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.
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.
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.
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.
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.
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.
Market Cap (000,000s)
Higher Than MSTR
fiscal year ends 2/28. All other vendors' fiscal year ends 12/31.
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