First North American Magic Quadrant: CRM Suites for SMBs
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1 Markets, J. Outlaw Research Note 6 February 2002 First North American Magic Quadrant: CRM Suites for SMBs Customer relationship management application suites have become the most-popular form of CRM technology acquisitions by most small and midsize businesses. Core Topic Small and Midsize Business: Application Strategies Key Issue Which vendors delivering software applications to small and midsize businesses will survive during the next three years? Small and midsize businesses (SMBs) are in various stages of recognizing and embracing two relevant philosophies about customer relationship management (CRM) and e-business. The first is that CRM as an enterprisewide strategy can have value for them. SMBs recognize that CRM is not just for large enterprises and that it can help them: Keep the customers they have and grow their business with those customers Add new customers Lower their operating costs in areas such as sales, customer service and marketing The second philosophy being adopted by midsize businesses and, to a lesser extent, by small businesses, is that their e- business transformation strategies and plans should not compete for resources with their CRM strategies and plans. Rather, the strategies should be merged and, thereby, become synergistic. Unlike the first philosophy, the second has not permeated as many SMB markets, except for market segments such as financial services, communications and high-technology. SMBs views toward these two philosophies, in addition to their traditional values, determine the kinds of CRM solutions they purchase and the vendors they select to support their CRM strategies. The market for CRM solutions focused on SMBs is overflowing with choices. The majority of vendor applications fall into the integrated suite category, because SMBs prefer integrated solutions. These suites typically support the primary CRM applications (sales automation, customer service automation and marketing automation) across a variety of customer interface Gartner Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
2 points, such as in-person, over the telephone and via electronic means (Web, , fax and text chat). Gartner Dataquest estimates the SMB market for CRM applications is only about 20 percent penetrated. Due to the economic conditions of most SMBs, sales of CRM applications slowed dramatically in There is an influx of new competitors (Salesforce.com, Talisma, TriVium Systems) and down-market penetration by large enterprise CRM and enterprise resource planning (ERP) vendors (Oracle, PeopleSoft, SAP and Siebel Systems) into the SMB CRM market. This will put additional economic and price pressure on the traditional SMB CRM vendors (Applix, Epicor Software, Interact Commerce, Onyx Software and Pivotal Software). Through 2003, a significant consolidation of the CRM vendors for the SMB market is likely, and 35 percent of today s vendors focused on CRM suites for SMBs will merge, be acquired or cease operations (0.8 probability). When evaluating vendors in the Magic Quadrant (see Figure 1), consider the vendor s Ability to Execute and its Completeness of Vision to support SMBs CRM requirements. The specific criteria (functionality, viability, service and support, technology, cost and vision) when evaluated along these two views provides the framework for positioning vendors in the market (see The Complete SMB Guide to CRM Vendor Evaluation, COM , and An SMB s Guide to Evaluating CRM Technology, COM ). 6 February
3 Figure 1 CRM Suites for SMBs Magic Quadrant Challengers Leaders Siebel (MidMarket Edition) Pivotal Software Ability to Execute Oncontact Software Saratoga Infinium PeopleSoft IACT (SalesLogix) Epicor Software Applix Onyx Multiactive Software Talisma Salesforce.com FrontRange Solutions Trivium Technologies Firstwave As of 1/02 Niche Players Visionaries Completeness of Vision Source: Gartner Research Base Criteria for Inclusion in CRM Suites for SMBs Magic Quadrant Support for the primary CRM application functions: sales automation, customer service automation and marketing automation Base-level integration between the primary application functions Compliance with the CRM technology sweet spot Leaders Characteristics include: Strong, balanced functionality for sales, customer service and marketing Fully and seamlessly integrated sales, marketing and customer service functionality Robust and coordinated support for multiple customer interface channels Robust support for disconnected use Easy-to-use, intuitive interfaces 6 February
4 Proven integration with ERP and other operational applications, as well as other customer-facing and CRM components Horizontal foundation with support for industry vertical solutions Robust development, customization and system administration environments and tools that can be understood and used by end users, for system administration, and by IT users, for extending and customizing functionality Strong vendor viability Challengers Characteristics include: Strong development organization and ability to fill gaps in products quickly Strong marketing, sales and support organizations Strong sales and support channel organization Limited or unclear commitment to SMB market and SMB requirements Visionaries Characteristics include: Strong focus on SMB market and requirements Some leading-edge technology or functionality Niche Players Characteristics include: Focus limited to specific hardware or software platforms Focus limited to specific industry or geographic market segments Sometimes unbalanced functionality among suite applications Sometimes weak integration between functions Often lower-than-average prices to acquire and to maintain Less depth and sophistication in functionality 6 February
5 Key Vendor Profiles Leaders Onyx had a very difficult 2001, with financial losses and personnel layoffs throughout the year. In addition, Onyx has struggled in its efforts to target the low end of the large-enterprise CRM market, while maintaining its appeal to midsize businesses. However, Onyx remains a market leader in the CRM application suite market for SMBs due to its leading-edge Microsoft-centric architecture and its strong functionality across the three primary CRM functions that provide sweet spot functionality for SMBs. We forecast another difficult year for Onyx, because the market segment Onyx targets (high end of midsize and low end of large enterprise) will be among CRM s most hotly contested segments. When to consider: When requirements include strong customer service functionality with contact center integration, financial services experience and scalability for hundreds of users. Pivotal targets the high end of the midsize enterprise and the low end of the large enterprise markets with its products and services. Pivotal s CRM