Magic Quadrant for CRM Customer Service Contact Centers

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1 Page 1 of 13 Magic Quadrant for CRM Customer Service Contact Centers 9 April 2010 Michael Maoz Gartner RAS Core Research Note G This Magic Quadrant looks at customer service software for the human agent in the contact center versus self-service. Enterprise demands for analytics, integration with Web customer service and communities are driving changes in the industry. What You Need to Know Strategic Planning Assumption(s) This document was revised on 5 May For more information, see the Corrections page. Through 2013, four major initiatives will dominate overall customer service strategies: Tying together service interaction channels Integrating social CRM capabilities Analyzing the customer experience Applying business rules and knowledge in real time Two major challenges will impact the definition of market leader in the CRM customer service contact center space, which focuses on tools for the human agent or service representative: A new generation of customers has a deep resistance to telephone-based customer service. Customers expect best practices in one industry (for example, Amazon.com in online retail) to be the norm across industries. These changing expectations come at a time of continued economic uncertainty, with business leaders observing signs of renewed growth while continuing to view discretionary investments cautiously. Vendors in this space must have convincing business cases and metrics to demonstrate that their products will have a measurable impact on one or more key performance metrics in the customer experience. The argument for increased investments in the customer service contact center is bolstered by two facts: Many organizations are facing upgrades of infrastructure, such as older client/server applications, from long-defunct companies, and there are new demands to support the Web-based customer. Customers expect to find their own answers and solve their own problems, and when they cannot, they want the opinions of their peers in forums, communities and microblogs. These realities are changing the Magic Quadrant evaluation criteria. As was the case in 2009, budget realities will have an impact on the ambitious goal of creating an integrated and consistent customer experience across channels. Corporations, governments, universities and not-forprofit agencies have made promises to their constituents (customers, citizens, students and donors/supporters, respectively), and they are now discovering that a failure to provide fast, personalized, accurate and consistent service is leading to customer defection. Government is an exception, in that customers do not defect, so much as vote for change. The customer service software market in the core contact center will compete for budget money with Web customer service, analytics and social CRM projects. Vendors that can demonstrate a strategy of providing support for all four of these areas (contact center, Web, analytics and social CRM) will be best-positioned to lead the market. In priority order, the most frequently cited need for new capabilities in 2010 and 2011 will be: Knowledge management for the service agent A single view of the customer experience and history (customer data integration) Consistent treatment of the customer across channels and media Human support of online communities of users: blog creation and management, bookmarking, collaboration tools, community forums, discussion boards, Really Simple Syndication feeds, recommendation engines, social networking (tagging, content creation, rating, ranking), and wikis Extension of agent presence to online communities Multichannel capabilities ( , Web chat, telephone, Short Message Service [SMS]) delivered as a standard feature, rather than complex customization Support for mobile customers Real-time decision support (analytics) to understand customer intentions, and customize services and interactions accordingly Strong business process management (BPM) capabilities for the customer service function Like all Gartner Magic Quadrants, the 2010 Magic Quadrant for CRM Customer Service Contact Centers is not intended to be the sole tool for creating a vendor shortlist. Use it as part of your due diligence and in conjunction with discussions with Gartner analysts. By 2013, at least 35% of customer service centers will integrate some form of community/social capabilities as a part of the contact center solution. Through 2011, 30% of organizations moving to a new platform will select a software-as-aservice (SaaS)-based solution as the core customer service desktop. Note 1 Customer Service Contact Center Needs Best-of breed expansions to the customer service contact center Knowledge base for self-service: Webbased self-service using a knowledgemanagement-type solution that's accessed via a website or Web storefront response management systems (ERMSs): management environment with optical character recognition (OCR), routing, a virtual agent and other features Web chat: Online, Web-text-based chat with a live agent, or speechbased interaction with a virtual assistant Collaborative browsing: Simultaneous browsing of a website to assist with a shopping cart or forms completion Virtual assistant: Interaction with a "virtual person" via the Web, SMS, messenger and other interfaces Multimodal services: Service notification and requesting via a mobile device or smartphone using data and an SMS channel Note 2 Pegasystems Acquisition of Chordiant Software On 31 March 2010, the U.S. Federal Trade Commission granted early termination of Pegasystems' waiting period for its planned acquisition of Chordiant Software (NASDAQ: CHRD). Pegasystems must make good on the intent stated during investor calls to support and augment the Foundation product line. Only in very limited geographic regions like Turkey does Pegasystems intend to lead with the Chordiant Customer Service Foundation product line. We do not expect active new sales of the product, but primarily an extension of maintenance for all existing production sites. Chordiant had a tight focus on supporting consistent multichannel customer service interactions for large enterprise customers, specifically with European telecommunications providers. Chordiant was one of only a few CRM software providers that supported a wide range of channels, such as customer portal, contact center and branch office. The Decision Management platform is a strong product for organizations that wish to determine customer treatment, offer prioritization and have the correct workflow for a given service process. This is important where there is upsell/cross-sell potential for an interaction. Decision Management contains a proven and effective contact center agent tool to advise and prompt the agent with the recommended next action to take with the customer. The core desktop application for customer service is not on par with the decisioning product, and Pegasystems will need to demonstrate that it can invest development resources beyond what is necessary to meet the needs of existing Chordiant clients.

