Magic Quadrant for CRM Service Providers, North America 30 August 2010 Matthew Goldman, Ed Thompson Gartner RAS Core Research Note G00205524 Demand for CRM project-based consulting and implementation services is slowly returning to positive growth after contracting in 2009. The Magic Quadrant for CRM service providers in North America positions service providers considered for CRM initiatives and presents the current vendor landscape. What You Need to Know The Magic Quadrant for CRM service providers in North America analyzes the market for CRM consulting and solution implementation services. The relative positioning of vendors in this Magic Quadrant is based on inclusion criteria and key criteria for evaluating ability to execute and completeness of vision. Consulting and solution implementation projects require a blend of business, industry, technology, project and program management skills that must align with your objectives, institutional and business culture, and employees. Do not simply select service providers in the Leaders quadrant. All selection processes are enterprise-specific; consequently, vendors in the Challengers, Visionaries or Niche Players quadrants may prove to be more appropriate for your requirements. Many smaller service providers not covered in this Magic Quadrant may be appropriate for your needs on smaller or regional-specific projects. Magic Quadrant Figure 1. Magic Quadrant for CRM Service Providers, North America 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. 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, 1 of 10 12/26/10 12:44 PM
Source: Gartner (August 2010) 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, service-level 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. Market Overview What Happened? External service provider (ESP) expertise in CRM technologies, processes and strategies remains broad and deep in 2010, supported by market spending growth rates that are turning positive after a market contraction of 4% in 2009. The impact of the recession on CRM and system integration services was notable; however, several larger providers have maintained capabilities as a result of a then healthy backlog of work that endured broader cutbacks. For other providers, managing the downturn forced head count reductions or delayed investments in CRM-specific solutions until the market stabilized. Further contributing to the slow return to growth is enduring downward pressure on prices, which drives more work into global delivery models that, in turn, moves the work to lower-cost labor locations. These factors can impact enterprises in several dimensions, including higher-than-typical project-level resource turnover, aging solution accelerators/templates, and less on-site involvement. Some sectors are showing stronger relative gains, such as healthcare, life sciences and insurance, and are expanding faster than the CRM consulting and system integration (C&SI) market as a whole. Fueling this level of spending are enterprises' aims to improve the customer experience, leverage existing technology investments, adopt customer analytics solutions (which remain highly sought after), pursue mobile solutions and improve the efficacy of interactions across channels. Advances in both technology and the ability of third-party providers to help guide enterprise adoption enable the demand for these services. An example of a continuing change is the idea of "departmental CRM versus big CRM." A new breed of departmental CRM projects have emerged and are being served by a growing set of service providers that focus their C&SI services on Microsoft CRM and software as a service (SaaS), such as Avanade, Appirio and Bluewolf. These projects can and often do require fewer resources per 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. 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 2 of 10 12/26/10 12:44 PM
project (often fewer than five full-time equivalents) with shorter timelines (less than three months) per project. The growth in the number of smaller, departmental CRM projects has risen and has had an impact, but it has not significantly eroded the demand for big CRM projects. Rather, it makes CRM project goals attainable for a broader mix of enterprises. It does, however, create a more-complicated environment for future integration, unless proper planning precedes departmental deployments. Some larger CRM providers (e.g., Accenture and Deloitte) are investing more time and effort into SaaS implementation efforts. This expanded participation further crowds the market, with the global system integrators, focused pure-play SaaS specialists and the heritage offshore providers all vying for a share of projects. through partners, channels and subsidiaries as appropriate for that geography and market. What's Happening? The outlook for CRM services remains cautiously optimistic. With the threat of a continuing weaker economic environment, the focus on revenue and profit growth remains top of mind for enterprises, as does the implied customer-centric process and technology needs to achieve those objectives. Enterprises remain in a strong position bullied by buying power as the market supply for CRM services outstrips the demand for those needs. As such, buyers that are engaging or renewing contracts with providers need to be careful that they do not overexert their influence at the risk of applying too much pressure to lower costs. Rather, a more-sophisticated buying scenario is emerging in which enterprises are applying more emphasis on evaluation, specifically with regard to the composition of the resources proposed for the project and the ability of those resources to deliver in the enterprise's environment. Similarly, other factors impacting the evaluation and selection of service providers include: Scope A mechanism used to reduce near-term costs and risk. The challenge arises when enterprises compartmentalize projects into too many bite-size pieces and lose the momentum obtained by orchestrating similar activities into one program. Longer term, CRM programs often cost more as opportunities to capture economies of scope and scale are lost in short-run decision making. Many enterprises are aware of this; however, they have no alternatives, given the current economic climate. Objectives Setting the expectation that enterprises can achieve significantly more than is realistic, based on scope and price of projects. Enterprises that try to merge or share finite resources to achieve a broad range of objectives suffer an inability to successfully realize benefits