Gartner predicts survivors in CRM battle

Mid-size firms looking to make an investment in Internet-based CRM services should take a closer look at what their vendor is offering before signing on the dotted line, according to a study from Gartner Group released Monday.

The study predicts only 20 per cent of e-services providers will survive industry consolidation by 2004. And the advice from Gartner seems to indicate that in the long run, bigger is better. While smaller software firms may offer e-services as their core competency and provide a better solution, the concern is whether the company will survive market consolidation in the next three years.

“With the exception of Oracle, Siebel (Systems) and PeopleSoft, just about everyone out there is free game in the next two years,” said Esteban Kolsky, senior research analyst, Gartner Group. “Customers are trying to move towards have a single vendor provide an entire solution for CRM and they are really moving away from having say, someone line Kana for customer service and Epiphany for marketing and Siebel for sales. They want to have Siebel do everything or Kana do everything.”

Gartner defines e-services as customer service over the Internet. In the future that will include other channels such as wireless, but right now the ones that can be implemented efficiently include automated e-mail response management, interactive chat, collaboration tools, Web-based self-service and voice-over-IP.

“For the most part if they don’t have (those things) they won’t be there in the future,” said Kolsky.

Right now less than 45 per cent of vendors offer solutions that provide three or more of those critical components and even those that do frequently lack integration between them all. The three killer apps to have right now said Kolsky are e-mail, chat and Web-based self-service.

But by 2004, the Gartner study predicts that the 20 per cent of vendors left standing will have acquired or implemented new components to provide a more rounded solution.

“There are two different companies out there right now,” said Kolsky. “First you have the three vendors of CRM — PeopleSoft, Oracle, Siebel who have e-services as part of their offering. But when you go a little further than that you have the smaller companies and the problem they have is two-fold: financially speaking we don’t know how much longer they are going to be around.”

Gartner forecasts that smaller e-services companies will be acquired by some of the larger vendors to round out their current CRM packages.

“If you’re already using PeopleSoft for CRM, you will look at their e-service solution with a keener eye even though they are far from being the leader in e-service. And because it already has so many installations of CRM, they are probably looking at what they need to complete their suite, so they’re probably going to acquire somebody else to provide a better e-service solution.”

As an example of some of the consolidation taking place in the e-services market, Menlo Park-Calf-based Kana Inc. just merged with Broadbase Software Inc. — bringing U.S.$150 million into Kana’s coffers.

Kolsky says Kana will likely survive, but as part of a bigger suite belonging to a larger vendor. Kana’s clients include Ford, General Motors, Eddie Bauer and eBay.

“They seem to be okay for now and they are on their way to profitability this year,” said Kolsky. “RightNow Technologies however, is doing fairly well but is not profitable in the old economy sense of profitability, but they are on their way. There are other companies in much worse situation.”

While some customers will be orphaned if their provider goes out of business, others could be inconvenienced as the new provider integrates all its former customers.

“It’s the potential expense of having to go with a new solution. It’s highly unlikely someone will acquire Kana and maintain the solution exactly the same way it is and maintain compatibility for all the different versions. If someone were to acquire Kana more than likely Kana would be incorporated into a bigger suite,” said Kolsky.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Related Tech News

Get ITBusiness Delivered

Our experienced team of journalists brings you engaging content targeted to IT professionals and line-of-business executives delivered directly to your inbox.