2 Page 2 of 13 Magic Quadrant Figure 1. Magic Quadrant for CRM Customer Service Contact Centers Vendors Added or Dropped We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor. Evaluation Criteria Definitions Ability to Execute Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets, skills, etc., whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria. Source: Gartner (April 2010) Market Overview The market for customer service and support (CSS) applications for the contact center is split roughly into four major areas that correspond to the complexity of the information required to support the customer and the complexity of the business rules that form the steps in an interaction. In increasing order of complexity, the requirements may include one of the four major areas: Information access: These contact centers focus on low-interaction complexity and low-process complexity. They can support order placement, complaint management, password assistance or consumer information, service activation, balance look-up, timetables, or ticket purchasing. Basic CRM capabilities are needed for account information, order information and contract details, but there is less emphasis on real-time analytics or offer management. The process supported may not be particularly complex; however, the information must be reliable, readily available and delivered in an easy-to-use graphical user interface (GUI). Service process optimization: This is a customer service center or advisory center (for example, investing and insurance) with low interaction complexity, but high process complexity. It focuses on the efficiency and repeatability of the process. There may be little value in complex analytics or offer management. The goal of the customer experience is focused on process efficiency, rather than on profitability. End-to-end industry process experts: The contact centers in this context are complex and industryspecific, and often demand that the customer service representative not be forced into following a specific process for some parts of the interaction, but be forced to follow compliance in others. This is where high interaction, complexity meets a range of process complexity. For example, the steps in a loan process must be followed consistently, but the offer, rate and conditions may vary based on the customer type, profitability and potential. Intelligent dialogue/real-time decisioning: The conversations in this contact center require access to richer information about the customer and product or service, as well as sales and marketing goals. These conversations also become more process-intensive and can be driven by BPM software guided by workflow, analytics and predictive features that can be customized based on personalization rules. Vendors not on the Magic Quadrant We cover dozens of software providers that have valuable products yet do not meet our minimum criteria for coverage. These include, but are not limited to, BSI, Consona, Corizon, Infor, OpenSpan, vtiger, Parature and Vertical Solutions. We are available for assistance with these companies and products. The Role of Social CRM, SaaS and Cloud Computing For most organizations, the customer service contact center as a function that does not include access to mobile users and community views will expire by By 2011, agent access to a view into the customer's activity including Twitter and Facebook, on the organization's website and beyond will be attempted by 1% of customer service centers. We are seeing vendors such as salesforce.com and RightNow leading in this area. SaaS as a delivery model for customer service contact centers is becoming more accepted for most organizations, except for two areas: National/federal governments and healthcare organizations where regulations inhibit penetration More-complex environments with high call volumes, high transaction volumes and real-time integration with legacy systems, which can slow performance In our evaluations, we point out when we foresee a potential challenge for a product based on these limitations. Through 2010, customer service capabilities delivered in the SaaS model will be most prominent in the B2B, low-volume call/contact center. As more applications are built in a cloud-based model by 2011, SaaS will evolve from an interesting alternative Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, to continue offering the product and to advance the state of the art within the organization's portfolio of products. Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel. Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness. Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message in order to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities. Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, servicelevel agreements, etc. Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis. Completeness of Vision Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those with their added vision. Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements. Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base. Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements. Business Model: The soundness and logic of the vendor's underlying business proposition.

3 Page 3 of 13 delivery model into a critical selection factor at all levels of the customer service contact center. By 2013, at least 75% of customer service centers will use some form of SaaS application as a part of the contact center solution. This could be for knowledge management, desktop CRM functionality, feedback management or chat. Through 2011, fewer than 10% of organizations will select SaaS for complex business process support. Market Definition/Description The customer service contact center is built in five logical groupings: CRM business applications for customer interactions (customer service, knowledge base solutions, advanced desktop search, real-time analytics/decision support, CRM databases for account/contact/offer information, desktop integration, online community management and surveys) Contact infrastructures, such as telepresence, interactive voice response, computer telephony integration (CTI), automatic call distribution, chat, response, instant messaging and alerts, community support, mobile support (social CRM capabilities fall into this grouping) Workforce optimization tools (call recording and quality management solutions, workforce management, e-learning and performance management solutions) Enterprise feedback management Offline and real-time analytical tools Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including verticals. Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes. Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market. This Magic Quadrant looks primarily at the first layer: CRM business applications for customer service interactions. At their most basic level, these applications handle a wide range of tasks, such as order management, case management, advisory services, problem diagnostics and resolution, account management, and returns management. Applications may also be included for government, nonprofit agencies and higher education. They may include knowledge-enabled service resolution (such as advanced search tools), community management, offer management and service analytics dashboards. They are designed to enable employees or agents of a company to support clients directly, usually within a call or contact center, whether the product is a consumer good, a durable good or a business service, such as financial services, customer services (for example, retail banking, wealth management or insurance), hospitality, telecommunications, government, utilities or travel. Contact center technical support software is built to enable employees or agents of a company to support the clients directly, usually within a call or contact center, typically focused on clients' product use, implementation and problem resolution. Some of the capabilities are: The agent needs to be able to support the customer, regardless of whether the customer is on a website, on a mobile device, at a kiosk or in a vehicle. This means that the agent sees what the customer sees, and has the tools to solve the customer's problem or address his or her issue from a remote location. The customer service contact center needs to send out proactive, automated alerts. For example, when the status in a back-end system changes to one of which the customer needs to be aware (such as a bank balance, credit card fraud, flight delays, available upgrades, price range reached, a special offer on cars and insurance policy exceptions), an alert is sent to one or several devices until the customer responds that he or she received the notification. The application contains business rules for complex entities, such as contact, enterprise, subsidiary, partner and the workflow processes to route a case, opportunity or order based on the rule set for the specific relationship. A case may be routed from one department to another, depending on type. An application supports multiple languages simultaneously. Multiple back-end systems synchronize using their own rules; examples are credit card fraud, telecommunication-specific functions (such as telecommunication billing, service and resource management, product life cycle management, digital content and advertising bundling) and integrated order management. Situations exist for which real-time decision support is important. Inclusion and Exclusion Criteria Market traction and momentum: Has 15 customer references for CSS functionality in the contact center. Has at least five new customers for CSS in the past four quarters in at least two geographic regions (for example, Asia/Pacific, Latin America, South America, North America and Europe). Generated at least $7 million in software revenue for core CSS from new clients during the past four quarters. Exceptions can be made for open-source software applications. Appears regularly on client shortlists. Has built a practice with sufficient third-party consulting and integration firms to grow at a double-digit pace for five years. Short-term viability: Has sufficient professional services to fulfill current and future customer demands during the next six months, and at least enough cash to fund a year of operations at the current burn rate. Has technology to support an extension to cross-channel customer service without the need to code in a new development environment. Trendsetter or market mover: Is moving markets based on its software and strategy. Added Portrait Software has been added.