from any one objective. This approach unintentionally stalls or limits forward movement on CRM initiatives and can extend decision cycles well past desired timelines. Cloud Enterprises are keen to gain the benefits of more-agile and lightweight solutions, particularly those solutions that can be delivered inexpensively. Should enterprise interest in cloud computing for CRM scale more rapidly, buyers will be faced with a more-complex evaluation scenario that crosses broader technical and functional skills than typically found in pure CRM projects. These factors can be seen as inhibitors, but they also serve as guideposts for what not to do in a CRM program (e.g., focus solely on cost, decompose into inert programs or overengineer your project). Enterprises seeking to engage a CRM service provider to assist in or lead their CRM initiative should consider these as potential obstacles that must be proactively managed, or else the enterprises reduce their chance for a successful CRM program. 3 of 10 12/26/10 12:44 PM
How to Use This Magic Quadrant Selecting the right CRM service provider requires focused and deliberate evaluation. To be sure, the market for CRM services is maturing, and it is achieving price and offering parity. These factors have led providers to re-establish their competitive aims, forcing new approaches to differentiation and, thus, leading to changes in positions of providers included in the 2010 results. This year's Magic Quadrant saw notable shifts in the positioning of vendors, including: The first offshore heritage provider positioned in the Visionaries quadrant Separation of the largest global system integrators Re-entry of a Big Four firm to the landscape While positions are helpful to understand relative strength and weakness, this research reflects providers whose focus on CRM produces scalable breadth and depth for this blend of business and technology skills. Use this Magic Quadrant to help inform your thinking, recognizing, however, that Leaders as indicated by position may not be the right fit for your business simply because of that positioning. Gartner offers an array of IT sourcing life cycle research, insight, tools and templates to assist your decision making for simple or complex project needs. Market Definition/Description This Magic Quadrant focuses on the CRM consulting and solution implementation service market for North America. To further illustrate this market, consider the following definitions: Consulting and solution implementation Consulting services are advisory services designed to help companies analyze and improve the effectiveness of business operations and technology strategies. For this Magic Quadrant for project-based CRM service delivery, solution implementation services focus on packaged application development, integration and deployment services. Customer relationship management Gartner defines CRM as a business strategy in which the outcomes optimize profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer-satisfying behavior and implementing customer-centered processes. This research focuses on the following primary solution areas of CRM: Sales Solutions that support field sales, telesales, retail sales, Web sales and technology-enabled buying Marketing Solutions that support marketing analysis, campaign management and marketing process automation Customer service and support (CSS) Solutions that support customer service and support processes For a full description of Gartner's view of the topography of CRM applications, see "The Elusive CRM Magic Quadrant" and "Toolkit: CRM Industry Heat Map, 2010." 4 of 10 12/26/10 12:44 PM
Business value of IT To find the strongest arguments in support of an IT initiative, it is necessary to break out financial and operational performance metrics into categories that can be more clearly monitored and managed. The guiding principle is: "The business value of IT is always, always, always measured in improved business performance." Inclusion and Exclusion Criteria Gartner's Magic Quadrant research process involves primary research with direct client references supplied by CRM service providers, and each service provider's representation of its organization. The analysis involves weighting both sources of information, with a heavy emphasis on client feedback. As a result, many of the individual categories have "client reference" criteria factored into the scoring. Gartner considers client feedback to be one of the most-critical measures of a service provider's success. Gartner evaluates service providers on their ability to execute and their completeness of vision. When the two sets of criteria are evaluated together, the resulting analysis provides a view of how well the provider performs a spectrum of services compared with its peers and how well it is positioned for the future. This evaluation is a snapshot in time. The competitive nature of the CRM service provider market over time affects the relative position of evaluated companies. In addition to understanding positions in this Magic Quadrant, enterprises must conduct due diligence and check references. Enterprises also should ensure that their business culture is synergistic or, at a minimum, compatible with the service provider's culture. The most-critical criteria for project success are a provider's ability to work within an enterprise's business culture, and a provider's ability to work with an enterprise's people to effect the organizational change essential to a successful CRM program. A broad group of providers offer CRM services. Magic Quadrants do not include all vendors in a given sector. Many service providers focus only on parts of the overall solution. Companies considered for evaluation in this Magic Quadrant research are those that act as advisors and provide implementation services that encompass most or all levels of a solution, as outlined above. Further, providers also were evaluated in more detail using a combination of quantitative and qualitative criteria. Note that vendors assuming they meet the inclusion criteria cannot elect to be excluded from a Magic Quadrant. Quantitative Criteria for This Magic Quadrant Service providers that demonstrated CRM solution implementation service revenue derived from clients in North America A minimum of $50 million (in U.S. dollars) for 2009 in enterprisewide CRM service revenue (excluding value-added reseller [VAR] revenue, outsourcing and managed service revenue, and software maintenance and support fees) for projects based in North America Qualitative Criteria for This Magic Quadrant 5 of 10 12/26/10 12:44 PM
