just that, as well as building a new team at the executive level that could really operate the company in a way that is much more mature. And certainly, those results have dropped to the bottom line and our stock price has been rewarded accordingly.
TMF: I really appreciate you taking the time to talk to us today.
Zingale: Thanks for the opportunity.
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