4 Page 4 of 13 Dropped Helpstream was dropped because we believe its revenue falls below our minimum criteria, and we had insufficient data on management and resources to arrive at a fact-based analysis by publication of this report. Evaluation Criteria Ability to Execute Product/Service: Advances in software architectures particularly advances in Web orientation, support of mobile devices and Web communities are all Web 2.0 requirements that complicate the user's choice. The vendor needs to have a scalable SaaS (or on-demand) delivery model for some part of its platform as an option to be a leader. We are seeing a much greater need for strong mashup capabilities that allow organizations to embed existing applications within the service representative's desktop. We also see a strong demand for a development environment within which the user organization can design its own business objects, workflows and business processes without resorting to vendor support. We expect this demand for composite applications through inhouse development and application extension to the Internet/website to accelerate. We continue to see a great need for advanced decision support and complex knowledge solution capabilities, business rule engines and customer feedback management. The CSS application should have out-of-the-box functionality, which means a strong set of industry and process-specific business logic and data. Through process design or functionality breadth, the system must support end-to-end customer service processes (customer need to resolution) for the chosen market. Published application programming interfaces are critical to connect (or expose) an application's customer service functionality with another system or process. Vendors will be measured on the capabilities of their product releases to support customer service and on the technical support of their multichannel and crosschannel environments. The functionality portion of the vendor rating is developed by weighting: Case management/problem/service resolution: 15% Visibility into the social graph, and monitoring of the community: 5% Real-time decision support: 10% Offer management/sales capability: 5% Adaptive business rule engine: 10% Knowledge solution: 15% Support of collaborative online communities: 5% Integrated /chat, collaboration tools and mobile: 15% Enterprise feedback management: 5% Multisource search optimization and authoring: 10% Predictive customer analytics: 5% The vendor must have a stable product development team for each product module it sells, or a demonstrated successful strategic partnership. Overall Viability: We evaluate the vendor's capability to ensure the continued vitality of a product, including a strong product development team to support current and future releases, as well as a clear road map regarding the direction the product will take until The vendor must have the cash on hand and consistent revenue growth during four quarters to fund current and future employee burn rates, and to generate profits. The vendor is also measured on its capability to generate business results in the CSS market. Sales Execution: This is about the vendor's capability to provide global sales and distribution coverage that aligns with marketing messages. The vendor must also have specific experience selling its CSS to the appropriate buying center. The strength of the management team and the partner strategy are key. Market Responsiveness: We consider the vendor's capability to perceive evolving customer requirements and articulate that insight back to the market, as well as create the products for readiness as demand comes online. Marketing Execution: This refers to the vendor's capability to consistently generate market demand and awareness of its CSS solution through marketing programs and media visibility. In an ideal world, marketing execution should be less critical than some other factors; however, the business reality is that marketing success can fuel growth and improvements. Customer Experience: The vendor must produce a sufficient number (the recommended number is five) of quality clients and references with varying levels of sophistication to prove the viability of its product in the marketplace. References are used as part of the evaluation criteria for the ability to execute and create a vision for how organizations can improve customer service. Included in this criterion are implementation and support. The vendor must be able to provide internal professional service resources or must partner with system integrators with vertical-industry expertise, CSS domain knowledge, global and localized country coverage, and a broad skill set (such as project management or system configuration) to support a complete project life cycle. The critical point on customer experience is to ascertain the degree of change management that accompanied the implementation. Often, the end user experiences discomfort from the change processes that were introduced with the new system, not from the new software. The vendor's customer support organization must also provide satisfactory, prompt service to its customers in all regions of the world. Operations: The vendor needs to offer consistent and comprehensible pricing models and structures, including for such contingencies as failure to perform as contracted and mergers and acquisitions. The vendor is measured on its flexibility to support multiple pricing scenarios, such as on-premises licensing, as well as application on-demand offerings, such as hosted and multitenant. The vendor must have sufficient professional services in-house or through third-party business consultants and system integrators to meet evolving customer requirements (see Table 1).