Gartner analysts' interactions with enterprises, which reveal interest in specific CRM service providers. Vendor demonstrates depth and breadth of CRM service capabilities. The service provider's current and potential market impact, as measured by frequency of appearance on shortlists. Ability to provide consulting and solution implementation services (including program and project management) across multiple CRM software platforms (such as from, Oracle, SAP, salesforce.com, Microsoft, etc.). Many service providers focus only on parts of the overall solution. The companies evaluated in this research act as advisors and provide implementation services that encompass most or all levels of a solution, and the vendors were then evaluated in more detail using a combination of quantitative and qualitative criteria, as outlined earlier. Added PricewaterhouseCoopers In recent Magic Quadrants for CRM services in North America, PricewaterhouseCoopers (PwC) was not included, as its participation in CRM services declined postsale of PwC Consulting (PwCC) to IBM. In May 2009, PwC purchased key assets of BearingPoint in North America, including material capability in CRM services. Combined, the legacy PwC advisory services and the acquired BearingPoint assets have helped PwC evolve its strategy and investments in this area to the point in which it now meets the inclusion criteria for this year's Magic Quadrant. Note that PwC does focus more on advisory than technology services in CRM; however, its core offerings include a broad range of CRM consulting and solution implementation services. Dropped Fujitsu Fujitsu continues to offer CRM consulting and solution implementation services. However, in 2009, Fujitsu's business contracted to the point in which it no longer met the inclusion criteria for this Magic Quadrant. Possessing a breadth of technology services (derived from its acquisitions of Rapidigm, Okere and others), Fujitsu's focus has been driven largely by targeting midsize companies with their unique industry capabilities. Fujitsu still delivers CRM services through its industry go-tomarket approach as a value-add, complementary offering to its broader application services capabilities (infrastructure, outsourcing, etc.). Fujitsu's clients indicate positive results, particularly on more-targeted projects with well-defined scope. Evaluation Criteria Ability to Execute Our assessment of a vendor's ability to execute consisted of these criteria (see Table 1): 6 of 10 12/26/10 12:44 PM
Product/Service Core services offered by the provider that compete in/serve the CRM service market. This includes current service offerings, as defined in the Market/Definition Description section and expressed by growth, capacity, market penetration, skills availability, breadth and depth of offering, etc. Subcategories include: Assessment of services in key CRM business skills for sales, marketing, and CSS Analysis of technical knowledge and skills Assessment of a provider's ability to develop services to meet emerging market needs 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 to invest in the service, continue offering the service and advancing the state of the art within the organization's portfolio of services. Sales Execution/Pricing The technology provider's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support and the overall effectiveness of the sales channel. Market Responsiveness and Track Record Ability to respond and adapt to changing competitive forces as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the provider's history of responsiveness, and the ability to quickly address changing requirements. Customer Experience This criterion considers the provider's: Specific feedback on the client's experience working with CRM ESPs Demonstrated ability to deliver on key metrics that drive the overall "client experience" when working with a CRM ESP Operations The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, such as skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis. Subcategories include: Organizational and business model Applied use of methodologies Global delivery model capabilities Table 1. Ability to Execute Evaluation Criteria Evaluation Criteria Weighting Product/Service high Overall Viability (Business Unit, Financial, Strategy, Organization) low Sales Execution/Pricing low Market Responsiveness and Track Record high Marketing Execution no rating Customer Experience high Operations standard Source: Gartner 7 of 10 12/26/10 12:44 PM
Completeness of Vision Our assessment of a vendor's completeness of vision consisted of these criteria (see Table 2): Market Understanding Ability of the provider to understand buyers' needs and translate these needs into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance those wants and needs with their added vision. Subcategories include: Service provider's knowledge and articulation of key market direction and trends The analysis of the service provider's executive leadership (including thought leadership, continuity, operational capabilities, etc.). Marketing Strategy A clear CRM service marketing strategy with a differentiated set of messages consistently communicated throughout the organization and externalized through appropriate channels emphasizing differentiated positioning statements. Sales Strategy The strategy for selling CRM services that uses the appropriate network of direct and indirect sales, partner networking and alliance relationships that extend market reach to both prospects and the customer base Offering (Product) Strategy A technology provider's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements. Subcategories include: Service provider's strategies for partnerships and alliances Vision for creating new and/or additional CRM business Vertical/Industry Strategy The technology provider'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. Subcategories include: Approach to customer experience design and development Sustainable investment in proactive tools, methods and/or locations for CRM solution development Geographic Strategy The service provider'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. 8 of 10 12/26/10 12:44 PM
Table 2. Completeness of Vision Evaluation Criteria Evaluation Criteria Market Understanding Marketing Strategy Sales Strategy Weighting high standard low Offering (Product) Strategy standard Business Model Vertical/Industry Strategy Innovation Geographic Strategy no rating standard high low 9 of 10 12/26/10 12:44 PM
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