suite offers SMBs deep functionality and a Microsoft-centric Web-native n-tier architecture. Pivotal also announced financial losses and personnel layoffs in 2001, as well as a new CEO and senior leadership team will be a crucial year for Pivotal to prove itself in its chosen markets as it recovers from the economy to face even tougher competition. When to consider: When requirements include strong sales functionality with support for multiple customer interface channels, particularly the Internet and Web sales, Microsoft SQL Server or Oracle databases, and scalability for hundreds of users. Challengers PeopleSoft announced availability of its Accelerated CRM bundles (Accelerated Sales and Marketing, Accelerated Support) in August These are PeopleSoft s offerings for SMBs and are based on its large-enterprise CRM suite, packaged and priced into midsize enterprise-appropriate bundles. PeopleSoft8 CRM offers strong functionality across the three primary CRM functions. Customer service and integration to its other operational applications accounting, human resources, supply chain management (SCM) are its strongest suits, and support for mobile sales (disconnected use) is its weakest. In addition to its financial services solution released in late 2001, PeopleSoft is developing industry-specific options and will make three or four available in 2002 (0.8 probability). 6 February
6 When to consider: When requirements include scalability and a growth path into large-enterprise-class functionality, strong vendor viability, pre-integration to PeopleSoft s back-office applications and industry-specific support. Siebel began shipping Siebel 7 MidMarket Edition (MME) at the end of The new suite supports a zero-footprint browser client and increased functionality across the applications. Siebel announced industry-specific support for investment management, retail banking, insurance and healthcare. Like other vendors whose experience is with a direct sales channel, Siebel has had its challenges building and strengthening its indirect channel. Great Plains Software has been one of Siebel s most-significant channels for MME to date. Siebel has improved its ability to address SMBs CRM requirements. It needs to do more in the areas of flexibility, ease-of-use and cost before emerging as a market leader in CRM for SMBs. When to consider: When requirements include solid and wellintegrated functionality, a growth path to enterprise-class functionality and scalability, strong vendor viability and industryspecific support. Visionaries Applix re-engineered its applications to a Web-native architecture with r.8 and is now well-positioned to build on this strength by adding fully embedded analytics in early When to consider: When requirements include strong customer service functionality, Web-native architecture, and analytics for sales, customer service and marketing. Salesforce.com is an online CRM application suite primarily focused on SMBs. In early 2002, Salesforce.com is expected to introduce an Enterprise Edition with support for application integration, multidepartmental configuarability and more-detailed, user-managed system administration. When to consider: When requirements include ease-of-use, intuitive interfaces, low costs (for startup and ongoing), basic-togood sales functionality, basic customer service and marketing functionality, limited support for disconnected use and rapid implementation times. Talisma s ecrm suite has a cutting-edge, Web-native architecture and solid functionality for pre-integrated sales, customer service and marketing functionality, as well as support for application and call center integration. 6 February
7 When to consider: When requirements include Web-native architecture to facilitate tight Web application integration, browser or thin-client access, limited support for disconnected use and support for multiple integrated customer interaction channels (Web, telephone, chat, , in-person). Niche Players Epicor s efrontoffice CRM suite offers solid functionality across the primary functions. Epicor plans to port its suite from its Webenabled client/server architecture to Microsoft s.net architecture in When to consider: When requirements include integration to Epicor s back-office applications, SMB-appropriate levels of functionality, a migration path to.net and rapid implementation. Oncontact is privately held and relatively low-key in its marketing, but has a solid CRM application suite designed exclusively for midsize business requirements. Oncontact only sells the full suite, and maintenance fees include all application upgrades. When to consider: When requirements include good functionality, well-balanced and fully integrated across the primary functions; high-technology, financial services and manufacturing expertise; and strong support for back-office application integration. Sage Group acquired Interact Commerce in 2001 and, with it, the midmarket CRM application suite SalesLogix. SalesLogix had been firmly focused on midsize enterprise CRM requirements, but, in 2001, Interact Commerce introduced a fixed-price offering with software, services and training for small business. When to consider: When requirements include strong sales function across multiple customer interface points, support for disconnected use for hundreds of mobile users, ease-of-use, high configurability and back-office integrations. FrontRange Solutions GoldMine FrontOffice (GMFO) also plans to move to a.net architecture in FrontRange is focused on the middle to the low end of the midsize and the high end of the small-business CRM markets. GMFO exhibits vestiges of its origins (combining GoldMine SFA and HEAT) in less-thanseamless functional integration. GMFO has limited support for marketing automation. When to consider: When requirements include basic CRM functionality, lower-than-average purchase price, rapid implementation and a path to.net support. 6 February
8 Acronym Key CRM Customer relationship management ERP Enterprise resource planning MME MidMarket Enterprise SCM Supply chain management SMB Small and midsize business Bottom Line: Despite the current slowdown in the economy, and the resulting slowdown in the acquisition of CRM solutions by SMBs, the long-term trend is for continued and increased adoption of CRM and the enabling technology by SMBs. The quality and maturity of the CRM suites for SMBs will continue to improve. The most-successful vendors will focus most closely on the needs and requirements of SMBs. Vendors that do not focus on the core values of SMBs, as well as manage their own businesses carefully, will not weather this economy and the upcoming market consolidation. Until the economy and the CRM market rebounds, SMBs must increase the weight they assign to vendor viability in their CRM suite acquisition decisions. 6 February
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