It's been an eventful 12 months. This time last year the market was adjusting to Oracle's successful takeover bid for PeopleSoft; one year on and it's getting used to the idea that Siebel is soon set to join the ever increasing collection of software companies being gobbled up by the database giant.
But beyond that there's been a lot of other activity in the customer management space. The SME sector saw some interesting activity with a repositioning of Sage Group and the arrival at last of Microsoft CRM 3.0. Meanwhile the SME heartland saw further increased on demand deployments while enterprise implementations of the hosted model were also on the increase.
So who's up, who's down and who's standing still in the CRM market? Well let’s start with the big players. Oracle has had an expensive time of it, gobbling up PeopleSoft, Retek and Siebel as well as few other trifles along the way as in-between meal snacks.
It's further proof that the company’s stated policy reversal of aiming for growth through acquisition as opposed to its traditional practice of growth through development is being enacted. There's nothing fundamentally wrong with that - and Oracle’s predatory practices have finally kicked off the period of market consolidation that has been predicted for so long - but it does beg a series of questions.
There was already enough doubt about Oracle’s ability to absorb PeopleSoft (with the still undigested remains of JD Edwards inside that company). But throw into the mix, Retek and now Siebel - not to mention Oracle’s own applications - and there’s a pretty big mixing bowl to be stirred into something edible. That something is Fusion - a still somewhat nebulous long term vision that might be a roadmap or an architecture or a grand design (or a book or a play or a film for all I know!).
Delivering on Fusion is going to be an enormous challenge for Oracle in 2006 and beyond. Larry Ellison will continue to be haunted by rivals (and irritating journalists) quoting back at him his own sneering comment about it being easy to write cheques, more difficult to write software. Oracle must start to put more meat on the Fusion bones before it sets out to buy any more marketshare.
As for the forthcoming Siebel takeover, this in its own right sparks a few more questions - most notably how many CRM products does one company need to have? And if you find yourself with 4 or 5 different offerings (with different code bases) then which one takes precedence as you wait for Fusion to turn up. It was PeopleSoft CRM about 6 months ago; now it's most likely Siebel. It that's the case, then how hacked off are you supposed to be if you’re a PeopleSoft CRM user. And if you’re a JD Edwards customer, well...do you see any future beyond picking up the phone to Salesforce.com or Microsoft?
Salesforce.com has continued to go from strength to strength, even if there has been some speculation about the progress of projects at the higher end of the enterprise space. But there are plenty of happy customers prepared to testify to Salesforce.com’s functionality. An interesting development is the firm’s move to transform the software as service model into a platform in its own right, an ecosystem in which third party developers will produce their own vertical applications based around Salesforce.com. This is not a new idea in its own right, but it puts the firm on a direct collision course with Microsoft. For 2006, I'd expect to see more and more emphasis placed on the expansion and population of this ecosystem. The company will also have to manage the Wall Street analyst community which has been pretty much on side to date, but over time will inevitably find reason to carp.
Elsewhere the hosted sector will continue to outstrip the on premise CRM market in terms of growth. For companies such as NetSuite and RightNow which have proven track records in this space there will be increased competition from a repositioned Sage Group as well as the new found enthusiasm in the Microsoft camp for the Software as Service approach.
Microsoft has yet to confirm that it is working on a CRM Live hosted option that it can offer itself - depending for now on third parties to deliver this model on its behalf. But with Messrs Ballmer and Gates both seemingly incapable of getting to their hind legs without talking about a future in which its business applications are offered as a service. It's a radical revisiting of established Microsoft practice, but the ruthless way the firm made its late entry to the browser market in the 1990s should serve as a warning to all comers. And if all the other leading business applications are to be offered as a service then it defies all logic that MS CRM won’t eventually join them.
In the meantime the company has shipped MS CRM 3.0 - two weeks early or 50 weeks late depending on how charitible you’re being. It’s an incredibly important release for Microsoft and from the early reaction from users it seems to be going down well. Of particular interest is the emphasis being placed on integration with Outlook and Excel and the whole Microsoft look and feel of the new release. This is a potentially big tick in the box for Microsoft that will be appealing to a lot of users for whom CRM is too complex but for whom a Microsoft-flavoured desktop is entirely familiar.
In that respect Microsoft bosses must be awaiting the arrival of the first fruits of the joint Mendocino project with SAP with a little trepidation. Mendocino is about beefing up integration between SAP back office and Microsoft desktop applications like Office and Excel. Given that SAP’s own CRM will be in this mix, it looks at first sight that a Microsoft competitive advantage is if not being thrown away, certainly shared around...
