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Onyx/Pivotal Rivalry Through Thin Rather Than Thick

Written By: Predrag Jakovljevic
Published On: February 5 2004

Background

The latest round in the rivalry between Onyx Software Corporation (NASDAQ: ONXS) and Pivotal Corporation (NASDAQ: PVTL; TSX: PVT) began with their inceptions in 1995 and 1994 (respectively) and focused on an attempt by Onyx to buy Pivotal. This rivalry reflects the current state of the customer relationship management (CRM) mid-market.

Overall the CRM software market remains a land of opportunity, but one with many treacherous patches of quicksand, install-base or product scope-wise, for those uncertain about the breadth of their footprints in the field. It is a no-brainer fact that the 2000s have been adverse years in the entire enterprise applications market. Following the whopping growth rates of the late 1990s, and the spending surge on sexy e-business-related technology in 2000, hard times worldwide in almost all sectors have subsequently morphed into harrowing times for enterprise systems providers alike. While the biggest and richest vendors have been able to hang onto flat new sales, modest declines, or in some cases, modest growth, only the lucky and most apt few with true differentiation in a selected number of markets (such as warehouse management or supply chain execution [SCE] or supplier relationship management [SRM]) have bucked the trend to show some enviable growth of late (see The Hidden Gems of the Enterprise Application Space).

It might be of further interest to analyze the recent years of the enterprise resource planning (ERP) and CRM markets to discern how fortunes may often fluctuate and go in different directions at certain phases of their life cycles. The term "ERP", though not necessarily coming back into fashion, certainly is no longer the bad, pass term of a few years ago when almost all vendors were distancing themselves from it like it was the plague because ERP was perceived as off-putting (i.e., intra-enterprise versus entire external supply chain and collaboration focus). At the same time, anything associated with customer or front-office interaction was all the rage, attracting both venture capitalists who poured their capital into new startup companies with brave ideas and customers (over)buying these applications because of the then buoyant economy and the apparent need to better manage seemingly mushrooming customer bases. For an extended discussion see Comparison of ERP and CRM Markets' Life Cycle Snapshots.

Similarities

Therefore, having also gathered a number of high-profile early adopters worldwide, and enticed by the then large market capitalizations, Onyx and Pivotal too had followed suit and go public during the late 1990s. Little did they know then about the upcoming dot-com implosion and the economic downturn that followed. Maybe, had they known then what they know today, they would not have repeatedly foregone profits to invest heavily in new product development and sales and marketing. Since their inceptions, both vendors have offered CRM application suites that have been well-attuned to the needs of mid-sized companies. These include much lower price tags, innovative pricing arrangement, and implementation timeframes of the counterpart alternatives for large enterprises (such as those of Siebel Systems). To that end, both vendors have also built their applications on the latest available Microsoft technology stack at the time, and both vendors also claimed the forefront of leveraging the Internet at the time (i.e., browser-based user interfaces [UI], with no need for software download on the client side).

Further, both vendors have (arguably) equally broad sets of operational functionality such as the Pivotal CRM software suite. This suite includes an application platform and capabilities in marketing, sales, service, contact centers, partner management, and interactive selling. Onyx, by and large, covers similar bases. The vendors are comparable on the architecture side too, but so far, few customers have migrated to Pivotal's latest web architecture, version 5.0, since its release in April 2003; however, Onyx did it mid-2002 with Onyx Enterprise 4.0 release, when it web-enabled even its legacy client/server product Onyx Customer Center. Meanwhile, I has released another version, Onyx Enterprise 4.5, and the solution also shares critical information among employees, customers, and partners through three role-specific, web services-based portals. This has resulted in approximately 60 percent of existing customers using Onyx's current release. Onyx groups its products around the primary interfaces that users employ, allowing for customer, partner, and employee interaction through separate portals. Underpinning that is an E-Business Engine backbone, where all CRM data is centralized.