5 Page 5 of 13 Table 1. Ability to Execute Evaluation Criteria Evaluation Criteria Weighting Product/Service Standard Overall Viability (Business Unit, Financial, Strategy, Organization) High Sales Execution/Pricing Standard Market Responsiveness and Track Record High Marketing Execution High Customer Experience Standard Operations Low Source: Gartner (April 2010) Completeness of Vision Market Understanding: The market for customer service is highly diverse because of the multichannel nature of customer interactions and the wide range of industry processes that need to be supported. To succeed, a vendor must demonstrate a strategic understanding of CSS opportunities that are unique to its target market. This may be new application functionality, evolving service models or in-line analytical capabilities for unique customer segments. Market Strategy: The vendor can describe its go-to-market strategy as something other than "growing until it is acquired by a larger company." Even with this as the endgame, it must be clear how prospects will be protected or benefit from such a strategy. We look for a well-articulated strategy for revenue growth and sustained profitability. Key elements of the strategy include a sales and distribution plan, internal investment priority and timing, and partner alliances. Sales Strategy: The strength of the sales force and channel, as these make the difference between floundering and steady/rapid growth. We are looking for highly trained sales leaders who can quickly differentiate the value proposition of products and services, as compared with the competition. Offering (Product) Strategy: Specific vision criteria include: Supporting a threaded service task across functional areas, regardless of the channel. Providing for the creation of content about the most likely customer intentions and how to address them, based on continuously variable business scenarios. Continuously variable means that, depending on the business context of the interaction, the steps and decisions in a service procedure may vary. Selling successful tools to allow for customer participation in the service process via Web communities. Communicating openly with customers and to Gartner a statement of direction for the next two product releases that keeps pace with or surpasses Gartner's vision and our clients' expectations of the CSS market. The vendor has a sufficiently broad set of products to ensure the success of the product. Providing a SaaS product; without this, a vendor cannot be considered visionary. Business Model: To be a leader through the first half of 2011, an on-premises application provider needs to have a deployed SaaS option that is appropriate for its customer base. Application modules are tightly integrated and have business process modeling capabilities and advanced workflow. The company has a strategy to appeal to its key vertical industries that is, it integrates with systems unique to an industry, delivers packaged functionality and workflows for an industry (such as those for the telecommunications, automotive and consumer goods industries), and delivers B2B and business-to-consumer (B2C) interactions. Vertical/Industry Strategy: Unless a product is deployed as a strong add-on to an existing technology stack, a deep understanding of one or more vertical industries will be crucial to offer differentiation. Innovation: Innovative vendors incorporate concepts that extend to consumer technologies, virtual service agents and customer service functions embedded in virtual communities (for example, Facebook and Get Satisfaction). The vendor understands major technology/architecture shifts in the market and communicates a plan to use them, including potential migration issues for customers on current releases. For most vendors (any founded before 2000), the architecture is built to operate in a SaaS delivery model and on-premises. We examine how well the vendor articulates its vision to support service-oriented business applications. The system should provide a catalog of Web services that can enable interoperability with disparate business applications, without requiring extensive point-to-point custom integration. It should have a smart client, and be decomposable as widgets or as part of a larger mashup. Applications must help optimize a predictive customer analytics system directly or through tightly integrated partners. These predictive analytics alert management, agents or customers when service patterns are detected that might signal the need to adjust a business strategy or direction, or indicate that the likelihood of a particular business scenario has changed (for example, customers responding to a notice on defective parts, an accident or financial news). The vendor will be measured on the capability of its architecture to support global rollouts and localized international installations. The vendor must have the tools for IT and business users to extend and administer the CSS application. The customer is the final arbiter of whether a company is visionary. Geographic Strategy: The vendor understands the needs of the three largest markets the European Union (EU), North America and Asia/Pacific and knows how to build a strategy to focus on aspects of the overall market (see Table 2). Table 2. Completeness of Vision Evaluation Criteria Evaluation Criteria Market Understanding Marketing Strategy Weighting Standard Standard

6 Page 6 of 13 Sales Strategy Standard Offering (Product) Strategy High Business Model High Vertical/Industry Strategy Standard Innovation High Geographic Strategy Standard Source: Gartner (April 2010) Leaders Leaders demonstrate market-defining vision and the ability to execute against that vision through products, services, demonstrable sales figures, and solid new references for multiple geographies and vertical industries. Clients report that the vendors deliver a high level of value and return on their commitment. The development team has a clear vision of the implications of business rules, and the impact of social networking on customer service requirements. A characteristic of a leader is that clients look to the vendor for clues as to how to innovate in customer service. The vendor does not necessarily drive a customer toward vendor lock-in, but rather provides openness to an ecosystem. When asked, their clients reply that this product has affected the organization's competitive position in their markets and helped lower costs. Leaders can demonstrate $50 million in sales to new customers during the past year. Challengers The vendors in the Challengers quadrant demonstrate a high volume of sales in their chosen markets (i.e., more than 30% of new business by percentage comes from more than one industry). They understand their