Onyx Software: CRM Vendor Battling For Viability
Onyx Software Corp. (NASDAQ: ONXS) is one of the larger CRM vendors focusing
on such operational CRM (Customer Relationship Management) functions as
sales force automation and call center management. Onyx was founded in
1994 by three Microsoft employees who had developed front office software
used internally at Microsoft. The founders saw a demand for packaged software
that could consolidate customer data from disparate systems into one data
repository. Their original product, Onyx Customer Center, was a client-server
application that collected customer data from various internal data stores
and loaded a single data repository. This product forms the core function
of the Onyx 2000 suite. The suite has four components:
Engine - This is the backbone for the rest of the applications.
The engine consists of a data center, process technology (technology
that tracks customer interactions across company divisions and routes
customer data to the appropriate division), an interface framework that
manages the user interface for the other three components mentioned
below, and an integration framework to tie Onyx's front end applications
to other vendor's back end (ERP and other) systems.
Portal - This application allows organizations to provide personalized
marketing, e-commerce, and service functions to their customers over
the Internet. Capabilities include catalog and campaign management,
product configuration and order processing, and online service functions,
including a self-help knowledge database.
Portal - This application allows employees to manage contact information
and sales opportunities, and view customer service queues. The Employee
Portal also allows third party products to be viewed in the same interface.
- This application allows organizations to provide collaborative marketing,
selling and support capabilities to their partner channel. The portal
can be configured to distribute leads to partners, configure products
and process orders.
of Onyx's revenues traditionally come from companies with annual revenues
up to $500M USD, but Onyx's sales to the Global 2000 have increased significantly
during the second half of 2000. From 2Q00 to 3Q00 the average sales price
has increased from $275,000 to $325,000. Towards the low-end, the Onyx
suite primarily competes with Pivotal's eRelationship 2000 and FrontRange's
GoldMine Front Office 2000. In the mid- to high-end market Onyx primarily
competes with Siebel and Kana. Siebel sells Siebel MidMarket 2000 and
a number of enterprise level applications such as Siebel Sales and Siebel
Call Center. Kana sells a suite of applications for managing customer
communications and running marketing campaigns.
revenues have on average grown nearly 20% quarter over quarter from 1Q99
to 3Q00. Net income has hovered around break-even for the same period.
License revenue has consistently been between 60% and 64% of total revenues
for the past four quarters. TEC estimates Onyx's market share at approximately
2% of the broad CRM market. Figure 1 illustrates Onyx's financial performance.
Siebel, the clear CRM market leader, Onyx's revenues are consistent with
those of its competition. Figure 2 compares Onyx's recent quarterly revenue
to its competition.
fiscal year ends 6/30. Therefore 4Q00 and 1Q01 were used to compare the
same calendar quarters.
Strategy and Trajectory
Onyx is moving in the opposite direction from Siebel, its largest competitor.
Siebel traditionally sold CRM products to the high-end market and recently
entered the mid-market (see Siebel
Enters Smaller Markets In A Big Way for more information on Siebel's
entrance in the mid-market). Onyx traditionally sold to the mid-market
and is now beginning to sell more to the high-end market. The average
seat count of Onyx's installations has increased from 90 to 140. Onyx
has been gaining a share of the high-end market as a result of broadening
its product and service offerings and creating vertical solutions in Financial
Services, Telecommunications, and Healthcare. The Onyx 2000 suite has
functionality demanded by the high-end market, yet was unavailable in
previous Onyx products.
has consistently forgone profits to invest heavily in product development
and sales and marketing. Figure 3 indicates Onyx's investments in product
development and sales and marketing as a percent of total revenue.
is spending heavily to expand product and service offerings and send its
message out to potential customers. This trend should continue as Onyx
focuses future investment in these areas:
- Add more
integrated CRM applications that run off the Onyx E-Business Engine
- Onyx believes companies will continue to demand an e-business platform
from which they can incrementally add CRM applications and phase implementation
across the enterprise. Thus Onyx will continue to develop applications
as part of its portal products that run off the Onyx E-Business Engine.
More specifically Onyx will focus on aspects of eCRM, such as web-based
lead capture, catalog management, customer service, and product configuration.
The eCRM components will integrate with traditional CRM applications
such as call center management and sales force automation.
applications that extend beyond the enterprise - Onyx sees the Partner
Portal as the beginning of its B2B information exchanges. Onyx says
it will continue to develop the Partner Portal to include business webs
that exceed the value of traditional partner networks, but would not
disclose additional information at this time. As part of this initiative
Onyx will continue to develop XML data outputs to enhance information
wireless capabilities - Onyx has no wireless applications commercially
available at this time. Future development will focus on bringing wireless
capabilities to the field sales and service staffs. Onyx will use WAP
(Wireless Application Protocol) on PDA devices to allow remote use of
the Employee Portal.