The last few years have been harsh on most vendors in the CRM market segment; however, it has been particularly harsh on Onyx and Pivotal. The economic downturn and the standstill in IT spending have hit each company at a time when it was ramping-up product development and business expansion. Conversely, their primary, traditional nemesis, Siebel, has done a much better job maintain a commanding market lead through organic growth while maintaining healthy profit margins during the halcyon days til 2001. Then, after experiencing its share of difficulties (i.e., revenue drop and subsequent layoffs), Siebel has been maintained at least non-organic growth through acquisitions and still taking away market share from its smaller CRM competitors, if not from the ERP intruders.

Thus, other than their approach to the mid-market, both Onyx and Pivotal feature many common traits like limited customer base, limited market appeal, declining license revenue, and dwindling cash reserves. However, they also have some inevitable differentiating traits.

Pivotal

Pivotal remains interesting to mid-market companies with complex configuration and selling needs, and with the revenue range of $100 million to $2 billion (USD). More than 1,600 companies around the world have licensed Pivotal, whereas Onyx' install base is still less than 1,000. Also, Pivotal has long put as much emphasis on e-commerce enablement as on CRM, which was even reflected at some stage by referring to its main product line as a demand chain network (DCN) or business relationship management (BRM) solutions suite, rather than a CRM offering. The foundation for that has been an XML-based platform that manages relationships and business transactions between customers, partners and employees. On top of that would come the Pivotal's individual applications, which, for example provide capabilities for selling over the web (Pivotal Sales), or enable organizations to synchronize their marketing, sales and customer services over the Internet (Pivotal Marketing, Pivotal Interactive Selling, etc.).

Onyx

Nonetheless, Onyx seems to have a sharper industry focus by serving customers worldwide in a variety of industries, including financial services, healthcare, high technology and the public sector. To that end, Onyx has also long teamed up with Microsoft to jointly sell Windows NT-based CRM software to the financial services sector. On the other hand, as of the release 4.0, Onyx offers support for the Oracle database running either on the Sun Solaris and IBM AIX platforms, which expands the opportunity within the upper mid-market. A deal signed in early 2001 has also allowed the company to ship the Cognos' line of analytic software with its CRM products.

Thus, Onyx seems to have been the more tenacious of the two vendors, and it has also pulled ahead in the last two years, occasionally showing revenue growth and nearly satisfactory quarterly results. Still, one cannot help feeling that Onyx' potential have long been hampered by a loss-making aura, which seems difficult to shake off (see Onyx Software: CRM Vendor Battling for Viability). Still, due to its longstanding web-based architecture, Onyx has been an early adopter of solutions delivery via ASP (application service provider)/hosting option (see Onyx Thinks ASP Opportunities are a Gem), which has relatively recently resulted with the IBM's "e-business on demand" alliance and relationships with companies like Reuters and Metavante.

Moreover, Onyx has lately been demonstrating even more innovative software delivery strategies, by embedding its software into other systems in the form of composite applications. Onyx has been enticing its partners with a few approaches in embedding its technology:

  1. application stack,

  2. application framework, or

  3. component-based CRM.

In other words, independent software vendor (ISV) partners or value-added resellers (VARs) can use

  1. Onyx CRM applications in their entirety (both on premises or delivered as hosted products);

  2. selected "coarse grained" Onyx CRM modules within a broad-based integrated application for industry-specific business processes that may include multiple third party applications; or

  3. selected "finer grained/sliced" CRM components of Onyx to embed directly into another system via web services.

The approach seems to have resulted with a greater percentage of new licenses lately coming from embedded sales and through the partner channel. It should allow customers to make reasonably inexpensive, lower-risk investments in highly focused aspects of technology that can be integrated into their existing applications infrastructure, whereas partners may hereby find a niche to add value and differentiate their own offerings. Given the sobering-up enterprise applications market (including CRM) has done away with the mega-deals and uncontrolled IT budgets, alternative business models such as the above of Onyx could make the difference between survival and demise of many embattled enterprise applications providers, not only the CRM ones.

Detailed information about a plethora of mid-market CRM products is contained in the CRM Evaluation Center at http//www.crmevaluation.com/

 
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