1st ANNIVERSARY IN THE FRONT OFFICE
Part One
Last year on Memorial Day weekend I began my pursuit of the Front Office Gorilla Game. Rather than posting the usual monthly write-up, I'm offering a view of the past twelve months in the front office.
THE NEWS
Growth
In December, AMR Research published "Customer Relationship Management Software Report: 1997 - 2002." They showed a CRM market of $1.2 billion in 1997 and estimated an $11.5 billion market in 2002, an estimated 57% average annual growth. Licensing revenue is also expected to grow 10-fold over the same period, from $762 million to more than $7.5 billion.
The (arguably) biggest obstacle to growth in the front office is that using software to manage customer relationships is still a relatively foreign notion. Salespeople are especially resistant to try to use SFA (sales force automation) products. Management too often doesn't take the time to effectively commuincate with their software integrator, causing actual deployment to be frustrating and end results to be less effective than they should (could) be.. Also, management all too often forces employees to use front office software without involving them in the process in the earliest stages. As a result, employees too often don't "buy" into the improvements front office software can bring. In that situation, the employee's prophecy of less than stellar results becomes the self-perpetuated fact. Recognizing that AMR expects the space to grow in excess of 50% annually despite those obstacles, one only wonders what could happen if the obstacles are some day significantly minimized.
Product Trends
The big story about the type of product to get increased attention is the greater importance of automated marketing software in the CRM space. Sales and service modules are still the most important, but the marketing modules are coming on fast. Automated marketing is becoming so important that privately held companies such as Rubric and Market First that don't provide CRM suites are providing marketing modules.
Though "configure once, deploy anywhere" is Siebel's cute mantra, virtually all of the leading front office players are practicing that trend, making it possible for customers to use front office products on all platforms, in a car, in a client's office, using the Internet or all of the above. Help desks and call centers are helping customers whether they use the telephone, a fax, e-mail or the Internet or any combination of all of them..
In this year of the Internet stock craze, it's no surprise that the Internet has also arrived in the front office. Vantive and Clarify were the first to offer fully web-enabled suites and Siebel apparently is not far behind. (Siebel's web-based suite is not to be confused with a web-enabled suite, but it takes too much space for me to explain the difference.)
Because none of the independent front office companies have their own database products, they are making it easier for customers to use their product with their choice of database and platform. The trend is to integrate front office products with Oracle's, SAP's, IBM's and Softie's dabase and server software. Also, the front office players are partnering with the EAI (enterprise application interface) players such as NEON and CrossWorlds so their front office software can communicate with the ERP software.
Market Trends
The potential gorillas in the front office space have had their greatest success with the large companies that can afford the relatively high cost of licensing the software and implementing it across the enterprise. In the last 12 months we've seen greater importance placed on selling to the small- and mid-sized business that can't justify the costs.
As an example, Siebel Systems is in the infancy stage of selling their software through their telesales force. They are also providing for free a stand-alone product to any salesperson. The hope is that they wil upgrade to a networked product that would be used by the salesperson's employer. Time will tell if either strategy will prove to be significantly effective.
To help with the issue of cost for the smaller companies, an entire new sub-industry of ASPs (application software providers) is springing up. The ASP licenses the software from the front office provider as a reseller. They maintain the server hardware, the software and all of the upgrades, charging the end user a monthly fee to "serve" it to all the thin or fat clients at customer sites. That allows less costly entry into the use of enterprise-wide software, including the front office products.
Independents' Competition
The biggest fear of investors putting their hard-earned dollars in the independents' stocks is that the big boys will take over the space. Indeed, the profit margins, size of the market and the growth of the market are appealing.
A quick run-down shows Oracle is entering the front office market for the umpteenth time, as Thomas Siebel likes to remind us. SAP has once again delayed their front office suite until late this year. PeopleSoft's CEO has been quoted that he is exploring alternatives to their strong relationship with Vantive and Siebel, making some think PeopleSoft might acquire a front office company or build their own products. Baan is having notoriously serious problems, but it can't fall on deaf ears of front office enthusiasts that the former CEO of Aurum, a front office company acquired by Baan a couple years ago, was just named the CEO of Baan. Having acquired Software Artistry last year, IBM recently set up a wholly-owned front office subsidiary with an independent board called Corepoint.
The good news isn't just that the big boys are about two years behind the independents in both mind share and product capability. Some feel they are actually helping the size of the pie grow because they bring more attention to the viability of front office products. As the pie grows, so does the slice going to the independents.
The Four Wannabe Gorillas
Certainly the biggest story of the last twelve months is that Siebel has apparently successfully integrated Scopus, their year-ago acquisition. They brought out their 1999 version on time (actually a little ahead of time) and it was fully upgradeable from all existing Scopus versions. Though the company is much, much larger than Vantive and Clarify, Siebel continues to grow at a rate that is the same or higher than those primary competitors.
The last 12 months have been good for Clarify (and their stock price reflects it.) The company has finally shown signs of turning around the company, set back by a series of problems associated with an acquisition more than two years ago.
Vantive recently dumped their founding CEO and is now on a mission to focus on their core competency in the front office instead of taking on Siebel in the SFA portion of that market.
Remedy had a signficant set back about a year ago when they realized their salesforce wasn't competent at doing the deals with the CFOs and CEOs becoming more involved in the longer and longer sales cycles. It takes a long time to successfuly address such a signifcant issue, but Remedy remains the far-and-away leader in the internal help desk market with everyone else running a very distant second.
Though Remedy is entering other aspects of the CRM market, their role in our Front Office Gorilla game is not as a significant competitor of the other three players. Instead, Remedy is a player in the game by virtue of its success as a help desk software provider. It is possible that out game could produce two gorillas, Remedy and one of the other three (Siebel, Clarify or Vantive.)
For the numbers in the Front Office Gorilla Game, see Part Two.
--Mike Buckley |