Onyx has two key strengths, developed from serving the mid-market, that
will provide competitive advantage in the high-end market. The first is
its short implementation time. Mid-market customers demand short implementation
times primarily because they cannot afford to devote IT resources to long
implementations. Onyx's average mid-market implementation takes approximately
12 weeks. High-end implementations take approximately 16 weeks. This is
considerably shorter than Siebel implementations that can take 6 months
for comparable projects. This is an attractive selling point to larger
organizations that realize risk of failure positively correlates with
second strength is its 100% web-based architecture. Applications are accessed
entirely through a web browser, with no download to client computers.
This aids in reducing implementation time and reduces the strain on IT
staff for application maintenance.
devotion to product development and sales and marketing has pros and cons.
Investing to avoid product obsolescence and to develop direct and indirect
sales channels is vital to a software vendor, particularly in the CRM
market. But if sufficient investment requires the company to operate unprofitably
over the long term, there is no viable company. Onyx has been in business
for over 6 years without substantial profits. Siebel is able to maintain
a commanding lead in the CRM market while maintaining a profit margin
around 15% or more. Onyx states that it has chosen a break-even position
(before acquisition related charges) in order to gain market share. The
company also claimed that it could at any time restructure spending to
Onyx's biggest challenge is taking Siebel on in the high-end market. Siebel
clearly has more resources to throw at product development, sales and
marketing, and partnership development. If Onyx plans on competing with
Siebel it must differentiate its offering enough to convince customers
and large channel partners that it offers a valuable alternative.
is slow to adopt wireless technology, and that may hinder future growth.
Onyx has no formal wireless product and has yet to announce a partnership
with a wireless applications vendor. Onyx has had an Asian systems integrator
develop a wireless application that brings some functionality of the Employee
Portal to the Compaq Ipaq, but each of Onyx's major competitors has made
announced the release of wireless eBusiness applications in February of
this year, and has since then partnered with Sprint PCS to bring Siebel
applications to Sprint's Wireless Web. In October Kana announced the release
of Kana mBusiness, a set of wireless applications that bring some of the
functionality of their existing products to wireless devices. Kana mBusiness
integrates with the Kana eBusiness Platform. In the same month Pivotal
announced the release of Pivotal Anywhere, a set of applications that
bring corporate and customer data to wireless devices such as Blackberry.
Pivotal also recently announced a partnership with GoAmerica, a provider
of wireless data and Internet services, to expand the functionality of
Pivotal Anywhere. Onyx has yet to make similar announcements.
has a competitive product in a high growth market. TEC predicts that Onyx
will continue to see quarterly revenue growth at or near 20% over the
next four quarters. We think that Onyx's commitment to 100% web-based
products that are delivered on a single platform (the Onyx E-Business
Engine) will be attractive to both the mid- and the high-end market.
predicts that Onyx will use partnerships or acquisitions to bring new
functionality to its suite of applications. Analytical CRM and wireless
applications are two areas they will likely consider. Neither type of
product is a natural progression from any existing Onyx product, yet both
the mid- and high-end markets demand both. Internal development may prove
to be too time and resource consuming making partnerships and/ acquisitions
Onyx's future development plans are primarily focused toward inter-enterprise
applications. This is probably a good move, but only if Onyx does not
neglect other trends in CRM. One of the larger trends is the demand for
a single vendor or single solution to supply all operational and analytics
components of CRM. Vendors such as E.piphany, Broadbase, and Microstrategy
have focused significant business and product development efforts towards
meeting this demand, and Onyx would be wise to follow suit. Onyx does
have partnerships with Hummingbird, Hyperion and Cognos (three business
intelligence vendors) but it does not have any branded analytical applications
that run on the Onyx E-Business Engine. The company relies on these integration
partners to develop sophisticated analytics applications.
should also accelerate its wireless development. Wireless capability is
poised to become a significant selling point for CRM vendors as the use
of wireless devices in field sales and service staffs increases.
Onyx provides a good alternative to Siebel because it has much of the
operational CRM functionality required and its web-based architecture
is particularly attractive. Clients interested in implementing a CRM suite
should certainly consider Onyx 2000. Onyx also has a very strong ASP offering
that many organizations will want to consider. For more information on
Onyx's ASP offering read Onyx
Thinks ASP Opportunities Are A Gem