Event Summary
On
March 24, Click Commerce, Inc. (NASDAQ: CKCM), a provider of
partner relationship management (PRM) software for the Global 2000 companies,
announced it reached an agreement in principle to acquire Allegis Corporation,
a San Francisco-based privately held PRM company, founded in 1998. The vendor
believes this move will reinforce its leadership position in the PRM market,
extend its product offering, and broaden its reach into new vertical and geographic
markets. Click Commerce provides configurable software solutions aimed at enabling
global corporations to improve relationships and operational efficiencies within
their distribution channels through online commerce, channel management, and
partner relationship management. Corporations such as Black & Decker,
Delphi, Emerson, Equistar,
Kawasaki, Lubrizol, Mitsubishi,
Motorola, and Volvo have reportedly transformed
their channel relationships using the Click Commerce Partner Portal
and Application Suite. Founded in 1996, Click Commerce leverages
more than six years of channel management expertise to enable global enterprises
to significantly increase brand loyalty, customer satisfaction and financial
performance. Its software is used by corporations in more than 70 countries
and in 15 languages.
Thus,
Click Commerce believes the combination of the companies' complementary product
strengths will result in a comprehensive solution for the PRM marketplace. Namely,
it should bring together Click Commerce's renowned commerce and aftermarket
service offering and Allegis' strengths in marketing and partner management.
Through the acquisition, Click Commerce aspires to also extend its reach into
the high technology and financial services markets and add industry-leading
companies including Charles Schwab, Dow Corning,
Lexmark, and Microsoft to its already strong
manufacturing client roster of both the above-mentioned companies such as Delphi,
Emerson, Kawasaki, and not mentioned Lincoln Electric and York.
Both companies moved very quickly from the agreement in principle on March 24 to a closed acquisition on March 28.
Market Impact
While
many debates will still rage about PRM's relation to customer relationship management
(CRM) (i.e., whether the first is only a cousin or a child of the latter) and
about its stand-alone viability, it is certain that there has been a need and
demand for PRM, albeit the area has been a moving target ever since its relatively
recent advent. See Who
Alleges The PRM Market Consolidation? for a discussion of PRM as it relates
to CRM.
While even during the dot.com euphoria many were dreaming about disintermediation, i.e., reaching their customers directly (often even hoping it to be at the expense of their partners), the more realistic ones have always known the importance of the indirect channel, starting with some enterprise application vendors, whose entire success has always relied on their value-added resellers' (VARs) execution. Now that back-to-basic reality has indisputably triumphed, almost every company has been scrutinizing more closely their relationships with partners, and figuring out how best to reach and nurture them. Some pundits are predicting as much as 80% of business going through indirect sales channels in the next five years. Given ever-shorter product lifecycles and companies' ever-increasing reliance on third-party channel partners to drive sales and increase customer satisfaction, the need for some form of PRM should not be questioned.
Organizations that sell their products/services through complex networks of partners (e.g., dealers, affiliates, VARs, resellers) are indeed leveraging Web-based solutions to better service and sell via these channel partners, owing to the increased technophobia and aversion to the IT going downstream the channel, and to a consequent training simplicity imperative. Thus, a solid functional PRM system might have many of the features of a traditional CRM package, plus specific functions so that the most functional PRM systems could allow businesses to capture, analyze and optimize customer data and feed back new ideas and better information to the partners who have these direct customer relationships.
PRM software should allow companies to manage the amount of information that goes out to partners, as well as managing partners' contacts with customers more effectively, so that, for instance, a customer does not receive multiple calls from channel partners all pushing the same solution since channel partners should have leads or territories logically allocated to them.
Well,
as many times seen before in the enterprise software market, many specialist
start-up vendors have already jumped at the opportunity and have come up with
by and large partial answers to the above market needs. A number of still existing
pioneering vendors that first offered specific PRM offerings a few years ago
would include Allegis, whose former Sales Partner module (now
a part of much wider Allegis eBusiness Suite) featured a funds
manager, business planner, program manager, and best practices mentor; ChannelWave,
whose Partner Loyalty System product (now within ChannelWave
5) featured a range of partner functions, including pre- and post-sales
support, marketing fund management, training and service management, lead management,
sales forecasting, literature fulfillment management, opportunity management,
and order/quote configuration capabilities; and Comergent Technologies,
whose Distributed E-Business System featured an online selling
process, letting partners offer co-branded sites, cross-selling, and order tracking
capabilities. The list could contain many more candidates such as Webridge,
iMediation that was purchased in 2002 by a like vendor Haht
Commerce, very subsequently after it acquired arcadiaOne,
and OnDemand, whose portal solution had long offered sales
and marketing information, training and certification programs, and tracking
and reporting functions, and which was also acquired in 2002 by Chordiant
after itself acquired North Systems in 2001.