As for SAP itself, the company needs to add some flesh to the skeletal bones of its on demand strategy. We know it exists, but that’s about it. Saying that it will fill in the blanks sometime in the next 12 - 18 months may be enough to stop SAP customers reaching for the Salesforce.com or Oracle telephone numbers, but as a strategy it’s not got long term .
So what have the highlights of 2005 been for various industry figures. CMC asked a few of them for their comments:
Brad Wilson, general manager Microsoft CRM
"Delivering a product to the market that offers the simplicity that users have been looking for has been a definite highlight. Seeing the response to that has been genuinely exciting."
Marc Benioff, CEO, Salesforce.com
"My personal highlight: September 12, 2005
Years of hard work by our team had culminated in what was planned to be our most important announcement ever. For months we had perfected the product, and we had been refining the pitch in countless hours of rehearsals. Finally, the day had come when we could announce the AppExchange, our application sharing service. Confidential briefings with customers and analysts told us that we had a hit on our hands and the world was ready for a whole universe of on-demand applications that could be installed with just a click.
But the plans didn't work out that way. It was much better - impossibly so. I didn't sleep much that night. Then, before dawn, a huge gift from Larry Ellison. He put Siebel shareholders out of their misery, something that we had been doing for Siebel customers for years. The news energized the crowd at Dreamforce and gave our announcement even more rocket fuel."
Greg Gianforte, CEO, RightNow Technologies
"More than any other year, 2005 has been the year of on demand software. All major software vendors did an about face with their on demand software position. SAP, which previously claimed it would never take this route, promised several times in 2005 that it would be making an on demand software announcement 'soon'. We saw Microsoft make a move with CRM 3.0 and even Oracle had a wake up call, buying Siebel to get into the business. Unfortunately for Larry the alarm buzzer went off 8-years too late. While Oracle has been busy buying software vendors, companies like RightNow were working on the new dawn of software - providing enterprises with a true alternative to client - server software. Now Larry will find he has some ground to make up while also undertaking the world’s largest software integration project.
The same can be said for Bill Gates and Co. Well done for realising that there may be something in this software-as-a-service sea-change, bad luck in thinking that it can be done via the channel and as a single-tenant proposition – there are no economies of scale or margin in single tenant hosting hence the wholesale failure of ASPs in the 90’s. What all of these moves do serve to highlight is the fact that on demand is the way companies want to consume their software applications.
But it's not the fact that some industry behemoths are moving, albeit in their own strange and unique fashions, towards offering software-as-a-service; a true 2005 highlight is that enterprises continue to embrace the benefits offered by hosted applications. For my own part, I can only talk about how we’re seeing our on demand CRM customers join in the industry shift from old guard, client-server deployments, to something altogether more cost effective, scalable and easier to deploy. But even more than this, as we work in an industry with a history of not being able to deliver, the highlight for us is, and continues to be, a customer retention rate of more than 90% - the true litmus test of on demand success."
Chris Boorman, vice president marketing EMEA, Salesforce.com
"I have been a believer in on-demand computing for many years. Now working for the pioneers behind such a powerful platform as AppExchange, I witness the impact and endless innovation that salesforce.com delivers to customers and industry. In 2005 traditional vendors either collapsed or succumbed to our model. On-demand is truly a reality. What will 2006 bring?"
Zach Nelson, CEO, NetSuite
"My personal highlight was experiencing true English binge drinking with two Scottish journalists and an A.A. Milne relative. [Editor’s Note: I'm saying nothing...!] I am hoping thatin 2006 I will get to meet Posh and Becks because as they are the only subject covered more than binge drinking by the UK media! My professional highlight was having NetSuite named the fastest growing software company in North America by Inc. Magazine and Deloitte Consulting. And what's as rewarding is that we are growing even faster in the UK than we are in the US."
Neil Morgan, vice president EMEA marketing, Siebel
2005 was the year that smaller companies woke up to the benefits of CRM and embraced what technology can do for their business. We also saw CRM becoming more sophisticated, moving from understanding the customer to influencing the customer. This shift occurred because analytics provided sales and marketing departments with the capability to make business decisions based on what they already know about the customer. The move from efficient use of CRM to effective application was key this year."
What are your CRM predictions for 2006? What's key to you and your organisation in the coming year? Click the 'Add your own comment' below to share your thoughts and opinions.
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