Event Summary
According
to many recent reports in the press, it appears that Xchange,
Inc., once one of the leading marketing automation and analytics providers,
has very recently closed down its operations. Part
One of this note discussed the specifics of the Xchange demise
and related it to the changing nature of the ERP market. It also noted that
almost all traditional ERP vendors (small and big alike) had to experience a
wake up call' and have long been trying to expand their product offering in
tune with the ever-changing trends and requirements of the new collaborative
economy.
Collaboration Is Key
To that end, over the last few years, all significant enterprise applications players have been actively partnering or finding other ways to provide solutions that allow businesses to collaborate more effectively. Consequently, the boundaries between ERP, CRM, e-commerce and SCM have meanwhile blurred so much that any attempt to functionally separate them becomes ever more pointless. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the once considered more remarkable and supposedly more relevant CRM and e-commerce activity
The cycle begins with the attraction of the customer through sales and marketing. This hopefully results in an order management and fulfillment process and ends with a customer service, which can involve anything from field installations through to enquiry and complaint management. All of these steps have to be executed well without exception. Otherwise, the customer will end up on a competitor's list of customers. Therefore, the relative importance of CRM vs. ERP, ERP vs. SCM or of any other match-up is irrelevant. All of these functional areas are critical, except for some esoteric or autistic businesses that can go by with implementing islands of information. The 64,000-dollar question is how all business processes work together. In the electronic world, the degree of flexibility and efficiency of collaborative processes relating to the customer lifecycle, product lifecycle, and so on, to name but a few, will be a big determinant of losers and winners.
Incidentally,
Applix, with its recent exit from the CRM market (see Will
A Big Fish's Splash Cause Minnows' Flush Out Of The CRM Pond?), may exemplify
the other side of the CRM medal nowadays, as droves of smaller pure CRM vendors
have been hard pressed to survive owing to the combined effect of CRM users'
disenchantment with the products' hardly ever materialized benefits, after a
hasty infatuation with its touted silver bullet' mantra (which once also happened
to its older sibling ERP's users), compounded with the tight IT budgets due
to the worldwide economic recovery delay and with Microsoft's
entry into already crowded place. Although many mid-market pure-CRM solutions
have been maturing and improving, they must continue to facilitate integration
with back-end systems, given the increasing awareness of this need for full-fledged
benefits of CRM. Further, they must also provide the differentiation through
verifiable return on investment (ROI) metrics, and indispensable features and
functions germane to selected industry verticals.
Despite these niche CRM vendors' attempts to overcome these challenges, many will continue to struggle to avoid insolvency, while the luckier ones that have some attractive point solutions (e.g., partner relationship management (PRM) or portal solutions) that large enterprise vendors would still gladly incorporate will become acquisition targets. Although Xchange might have held out longer than most of its peers after the dot-com bust, it is a crumb of comfort to its stranded customer base now. Its predicament has been only aggravated and expedited by the company's public nature, given that some of its privately-held competitors have not had to come out with an array of dismal results and thereby further feed investors' bad sentiment and pessimism.
Larger CRM vendors have, on their hand, been weathering the storm by relying on cross-selling broader CRM application suites to their existing and potential customers, involving also components such as Sales Force Automation (SFA), employee relationship management (ERM) or call centers. Marketing automation point solution providers have particularly fallen prey to pessimistic investors and diminishing global corporations' appetites for technology. They have taken the impact of the slowdown because of a more budding market yet to create the market awareness of its true value proposition, and because of the slower adoption of information technology in marketing departments. These applications will have also often been perceived either as luxury (a nice to have' but not show-stopping) applications in these days of anyone hardly having any customers at all, or, in cases of customers valuing the proposition, they might be much more inclined to obtain it as a part of a broader CRM suite (if not even from an ERP provider) rather than as a point solution. Thus, the need for providing a full, comprehensive CRM suite rather than an individual solution or a bundle of point solutions for each distinct CRM area remains firm, and will urge further CRM (and overall enterprise applications for that matter) market consolidation.