Beside
the above vendors focusing more on partner relationship side of the business,
companies like Comergent, InfoNow, Art Technology Group,
Haht, Entigo and Click Commerce add a channel-centric e-commerce
sell-side and/or aftermarket element to the mix, designed to keep track of transactions
across multiple tiers of suppliers and to let manufacturers automatically route
customers to the right partner and close a sale. Moreover, while specific PRM
software solutions have for some time appeared on the market, CRM and ERP vendors
have also been adding PRM modules to their own software suites. To achieve this,
most enterprise applications suite vendors have launched portal initiatives
that should tempt partners to share information about customers' demands in
turn for deeper product knowledge and training and for more efficient ways of
sharing leads.
In
addition, CRM leaders like Siebel Systems, Pivotal
and Onyx, are extending their suites with PRM functionality.
Particularly Siebel's system goes far beyond lead management and pretty portals
to include modules for managing market funds, lead management and distribution,
delivering current product and pricing information, and generating quotes and
orders, and offers a 360-degree review of the relationship between a company,
its partners, and its end customers. This is accomplished through integration
of the PRM system with its sales force automation (SFA), call center and other
CRM modules, while various versions of the system target eight different vertical
markets.
Click
Commerce's acquisition of Allegis is a good defensive move, since it should
combine the resources of two companies that would often face each other fighting
for dwindling opportunities. They have quite complementary product offerings
and industries of focus, while very similar approaches to embracing emerging
technologies (i.e., Microsoft .NET platform commonality) and
excellent customer references. As mentioned earlier, Click Commerce's legacy
and core competence lies in the service side of the e-business including warranties,
and streamlining disconnected, inefficient processes manufacturers have with
service and support centers throughout their channels. Click Commerce has so
far acquired a number of prominent customers in the following vertical market
segments: Automotive, HVAC (heat, ventilation, and air-conditioning), Chemical,
Pharmaceutical, and Industrial Products/Durable Goods
On the other hand, Allegis offers a number of non-commerce PRM functions for partner life cycle management (e.g., funds management, automating special pricing requests and tracking lead management and escalation strategies' direct impact on sales and forecasting), and analytics (e.g., as financial performance of channels and programs), but it has been exactly deficient in Click Commerce's capabilities like sales configuration and sell-side e-commerce.
Conversely,
Click Commerce customers should leverage many Allegis' partner life cycle management
functions (such as partner recruitment and certification) and lead management
functions. To that end, Allegis Sales Partner allows the user
to build up a profile of its partner companies, including size, location, product
range, customer base and sales performance, giving the manufacturer or supplier
a personalized view of each partners' performance. It also provides an automated
lead management process, allowing sales to be passed on to the most appropriate
channel partner.
The software includes recruitment and assessment features, making it easier to identify and recruit potential partners. End-user customers can also be provided with the ability to select potential suppliers from the partner database, according to which one meets their needs, judged on a range of criteria such as product set or skill base. Allegis has also so far exhibited the ease of use, integration, multi-national capabilities and administration that make it amenable to large, complex partner management networks and global requirements. It has also penetrated financial services and high-tech companies, industries in which Click Commerce has not achieved major presence.
Challenges
However, despite a good fit at first glance and improved cross-selling opportunity, some challenges and product gaps are yet to be overcome. One is to conduct inevitable products rationalization and integration, to orchestrate sales forces, and organize services strategies. Click Commerce has pledged to pick up all existing Allegis contracts, including those operating under the ASP (Application Service Provider) model. The caveat is that Click Commerce has never offered an ASP option for its products and one should observe how it will offer a future integrated product via an ASP option, as the vendor did not commit to firm time frames for this option either.
The company will also need to bolster its content management functionality, and provide flexibility of its product to accommodate the changing business practices, integration and IT standards. To meet more collaborative, diverse and dynamic relationship capabilities, the future product will have to support a distributed application architecture that enables business process flows based on intricate business logic and roles of participants and their trading organizations. Although both the Click Commerce product and the Allegis product offer distributed application architecture today, a serious product development rationalization will have to take place to keep this philosophy as the company moves forward.