clients' evolving needs, yet may not lead customers into new functional areas with their strong vision and technology leadership. They often have a strong market presence in other application areas, but they have not demonstrated a clear understanding of the CSS market direction or are not well-positioned to capitalize on emerging trends. They may not have strong worldwide presence or deployment partners. Vendors in the Challengers quadrant can demonstrate $50 million in sales to customers during the past year. Visionaries Visionaries are ahead of potential competitors in delivering innovative products and delivery models. They anticipate emerging/changing customer service needs, and move into the new market space. They have a strong potential to influence the direction of the CSS market, but they are limited in execution or demonstrated track record. Typically, their products and market presence are not yet complete or established enough to challenge the leading vendors. Niche Players Niche players offer important products that are unique CSS functionality components or offerings for vertical segments. They may offer complete portfolios, but demonstrate weaknesses in one or more important areas. They could also be regional experts, with little ability to extend globally. They usually are focused on supporting large enterprises, rather than on small and midsize businesses. Vendor and Amdocs Amdocs is a nearly $3 billion company selling a comprehensive set of software and services to communication service providers (telecommunications, media, satellite communications). Amdocs needs to improve on delivering a holistic view to Gartner of where it's going with its overall CRM strategy for the customer experience. It is very highly regarded in the business support system, BSS and operational support systems (OSS) telecommunications software markets. Amdocs continues to release new products and to make complementary acquisitions. This is evidenced in the new release of Customer Experience System (CES) CRM 8 in The company has a broad set of offerings, from the operational layer to the business layer, for the telecommunications area. These include sales, catalog, order management, service configuration and activation. Amdocs' consulting has very strong experience in project management, best practices and key performance indicator mapping. The vendor has a focused commitment to its products, targeted at the installed Amdocs customer base

7 Page 7 of 13 in telecommunication services, and offers good products for billing, fulfillment/order management and activation, product catalog, and customer interaction. Amdocs is a thought leader for parts of the telecommunications sector. It is not recommended for customer service contact center shortlists across other industries, though it may be appropriate for consideration on a longer list. Despite articulating leading ideas for customer experience, we find that it is not best of breed in areas (see Note 1) such as chat, knowledge management, virtual assistants, social CRM and real-time agent analytics. Amdocs has limited traction in growing third-party external service providers for consulting and implementation services. Astute Solutions Astute Solutions' epowercenter has been successfully deployed across the U.S. and the U.K., and has extended to more than 25 countries, primarily in small and midsize customer service centers (15 to 100 agents). The vendor has strong knowledge of customer service processes in industries such as restaurants, hospitality, consumer goods and retail (nonbanking or other financial services). Its RealDialog Agent Assist product for knowledge management is easy to use and manage. It has easyto-modify basic screen features, and the GUI is flexible and easy to navigate. Astute Solutions pays good attention to client needs, from functionality and technical support perspectives. Astute Solutions is a small company (fewer than 100 employees, and Gartner estimates that year-end 2010 revenue will be less than $10 million) that has not added significant new clients during the past two years. Astute is being mentioned less frequently than better-financed and better-positioned competitors, such as salesforce.com, Microsoft Dynamics CRM and RightNow. Lack of a software partner ecosystem or functional breadth will make it difficult to scale the company. Astute Solutions has a limited presence outside the U.S. and the U.K. It is rarely seen as a multichannel solution for large, distributed international service environments. Chordiant Software Chordiant Software experienced a 30% drop in revenue in 2009, and ended the year with a loss. Though it successfully rejected an acquisition offer by CDC Software, it will need to strengthen its system integrator relationships to win significant customer service projects. Chordiant had very few new customers for its core Foundation product for the contact center in 2009, and is expected to be acquired by Pegasystems (see Note 2). Pegasystems is not buying Chordiant for its Foundation product. Regardless of the outcome, the core contact center agent desktop product likely will be seen as risky by prospects. Chordiant has a tight focus on supporting consistent multichannel customer service interactions for large enterprise customers, with good recent success experiences with European telecommunications providers. Chordiant is one of only a few CRM software providers that supports a wide range of channels, such as customer portal, contact center and branch office. The Decision Management platform receives very high marks from customers for its ability to determine customer treatment, and offer prioritization and the correct workflow for a given service process. This is important where there is upsell/cross-sell potential for an interaction. The product contains a proven and effective contact center agent tool to advise and prompt agents with the recommended next action to take with customers. Adaptive applications learn as they go, evolving the quality of customer service. Its scalable product has embedded business process modeling and predictive analytics. The impending acquisition of Chordiant Software by Pegasystems casts doubt on future development efforts on Chordiant's Foundation product. The core desktop application for customer service, Foundation, is not on par with the decisioning products, and Chordiant is unlikely to experience the competitive advantage with the core desktop that it has with decisioning. Chordiant has not deployed a multitenant, SaaS-based version of its desktop product. Its core desktop application requires a strong financial and resource commitment from prospective buyers that is in line with the complexity of the business change management that customers require.