The
seriousness of these narrow product footprint vendors' predicament might be
well illustrated by the Applix' departure, given the vendor had a solid CRM
product breadth and technology foundation, a good implementation track record
with nearly 1,000 satisfied customers, and some notable endorsements from ERP
vendors that have been remiss in delivering their own CRM (i.e., SSA
GT and Geac Computers Corporation). Many pure-CRM
players that cannot even come close to the above traits should do their own
math and analyze the justification of their independent existence within the
CRM battleground. Not surprisingly, marketing automation-only providers have
long been falling away to the extent of only a few possibly also endangered
remaining providers like Unica, Aprimo, MarketSwitch,
and MarketSoft. PeopleSoft's acquisition of
Annuncio (see PeopleSoft
Annuncio-es Continuation Of Its Shopping Spree ), Kana and Broadbase merger
(see The
Mid-Market Is Consolidating, Lo And Behold ), Pivotal's
recent acquisition of MarketFirst, DoubleClick's acquisition
of Protagona, S1 Corporation's acquisition of Point
Information Systems, Vignette Corporation's acquisition of DataSage,
and Chordiant's acquisition of Prime Response all should indicate
diminishing life expectancy of independent CRM point solutions providers.
CRM Difficulties Contrasted to ERP
Why has it been so difficult for CRM point solution providers to even find a white knight, which has not generally been the case with even ancient ERP products? With several generations of some ERP products being available over a long period of time, the product development costs have been spread among a large population of users. These annual service & maintenance fees thus represent a substantial portion of revenue for most ERP vendors, and even if the product has not been actively marketed any longer, that revenue stream is going to be attractive to someone, if not to the original developer. This large installed base also allows for a greater aggregated vendors' experience, resulting thereby in higher-quality tried-and-true products.
The untapped ERP market segments will have also benefited by vicariously learning from mistakes and failed ERP implementations in many commercial companies in the past. Additionally, many ERP systems are now componentized, which provides phased implementations in more manageable chunks (instead of a traditional 'big bang' approach) in addition to vendors' developed implementation methodologies that are based on bypassing the usual traps of past failures. Many ERP systems have meanwhile also been Internet-enabled, which also allows for a quicker and simpler implementation, because client machines do not have to be configured time and again. Consequently, a prospective customer also has a choice of either installing software on its own intranet or renting it via an application service provider (ASP). Further, the leading ERP vendors have incorporated CRM, SCM, e-procurement and business intelligence (analytic) modules by developing them in-house, by acquisition or through strategic partnerships with the best-of-breed vendors.
Both
large customer base (i.e., recurring revenue) and incremental products enhancements
will have favored ERP vendors' longevity in the market, which has not been the
benefit of CRM weaklings. Many of them will not have gathered large enough client
base to find an interested suitor to try to recuperate an immense investment
given these products had to be developed on cutting-edge technologies from scratch,
as seen in Xchange's case above. Still, the most likely benefactors from Xchange's
sellout should be direct competitors like Unica, Chordiant, E.piphany,
DoubleClick, SAS, and NCR Teradata. These vendors either have
enough resources and/or they have open solutions that can either supplant or
can be grafted onto Xchange customers' instances. Some of them have apparently
even already migrated some chunks of customer base and will be going after the
remaining installed base with much zeal, while most of them have a more attuned
product, more relevant customer references, and more dedication to marketing
automation than large CRM/ERP suite vendors. Still, the large suite providers
like SAP, Siebel, Oracle or PeopleSoft will indirectly benefit
by citing Xchange's case to point out the need for a single-source, viable provider.
