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MicroStrategy Manages Your Customer Relationships And Its Own

Written By: L. Talarico
Published On: December 15 2000

MicroStrategy Manages Your Customer Relationships And Its Own
L. Talarico - December 15, 2000

Event Summary

MicroStrategy (NASDAQ: MSTR) is a Business Intelligence vendor with its sights set on the analytical CRM market. The company is positioning its CRM offering to take advantage of the demand for sophisticated customer analytics by leveraging its experience in Business Intelligence. MicroStrategy's new CRM product suite, eCRM 7, combines the company's analytical applications with new CRM focused additions such as campaign management and tighter integration with other data sources (ERP, call center, click stream, legacy, etc.) to provide customer centric analytics.

Complementing the new product suite is a change in MicroStrategy's customer service and selling strategy. The company has revamped the sales and customer support processes to take advantage of the web. The company's most notable move is a shift to standardized pricing. MicroStrategy's traditional sales process included time-consuming price negotiation with the sales representative. Under the new pricing policy the company has set fixed per seat or per CPU prices. At the MicroStrategy WebStore customers can configure and price their purchase knowing they have received the same deal as other customers. Furthermore customers can view product demonstrations, receive technical support and training, and download software documentation via the web site.

By augmenting traditional direct and indirect sales channels with the web, MicroStrategy believes it can cut sales related costs out of the transaction while shortening the sales cycle. The company expects over 60% of low (or no) cost, high volume transactions to be conducted unassisted at its WebStore by the end of 2001. The company hopes that this will also allow the sales force to focus on larger deals that require a sales representative. The new sales process and online customer support features will also allow MicroStrategy to more efficiently serve a larger customer base as the company enters the mid-market. The next section will discuss the company's challenges as it focuses on the mid-market and markets its eCRM 7 suite as an analytics CRM package.

Market Impact

MicroStrategy's changes should help it compete in the mid-market, but the company faces new competition as it moves into this space. MicroStrategy is traditionally strong among the Global 2000 in the Business Intelligence market where it competes against SAS, Cognos, and Business Objects. Each of these firms is entering the analytical CRM market where other analytics firms such as E.piphany and Broadbase have been competing for some time. MicroStrategy's analytics have the sophistication required by the mid-market, but equally important to these firms are implementation time and ease of integration with other systems. MicroStrategy will have to prove to the mid-market that its products meet these needs as well.

The company's strained resources may hinder chances of success in this market. Much has changed within the company in a short amount of time. In late 1Q00 MicroStrategy had to restate revenue and earnings for 1997 through 1999. The company claims this was simply a matter of timing of revenue recognition, but the impact was detrimental. The restatement forced MicroStrategy to cancel a secondary public offering scheduled in the first half of 2000 and had a negative impact on 2Q00 sales. In the midst of this brouhaha the company released MicroStrategy 7 and eCRM 6 in April. Three months later eCRM 7 beta -- a 100% re-write over eCRM 6 -- was released. Combined with the new pricing model and WebStore these product updates are surely spreading resources thin across the organization. The company has also put a freeze on hiring and reduced its workforce by 10%, primarily through reductions in sales, marketing, and administration.

Wall Street has yet to reward MicroStrategy for its attempts to turn the company around since the restatements. MicroStrategy was trading above $300 per share in March before the restatements were announced. The stock is currently trading under $20 per share. The entire analytics market has faced devaluation, but MicroStrategy is trading at a lower revenue multiple (Market Cap / Revenue) than any of its competitors. Figure 1 compares MicroStrategy's revenue multiple to its competition's.

Figure 1.

Company Ticker 3Q00 Revenue (000,000s) 11/28/00 Market Cap (000,000s) Revenue Multiple % Higher Than MSTR
MicroStrategy
MSTR
$ 64.86
$ 1,128.77
17.40
-
Business Objects
NOBJ
86.01
2,686.69
31.24
79.5
Cognos*
COGN
118.21
3,093.46
26.17
50.4
E.piphany
ENPY
39.14
2,035.31
52.00
198.8
Broadbase
BBSW
14.32
344.70
24.07
38.3

*Cognos' fiscal year ends 2/28. All other vendors' fiscal year ends 12/31.

User Recommendations

Organizations looking to add analytical CRM applications should consider MicroStrategy. The company's applications are recognized as being among the most sophisticated in the industry. The next six months will indicate whether MicroStrategy's resources can support simultaneous product development, staff cutbacks, and new pricing and customer service strategies. Furthermore, because eCRM 7 is a re-write over eCRM 6 the risks of implementing software that has not been generally available in a previous version do need to be weighed.

 
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