8 Page 8 of 13 eglue We have kept eglue's InterAct Suite on the quadrant despite some business difficulties because it is an important niche addition to the market, where the customer service center wants to augment its capabilities without a complete overhaul, or for complex customizations of the CRM applications in the contact center. The eglue InterAct Suite allows an organization to deliver the information that is most relevant to the service agent without any deep integration requirements. It can take any information delivered to the agent screen or from databases, or accessible via Web services, analyze it and deliver it onto the screen. The customization/development tool, InterAction Designer, is intuitive and can be used by internal IT or business resources with minimal training. The product enables contact centers that have an investment in a CRM system to move forward with revenue-generating (or agent efficiency) activity without adding expensive BPM or other analytical tools. As we cautioned in 2009, eglue faces viability issues that it may not surmount. There are several positive signs that the company is righting the business, but prospects should seek strong contractual language to protect them in the likely case of either an acquisition or another eventuality. Despite eglue's recent partnerships with professional service companies such as Accenture, Amdocs, IBM and Tata, there is still much work to be done to gain inroads into a wider set of business opportunities. Because eglue is not the CRM system or the customer system of record, it can be viewed as a tactical solution, rather than as a long-term strategic choice. This is not to suggest that it is not a valuable product, but that the buyer often must explain the reason for seeking this best-of-breed approach over a CRM package. Jacada After significant growth in 2008, Jacada's revenue was $16.7 million in 2009, with approximately 140 employees and between six and nine new software deals (by Gartner's estimate). Many of the new product capabilities found in the Jacada WorkSpace 5.2, such as real-time decisions and bundled analytics, are in the process of deployment. If successful, we believe the company and product, with proper execution, will perform well over the planning horizon. Extensions to social-media products are coming online as well. Especially in a down economy, Jacada WorkSpace Unified Desktop Suite is an alternative to packaged customer service applications for organizations with B2C contact centers focused on developing a standardized customer service desktop, while not replacing back-end and front-end systems. The Jacada Advisor product is a useful overlay product in areas where the service agent needs to identify key information on a well-organized screen that would otherwise be dispersed across several interfaces. Jacada supports IBM WebSphere and Oracle (BEA) WebLogic platforms, and is best in non-microsoft platform environments. Jacada offers proven solutions in areas such as the telecommunications and insurance industries, and for outsourced call centers in the U.S. and the EU, where there is a heavy reliance on legacy data. It offers scalability with careful optimization into the 1,000 or more seat range. Competitors such as Microsoft Customer Care Framework (CCF) and the larger application companies are improving integration capabilities. This led to prolonged decision cycles and price pressures in 2009, and these will continue. Since Jacada is a niche entrant in the customer service contact center market, prospects with a low tolerance for risk should focus on the views of new reference customers for support during the evaluation process, while seeking contractual guarantees for project success. Lacking control of the database, and not serving as the account/contact record or the process design platform, IT organizations can view Jacada as a tactical contact center deployment. Overall, Jacada lacks CRM functionality beyond basic customer service functionality, and is weak in knowledge management and Web self-service. Microsoft Microsoft has said that it has over 1 million users of the Microsoft Dynamics CRM product. The list of industries and its geographic reach continue to expand and deepen. Despite a continued challenge in articulating a consistent vision for the product set, clients are beginning to understand the capabilities and limitations.

9 Page 9 of 13 Microsoft released Microsoft Dynamics CRM 4.0 worldwide, followed by training of dozens of reseller partners and system integrators, along with the methodologies and templates to speed adoption. Microsoft has successfully described its vision of xrm, or application development that allows customers to extend the CRM platform for the needs of the enterprise. Customers can choose from a strong set of Microsoft products with which to integrate such as BizTalk, Office Communications Server and Microsoft Office SharePoint to foster tight integration and internal collaboration around the customer, and later to support customer communities. Microsoft CCF is now an integral part of Microsoft Dynamics CRM, and is better integrated into the product portfolio. The user interface is intuitive and appeals to broad audiences familiar with the look and feel of Microsoft's applications. Microsoft as a corporation appears to view the CRM space as a distant second or third to its main product lines. Strong assets such as search and knowledge/content management, mapping and mobile are only loosely connected to the product portfolio. Simultaneous offerings for CRM on-premises, hosted and Microsoft Dynamics CRM Online versions present challenges to prospects, and guidance from reseller partners is critical, but better clarity from Microsoft is necessary. The product is not best in class in support of real-time decisions, proactive service, virtual assistants, online Web communities or mobile service. Few industry-specific capabilities are available directly from Microsoft. Partners are assisting with offerings in areas such as healthcare, banking and other service industries. Independent software vendors that are writing applications specifically for Microsoft Dynamics CRM need to be better promoted and referenced. Neocase Software Neocase Software is a privately held niche provider of customer support software available in either a hosted or on-premises model. It was added to the Magic Quadrant in It has limited to no presence outside of France, and some presence in the U.K., and in the U.S. for the customer service contact center. The main highlight of the contact center product line is that it has versions for customer support, HR and internal support. It is both a stand-alone product and an occasional add-on product to the Microsoft Dynamics CRM offering. Executive leadership is based primarily in Europe, with headquarters in France. The system is straightforward to deploy and configure. There is a good for case management with a horizontal focus, rather than an industry focus. Though we had seen its strength in Microsoft environments, the company does not position itself to lead with its capability in Microsoft-oriented service centers. Neocase has a range of business intelligence and automation tools customer service in the contact center, Web self-service, human capital management and finance. The company has shown little ability to capture the attention of prospects or potential partners outside western Europe and limited U.S. deployments. There are very few scalable references in the core customer service contact center, and prospects should carefully question references as to the complexity of their environments to ascertain how well capabilities map to need. Our observation of the deployed systems is that the pace of new software deployment, adoption and development lags behind evolving market direction in areas such as communities, mobile applications and real-time decision support. Oracle (E-Business Suite) Oracle E-Business Suite (EBS) continues to be maintained and improved for Oracle customers, with heavy reliance on the rest of the EBS suite, such as parts and order management, logistics and return material authorization (RMA). We recommend it for shortlists in this area. For Oracle customers with a deep knowledge of the Oracle EBS, in a technical support environment, with little need for upsell/cross-sell activity, the Oracle EBS serves as a good choice for shortlists. Oracle has good complementary assets to the Teleservice module where there is a need, for example, for field logistics and support, Web support (isupport), Field Service, and mobile solutions. Oracle has a firm understanding of business processes in B2B capital/high-tech equipment vertical industries.

