Front-office software market heats up
By Melanie Austria Farmer
Who ever thought that the front-office software market would become the industry's next soap opera?
Indeed, Siebel, which corners the No. 1 slot, is fending off the feisty marketing mastery of
Oracle, which wants nothing more than to topple Siebel's lead.
"They are hungry and they smell blood in the water," said Dave Caruso, analyst at AMR
Research.
But among the smaller rivals, competition is just as fierce. Such companies as Clarify and
Vantive, which are about a third the size of Siebel, are also battling for market share in
front-office software, which helps businesses automate their sales, customer service, and
marketing needs. The market is expected to explode from $1.9 billion in 1998 to $11
billion in 2003.
Judging by last quarter's numbers, analysts say Clarify is now clearly ahead of Vantive,
which has struggled in recent months to restructure its business model and refocus on its
core call center strength under its new CEO Tom Thomas. Vantive's numbers last quarter
were disappointing: The company reported revenue of $48.5 million, down from $37.7
million a year ago, and a net loss of $1.5 million.
Meanwhile, San Jose, California-based Clarify reported encouraging results last month,
announcing that second-quarter net income more than tripled to $3.4 million from a year
earlier on revenues that rose 75 percent to $52.3 million. To date, the company has
primarily focused on two key markets: telecommunications and the financial industry.
"Relative to Vantive, Clarify has a real clear focus," said Peggy Menconi, an analyst who
follows the front-office market at AMR Research. "They're looking at those two vertical
markets, and no one in the industry provides a complete set of products that will fit as a
footprint in those markets."
Clarify's charismatic CEO Tony Zingale, who signed on in
March 1998, takes much credit for the company's
turnaround, asserting that the company's stock is trading
above $30 per share, about three times what it traded at
before he came on board. He added that the average
software package sale is now up to about $500,000 per deal
from about $200,000.
The company is now pushing new Web-based applications
to customers with Zingale's hope that soon customers will
access it using anything from a hand-held device to a kiosk.
Meanwhile, Vantive, which pulled in greater overall revenues
for its customer support and sales software in 1998, has
slumped over the last few quarters, according to analysts.
Its stock has plummeted as well, trading at 9.13 a share,
down from a 52-week high of 15.81. Share value has sunk
about 76 percent over the past year. Nonetheless, Vantive
does have a base of impressive customers including Sprint,
AT&T, The Home Depot, Gateway, and British Airways.
IDC analyst Judy Hodges said she believes Clarify is smart
to target specific verticals, a strategy Vantive recently
decided to recommit to as well--namely utility and
telecommunications.
"That's where Vantive failed by spreading itself into too many
areas," Hodges said. But both Clarify and Siebel are already targeting those verticals as
well, and there will be lots of heat to win customers in that market, she noted.
Zingale said Clarify is poised to expand organically with two acquisitions of small,
high-tech companies within the next two months, as well as several new applications
outsourcing partnerships. Clarify currently partners with Breakaway Solutions, which is
offering to host Clarify's front-office applications for its customers.
While applications outsourcing--an arrangement where customers rent software from a
company that manages and hosts it for them for a fee--has been an industry buzz in
recent months, Zingale questioned how critical it is to the bottom line.
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