Event Summary
On Tuesday, October 2, Clarify's short-lived presence under the Nortel Networks (NYSE: NT) umbrella came to an end, as Amdocs Limited of St. Louis (NYSE: DOX), announced that it reached an agreement with Nortel to acquire the assets of Nortel's Clarify division for $200 million. Clarify was purchased almost two years ago by Nortel for what now appears to have been a monumental sum, $2.1 billion, in the assumed hope that Nortel could forge some sort of synergistic package between Clarify's CRM software suite and Nortel's Call Center hardware components (see Nortel and Clarify: Was There Ever Synergy Enough to Support this Marriage?). But Nortel, recently going through some very difficult fiscal times, has been slashing headcount and eliminating entire business units in its drive back towards profitability.
Clarify was served notice in June of 2001 by John Roth, President and CEO of Nortel, who commented at the time that it was Nortel's plan: "to streamline our business around our core growth areas of Metro Optical, Optical Long Haul, Wireless Internet, Core IP/Intelligent Internet and Internet Telephony; and to focus our investments to deliver the key next generation networking solutions," notably NOT listing CRM software as one of their "core growth areas."
Amdocs bills itself as "the world's leader in customer care, billing and order management solutions for the communications industry." With the acquisition of Clarify, Amdocs expects to be positioned as the "world's leading provider of CRM to the communications industry." Notes Avi Naor, President and Chief Executive Officer of Amdocs: "The acquisition of Clarify immediately expands our current offerings and market presence in communications CRM With our complementary product sets, communications-specific functionality and powerful delivery capabilities, we offer the number one CRM solution for the communications industry." Amdocs will establish a new CRM division, to be located at Clarify's headquarters in San Jose, CA.
Mr. Naor provided the following rationale for the Clarify purchase:
The key assets of Clarify that Amdocs lists include:
Mr. Naor made clear the notion that the key reason for acquiring Clarify was to enhance Amdocs' position as a leading software vendor to the Communications industry. He also made pains to state that there would be both communications-specific versions of Clarify modules that would be fully integrated with Amdocs modules, as well as standalone Clarify CRM modules that would continue to be supported and sold to the general enterprise market.
Mr. Naor also stated that the strategic plan for on-going support for Clarify in the enterprise market would fall to "strategic partners," or possibly to a single partner if one could be found to take the whole of the support. He mentioned Accenture as one partner option, but did not identify any specific partners that have signed on at this stage.
Finally, concerning the financial impact of the purchase, Mr. Naor stated that he expects the Clarify division to contribute approximately $100 million to the top line in fiscal 2002 which started October 1, with overall Amdocs, including Clarify, to generate $1.9 billion in revenues, amounting to earning per share of $1.52, supporting over 8,000 employees. Of the $100 million to be generated by Clarify, Amdocs expects only one quarter of this amount, or 25%, to be derived from the enterprise market, the balance being derived from the communications market.
Market Impact
For communications companies, the message is clear: Amdocs was a strong leader in customer care and billing applications, and with the Clarify acquisition, they position themselves well as a complete, front-office solution in the communications arena. Communications companies who are already customers of either Amdocs or Clarify should be very encouraged by the purchase, and can anticipate a unified CRM offering tailored to the communications industry in the months to come.
For the rest of the Clarify customer space, the outlook is not rosy. Mr. Naor went to great pains to indicate that there will, indeed, continue to be a standalone Clarify product that is viable for the general enterprise market. He also indicated that his company has always been dedicated to the customer, and has acknowledged that Clarify currently has big business in the enterprise space, and that Amdocs is committed to making a smooth transition to a "partner-centric" support approach over the next 12 months. But both statements were painfully short on detail and are sure to leave Clarify's considerable installed base in the enterprise market feeling cold.
With every statement of concern towards the enterprise market, Mr. Naor countered himself by stating and re-stating that the Amdocs' core focus is, and will continue to be, the communications industry. Explaining that there will be a standalone version of Clarify more generally available indicates to us only the notion that, whatever pieces of Clarify functionality that are developed for the communications space in the future will "leak over to the generalized version" as appropriate. We don't expect to see enterprise, or other verticals, targeted for new application functionality support in the Amdocs era.
It is our belief that Amdocs is hoping, ultimately, to bifurcate the Clarify code base, and find another company, preferably one already involved in some level of Clarify support or implementation activities, to take on both the enterprise code base as well as the enterprise customer base, helping Amdocs rid themselves of the overhang of Clarify's previous focus. But the fact that such a company has not been found, and that none jumps immediately to mind as a likely participant in such a transition, gives us pause.
User Recommendations
Communications Service Providers (CSPs) should be encouraged by the planned integration between Amdocs and Clarify modules. They should definitely take a look at the benefits they can gain from such an integrated approach to the front office, specifically tailored to their needs.
If you are a current Clarify customer not in the communications space, time will tell what level of support, both for bug fixes, new functionality, and general call support, you will receive. But the ill-defined nature of Amdocs' plans for your group does not bode well. Keep a keen ear out for movement, and start scoping out some alternatives, if you plan on keeping pace. .
If you are neither of the above, Clarify should clearly no longer be on your list of viable alternatives to consider in the CRM space. This former Tier 1 CRM generalist is slimming down and focusing in on communications, and there are simply too many other very good general and customizable packages on the market now to get involved here.