10 Page 10 of 13 For businesses not interested in a tightly integrated Oracle stack, the product would not be considered as a shortlist for most organizations. There appears to be little focus on new capabilities, such as support of online user communities and forums, automated virtual assistants, predictive real-time offer management, or in-line marketing. Oracle does not have a strong focus on B2C environments for this product (such as telecommunications, insurance and banking) or other high-volume retail contact centers where CTI options are necessary. The Oracle (Siebel) family would likely be the lead product from Oracle in these instances. Oracle EBS has limited support from large integrators or business consultancies, and few strategic partnerships with third-party software providers in the CRM space. Oracle (Siebel) Four years into the acquisition of Siebel Systems by Oracle, the pace of innovation has slowed. The interest of new customers and legacy customers in the Siebel Contact Center product has diminished, as measured by inquiries to analysts, searches on websites and mentions by partners. However, it remains the standard for large-scale call/contact centers looking for scalability and access to a global pool of third-party professional services, and with an inclination for the Oracle product line. A key factor in customer service is loyalty, and Oracle (Siebel) has several marketing analytics tools, campaign management tools and decision support capabilities to drive loyalty through the service function. The Siebel line continues to evolve, albeit at a slower organic pace. It now has broader and deeper integration with other Oracle assets in the telecommunications and public sectors with the version 8.2 product. The combination of an on-premises solution, a SaaS solution and integrated communications offers Oracle customers and others a broad range of options. The Siebel role-based, on-premises platform is best in industries where fulfillment requirements are high (and introducing change is difficult, and custom workflows are expensive), whereas simpler needs can be addressed by the on-demand product (which has more-limited functionality capabilities). The product lines have global software support and distribution, and a global presence of professional services for multiple industries. For users with a low level of complexity in the customer service area, and a small contact center (for example, fewer than 500 seats), the complexity of the Siebel product may be more than is necessary. The insurance, retail banking and utilities industries are not experiencing strong references or client demand for new Customer Service products from the Siebel product line. Look to new references for guidance. The knowledge management features are primarily through partnerships, and social CRM capabilities for customer service are not leading in the market. Prospects who are not interested in a deeper commitment to the Oracle technology and application stack (for example, if you are moderately to heavily oriented toward Microsoft and.net, or build your own open-source applications) should look to other products first, though not necessarily to the exclusion of Oracle. The integration of the real-time decision support product is still maturing within the Siebel product family. Business-analyst-level customization is in need of maturity. Pegasystems Pegasystems is a nontraditional participant in the customer service market, as it approaches the market strongly as a business rule provider with support for case management. It addresses service industries that require highly efficient and consistent process flows, where the value of business rules and BPM is seen as central to the customer service function. An acquisition of the Chordiant Software assets gives the company access to a potential new market in banking and telecommunications. Pegasystems reached over $264 million in revenue in 2009, with a second year of growth above 25%. Clients inquire about Pegasystems using several different entry points: as a case management tool, business process rule engine and customer service desktop tool. The Customer Process Manager product and surrounding tools are cited for their agility and flexibility. The company delivers industry-specific best practices, templates and advice, accelerating adoption. Pegasystems has an innovative "platform as a service." It is an Internet-based development area where teams or partners can collaborate on building solutions and designing best practices. It offers a highly scalable solution (1,000 or more concurrent users in an integrated environment with 99.95% uptime) and provides good support. Specialties are healthcare, insurance and financial services industries. New functionality is more broadly applicable to other industries requiring business process optimization.

11 Page 11 of 13 Outside of insurance, healthcare and retail financial services and some areas of telecommunications, where a rule engine and support for disputes, claims and other cases requiring tight consistency, the product may not be the ideal choice for a shortlist. Pegasystems has a highly flexible BPM tool that can be applied to any sector, but in those where the company has much experience it has prebuilt processes that speed deployment and require less work to reach the requirements. We have seen little example of Pegasystems as the customer service system of record in retail consumer goods, pharmaceuticals, telecommunications, high technology and technical support (or other areas where the maintenance of a physical asset is involved). Pegasystems does not offer a multitenant, SaaS subscription model. The vendor has limited cross-industry experience outside North America and the U.K., where countryspecific and industry-specific EU operations and EU-specific business rules are most important. We do not see sufficient emphasis on mobile device support or online Web communities, both of which are playing greater roles in brand position. The company needs a more significant investment in software partners. Despite improving support from large system integrators, Pegasystems is still building these partnerships to support global customers. Portrait Software Portrait Software is a publicly traded company with revenue of approximately $20 million and signs for growth in It has an interesting approach to customer service that leverages acquisitions such as Million Handshakes (2008) and Quadstone (2005) to allow customers to do real-time decision support during complex interactions, such as in financial services (wealth management and banking and, recently, in telecommunications). Portrait Software provides tools and applications to solve a range of business problems. It offers a business process platform (Portrait Foundation), horizontal applications (for example, Portrait Interaction Optimizer), the engine for Fiserv's customer interaction management solution and data mining as a predictive customer analytics platform. Portrait Software has a responsive professional service group. It has good partnerships with Fiserv and Unisys, and its core product is built on Microsoft.NET. Portrait Interaction Optimizer can be combined with rules from Portrait, or analytical scores from other analytics vendors, and delivers the best next actions to third-party CRM systems. Portrait Software has limited examples of full customer service contact center capabilities (for example, account system of records and interaction software). It has limited (but significant) recent experience outside of financial services. Despite profitability and good growth (Gartner estimates year-end 2009 of $20 million), the vendor supports a broad range of products focused on complex problems that absorb development resources. Portrait Software is highly dependent on partners and resellers for future growth. RightNow In 2009, RightNow revenue was approximately $150 million, and it had more than 800 employees worldwide, making it one of the largest, and fastest-growing, independent CRM software providers worldwide. RightNow continues to improve its capabilities in the customer service contact center, while simultaneously improving its Web customer self-service and its new entrance into the social CRM area with the acquisition of HiveLive. References consistently point to the influence of the vision of RightNow's CEO of the customer experience inspiring them to favor the product over less-focused rivals. Consumer-oriented, customer service contact centers that have a need for searchable content, integrated chat and , and solid scripting capabilities using a modern GUI will be attracted to the product. The system, delivered as a subscription service in a SaaS model, is straightforward to set up and configure without the need to resort to heavy IT involvement. RightNow has strong industry representation in high tech, government agencies, retailers, education, travel, consumer electronics and branches of telecommunications, while not focusing on industry-specific functionality (for example, billing, price catalogues, order execution and underwriting).