As
mentioned earlier, the combined company will have many large enterprise suite
providers on its heels. Siebel's and Pivotal's
growing footprint and authority in the PRM market will continue to promote a
coexisting interoperable strategy for Click Commerce, as to remain competitive
and with a valid value proposition, given PRM's intrinsic ties with supply chain
management (SCM) and financials management applications. To that end, while
Oracle, SAP, J.D. Edwards
and PeopleSoft might have been remiss to deliver deep PRM applications,
they have nonetheless been closing the gap with basic PRM functions, which may
be enough to convince their existing customers to at least postpone decisions
and wait for more capability from their principal enterprise applications provider.
Therefore,
we believe that Click Commerce, and all his PRM peers alike, must continue to
provide snazzy and functional portal user interfaces, connectors to ERP systems
(e.g., portlets, applets, etc.) and Internet exchanges connectivity through
partnerships and/or acquisitions. That might prove to be a tall order given
Click Commerce's revenue declining more than 50% from ~$44 million in 2001 to
~$18 million in 2002 (mostly because of a significant decline in the number
and average size of new-client contracts). One of the company's current investors
currently with ~20% of ownership, Insight Venture Management,
only a few weeks before Allegis acquisition, reportedly offered to buy the still
outstanding piece of Click Commerce. One is to wonder how the Allegis acquisition
might and affect Click Commerce's sale in the future.
Still, the sound cash position and revenue stream provided by Allegis' ASP customers should at least help provide a predictable revenue stream for Click for some time to come. Further, to PRM specialists' favor might go the fact that IT-wary resellers will not always be amenable to dealing with heavy-footprint large enterprise systems, and will prefer lighter and more agile point PRM solutions like Click Commerce.
User Recommendations
Combined respective Click Commerce and Allegis customers should consider this event as a move toward a more viable position for their IT investment, given the combined company stands a better chance to deepen its ability to provide elements of comprehensive demand chain management. Prospective customers in new' Click Commerce entity's core industry verticals should look favorably on the acquisition in the long term. There will be a few rough spots on the path until then, though.
Users should not expect a unified suite of applications to be available before the second half of 2003, and should challenge the company to commit to more certain product development and migration strategy roadmap. Click Commerce did mention it would release some level of an integrated product by May 2003 but has not indicated the details. Consequently, until the merger is consummated, users evaluating the above individual products should keep themselves informed, and consider generally available (GA) functionality only.
Users
should ask the following questions when evaluating the Click-Allegis combined
offering:
-
Are there any price advantages offered to existing clients who elect to purchase/migrate
to the future integrated products?
-
Will (and when) the applications share a common server platform and user interface?
On a more general note, the initial step for companies thinking of investing in PRM is to develop their overall business strategy regarding their indirect partners' channel. Manufacturers and service providers should give as much attention to their demand side as they do to the supply chain in terms of more advanced online facilities beyond simple shop windows and web catalogues. Also, PRM software should only be used to work alongside existing inter-personal relationships, and not to replace them. PRM is just a facilitating tool while it does not replace people, it can nonetheless free them up to do the quality relationship building. An undefined channel strategy, an unclear channel purpose and role definition, insufficient channel program support, and/or unrealistic expectations from the channel would be perfect examples of disastrously poor foundation practices onto which one should attempt to graft PRM software.
Companies can generally chose a PRM system that is either a focused solution that addresses specific complex partner network needs or a larger, versatile solution with deep integration to CRM and other parts of the enterprise applications. Choosing a solution will also depend on the company's market size, its vertical focus, and the most compelling parts of channel design and the customer lifecycle. The solution also has to address mission-critical issues, to provide tangible payback, and to be easy to use.
If you have only 20%-30% of your turnover through the channel, the real benefits of PRM might then come mainly when it is integrated with a CRM system. Conversely, manufacturers that make over 80% of their sales through multi-tiered distributors, a focused but flexible PRM might be a better choice. Enterprises should look for solutions that support a dynamic and potentially unlimited number of channel relationships and the specific, complex business processes that flow within the tiers of the channel. Since the PRM market is shifting from being single-channel-centric to delivering multi-channel platforms, the single-channel solutions will likely provide only short-term results, as they will not easily scale to serve multi-channel needs, and may force a duplication of subsequent efforts across multiple channels.
On the other hand, single-channel focused PRM solutions are naturally less expensive, faster to implement and tend to fit better within existing organizations, since they usually offer deeper functionality in pre-sales, sales and post-sales operations. More complex multi-channel management solutions, conversely, should offer consistency across channels and integration with core business processes, but will likely exhibit more shallow PRM functionality while imposing longer, more complex and expensive implementations.