User Recommendations
While we cannot advise Xchange's perturbed customers to remain cool, calm and collected, we do not recommend any knee-jerk reaction either. Due diligence and development of case scenarios for either a radical system change or remaining with the status quo states goes without saying. In the case of a successful implementation, smooth business processes flow and users being fond of the system, one would have to reckon with the tremendous issues of managing change and user resistance. Unless there is a crying need for and apparent (preferably quantifiable) benefits from abandoning the product currently in use, you may be better off by hanging on for awhile, especially if your campaign management processes are well attuned and if you have no major upgrades planned any time soon. Nevertheless, be on high alert and develop medium- to long-term alternative plans for moving to a new technology, particularly if you are anticipating major upgrades or enhancements in the near future. Ensure that you have the prerogative to change the source code and a team of skilled resources available (approaching former Xchage staffers could be an option too). 'Self-sufficiency' should be the name of the game.
In
case of the urge to jump ship following the above ownership change, look for
one of the above mentioned vendor alternatives,. Alternatively, marketing services
and former Xchange implementation partners like Harte-Hanks, Axciom,
Epsilon, KnowledgeBase Marketing and Fair Issac might
already have existing relationship with you, and, since they will have also
heavily invested in the software, they will likely gladly oblige you with an
ongoing support. An installed base of even modest size albeit of renowned customers
like Xchange's one should generate enough recurring revenue to support a development
group that will enhance the product at least enough to keep it viable at least
in the current technological environment.
Given Xchange's high-profile customers and technologically strong product, one would have expected an acquirer to pick up support for the software for a considerable length of time, and to gain entrance into several attractive industries, and to offer a marketing automation product that would be more functional compared to what larger suite vendors can provide. However, that is not necessarily true for Amdocs. Even the fact of Unica's lack of interest to acquire its former foe whose employees that had developed the software have all left might indicate it will be difficult for any acquirer to continue to enhance Xchange's platform. One exception will likely be communications companies — Amdocs has long been a strong leader in customer care and billing applications, and with the Xchange acquisition (following the Clarify one), it may position itself well as an almost complete, front-office solution in the communications arena.
Communications companies who are already customers of either Amdocs or Xchange should thus be even encouraged by the purchase, and can anticipate a unified CRM offering tailored to the communications industry in the foreseeable future. For the rest of the Clarify customer space, the outlook is not rosy, given Amdocs' close alignment with the communications industry. Although Amdocs has even bundled its own CRM functionality including order management and analytics into ClarifyCRM 11, due to the lack of Amdocs' serious sales and marketing effort in other industries, the fact that Clarify was once upon the time second to only Siebel in the CRM market now sounds almost as archaic as talking about the might of former Austro-Hungarian Empire.
Thus, Communications Service Providers (CSPs) should definitely take a look at the benefits they can gain from an integrated approach to the front office, specifically tailored to their needs. If you are a current Xchange customer outside of the communications space, time will only tell what level of support, both for bug fixes, new functionality, and general call support, you will receive. Thus you may want to start scoping out some alternatives, if you plan on keeping pace. It is not that unlikely though that, ultimately, Amdocs will bifurcate the Xchange code base, and find another company, preferably one of the above-mentioned consultants that are already involved in some level of Xchange support or implementation activities, to take on both the code base as well as the customer base, helping Amdocs rid itself of the overhang of Xchange's previous multi-industry focus.
If you are neither of the above, Xchange should for quite some time no longer be on your list of viable alternatives to consider in the CRM space. Until the acquisition is consummated and new product strategy becomes clear, we do not advise potential users to evaluate the product. We rather suggest evaluating the bells-and-whistles, price, and corporate viability of other vendors instead, before making a selection.
On a more general note, given that over the last few years, the enterprise applications market became stratified into growing and profitable vendors on one side, and stagnating and non-profitable vendors on the other side and since this will become even more accentuated, customers are advised to conduct due diligence regarding vendor viabilities. Still, even a fairly solid balance sheet cannot guarantee that the vendor will remain intact a few years down the track. Neither should you perfunctorily cross out a vendor just because it is not as big, and seemingly not financially viable, as some usual suspect behemoths on your list, given many recent success story of nimble, highly focused vendors in certain markets, whose ROI has been much more tangible and faster than those of large generalist providers. Ignoring these would only defeat the purpose of a due diligence, and would only nurture creation of a few complacent, large vendors' oligopolies.