12 Page 12 of 13 RightNow does not deliver an enterprise application suite or a technology suite. Organizations leaning heavily in the direction of an all-oracle or all-microsoft environment, for example, often face resistance from IT. The availability of third-party professional service resources has improved, which is important for organizations that require significant business change management as part of an engagement. The partner ecosystem needs to improve for the company to scale more rapidly. Competition from rapidly rising newcomers in the contact center space will continue to pressure growth in the contact center customer service desktop area. salesforce.com Salesforce.com accounts for over 20% of all CRM SaaS revenue, and the fastest growing source of growth by revenue is customer service. The geographic reach, industry penetration and scale of deployments continue to expand more rapidly than any competitor. Continued acquisitions, alongside organic growth and good partner network, are leading to rapid improvements in the company's performance in the CRM contact center. We expect this momentum to continue through year-end Salesforce.com has changed the way businesses think about software from an intimidating tool wielded by IT to a line-of-business aid to expand business acumen. The customer service product (Service Cloud) continues to broaden and deepen through organic development and acquisitions. The development and product marketing teams continue to command more attention from the CEO and founder, as well as from sales executives and integration partners. The company is moving beyond the B2B core to consumer centers (and outside its installed base), as the market increasingly embraces SaaS in general and salesforce.com and Force.com in particular. The salesforce.com product for customer service has an excellent GUI, simple design tools, intuitive navigation and a good understanding of the importance of Web communities. The company has strong investments in an expanded management structure for greater geographic reach. Salesforce.com has firmer commitments from regional professional service partners and divisions of global integration companies. The company risks focusing too much time and resource on the consumer aspects of mobile software and too little on the core business functionality required by different industries through the contact center. The product lacks an on-premises software model. This could potentially complicate decisions for some EU prospects concerned with the risk of outages and nonconformance to internal security requirements in industries such as banking, healthcare and government. The vendor is largely unproved in large, complex, retail, B2C contact centers that is, large-scale, highvolume call centers where processes must be continually synchronized and monitored, such as retail banking, loan origination, insurance policy administration, bill processing and fraud management. Without owning the customer master, , chat, product master, pricing, inventory or other key asset information, the salesforce.com product requires significant integration for customer service. SAP SAP has evolved as one of the most community-friendly companies in the market. It fosters customer and partner feedback through a broad variety of channels and strong Web tools. These include blogs, posts, videos, content creation, profiling and search. These "social" aspects are a very positive sign for product improvement cycles. SAP CRM 7.0 is another improvement for customer service and technical support. It has tighter integration with NetWeaver Enterprise Search, better workflow capabilities and more flexibility in customizing the GUI for different user types. The SAP CRM Interaction Center product set has a complement of customer service offerings, reducing the number of vendors required to build an end-to-end contact center solution. SAP has good integration with non-crm assets, such as contracts, bills of material, parts masters, and account and service tickets. These help in the support of end-to-end processes. Care should be taken when writing custom objects, using guidance from SAP. The customization environment still needs improvement to make it simpler, though when thoroughly mastered the customization tool is useful. The B2C large (500-plus users) contact center is not a core strength of the SAP CRM Interaction Center, though capabilities are improving. There is limited, but improving, traction with non-sap customers, but our recommendation is for non- SAP customers to continue to favor other products on shortlists. SAP must invest more effort in business process tools, workflow, real-time decision support, social CRM and collaboration tools. Its multitenant SaaS delivery model appears not to be a priority, as viewed by prospects and partners.

13 Page 13 of 13 Sword Ciboodle Sword Group purchased Graham Technology and the Ciboodle product two years ago, and the results have been favorable. The product continues to improve and is mentioned on the shortlists of clients in its target area. Sword Group's CRM product, Sword Ciboodle, is strong in process-centric environments where it is not needed as the system of record, and is successful in B2C customer service functions in finance/insurance and retail. The vendor has a responsive professional service team with a solid understanding of business processes, and has expanded into the U.S. to support growth in that geography. The underlying platform, the Business Process Management Suite, has a strong set of customer service functionality and ready-to-customize processes that accelerate time to solution, The Sword Ciboodle product, Intelligent Desktop, is a good tool that companies can use to design, orchestrate and execute their customer service processes on top of established back-end systems, making it attractive to business process outsourcers with call/contact center practices. The Sword Group, while giving the Ciboodle product and team freedom to grow, will require increased new R&D or acquisitions to compete most effectively. The product has the potential to expand and capture new market share, but requires investments in personnel dedicated to new product development. The geographic scope of the product's availability seems limited primarily to English-speaking geographies. Prospects should perform the standard due diligence before purchasing the product. Its solution may be too complex for organizations with standard service processes (for example, outside the banking, telecommunications and utilities industries), or where there are no trained local Sword Ciboodle professional services resources. The product line would benefit from deeper strategic CRM application partnerships to round out product offerings, while mobile service is becoming a key delivery channel Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. Reproduction and distribution 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. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.