Gartner's CRM Service Providers 2003 Americas Magic Quadrant

Transcription

1 B. Eisenfeld, F. Karamouzis, T. Berg Strategic Analysis Report 20 January 2003 Gartner's CRM Service Providers 2003 Americas Magic Quadrant Gartner's Customer Relationship Management (CRM) Service Providers 2003 Americas Magic Quadrant has fewer vendors than last year. As the economy takes its toll and the market for CRM services continues to change, the remaining players are striving to differentiate themselves. Management Summary The widespread and growing recognition by enterprises of the value of investing in CRM, coupled with the changing CRM vendor landscape, has led to a significant amount of confusion regarding this market. This Strategic Analysis Report examines the state of the CRM service provider market and its vendors. In doing so, it addresses this Key Issue: What is CRM, how will it evolve, and what drivers are emerging to force its adoption? Gartner's CRM Service Providers 2003 Americas Magic Quadrant illustrates the changes in the competitive landscape, which include acquisitions, name changes and closings of firms. Understanding the positioning of the vendors in the CRM Service Providers 2003 Americas Magic Quadrant can help an enterprise to evaluate the most-appropriate providers to assist in delivering a CRM initiative and enabling overall CRM goals to be achieved. To assist enterprises with evaluation and selection, Gartner provides a framework (the Magic Quadrant) and defines the evaluation criteria used to assess external service providers in the CRM service market. Leaders are service providers that are doing well and have strong prospects for the future. They have mature CRM practices, are financially stable, demonstrate long-term management commitment to their practices and have large numbers of CRM consultants that have delivered solutions in a number of industries. They are capable of delivering complete solutions with the proven ability to execute across multiple geographies to support Americas-based clients' global operations. They generally sell into the senior management levels, have long-term relationships and serve in long-term advisory roles. They have solid and long-standing partnerships with the leading CRM suite vendors. Visionaries are vendors that have great ideas for tomorrow, but they may be struggling in specific areas of consistent execution. They understand business requirements, demonstrate innovation in service offerings with a particular industry focus and tend to have fewer resources focused on CRM. Challengers are vendors that execute well, may dominate a large segment, have a less-mature understanding of market trends and directions, or are not able to articulate their vision clearly. It is undetermined whether they have all the elements to be successful in the future, but they have a solid track record of execution, financial resources and staying power. Generally, they are good choices for the specific segments where their track record demonstrates success. Gartner Entire contents 2003 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 Niche players are vendors that focus on a small segment of the market and do it well and vendors that have modest horizons and possibilities due to an inability to innovate or outperform other providers that participate in the CRM market. Niche players tend to deliver tactical implementations or strategy related to a single domain or project. They may lack overall vision and execution skills for broader CRM (e.g., partnering with only a single CRM suite software vendor). They tend to serve a smaller part of the CRM market and may be confined to a specific geography or vertical market. Magic Quadrants do not always include all vendors in a given sector. Vendors evaluated are chosen based on their current and potential market impact and how often Gartner analysts receive inquiries about them. Besides understanding positions in the CRM Service Providers 2003 Magic Quadrant, an enterprise must conduct due diligence and always check references to ensure that the cultures of the service provider and the enterprise are synergistic. All other things being equal, the most critical criteria are often the ability for providers to work within an enterprise's culture, work with its people and effect the organizational change that is key to a successful CRM program. 20 January

3 CONTENTS 1.0 Introduction Market Forces Magic Quadrant Analysis Evaluation Criteria for the Americas Region Minimum Criteria for Inclusion Expect More From a Leader The Leaders Accenture BearingPoint Cap Gemini Ernst & Young Computer Sciences Corp Deloitte Consulting IBM Business Consulting Services When to Consider a Leader The Visionaries American Management Systems eloyalty Inforte When to Consider a Visionary The Challengers The Niche Players Answerthink EDS Experio Solutions Headstrong Unisys When to Consider a Niche Player Industry Expertise Matters Additional Vendors Beyond the Magic Quadrant Other Emerging Vendors A Final Word About the Magic Quadrant...18 Appendix A:Acronym Key January

4 FIGURES Figure 1. CRM Service Providers 2003 Americas Magic Quadrant January

5 1.0 Introduction The results of Gartner's CRM Service Providers 2003 Americas Magic Quadrant illustrate the changes in the competitive landscape, which include acquisitions, name changes and closings of firms. The Leaders Quadrant features a number of the same leaders as last year's Magic Quadrant analysis, primarily because larger firms are in a better position to "weather the storm" of a down economic cycle. In all, some bold acquisitions have occurred as well as smaller ones, along with survival and desperation moves. The major changes include: IBM acquired PricewaterhouseCoopers Consulting BearingPoint increased its worldwide CRM consulting head count by 50 percent as it added a significant number of Andersen Business Consulting professionals in the United States along with the acquisitions of 23 practices in Europe, Asia and South America Deloitte Consulting separated from its accounting parent (Deloitte Touche & Tomahtsu) Andersen Worldwide exited the IT consulting market as a result of the Enron debacle As is expected when a large amount of merger, acquisition and divestiture activity occurs, many changes in the leadership of the CRM practices took place, too. Only two of last year's leaders had no changes in the makeup of their CRM senior leadership. Numerous name changes and new brand launches also occurred. The most prominent are: KPMG Consulting changed its name to BearingPoint Deloitte Consulting announced that it will soon be renamed to Braxton Unisys abandoned its Monitor Heads advertising image in favor of the slogan Imagine It. Done IBM Global Services renamed its Consulting and System Integration unit to Business Consulting Services Thus, the sourcing landscape has changed, and the changes will affect options available to enterprises. Therefore, it is important to understand the market forces affecting the delivery of consulting and system integration (CSI) services for CRM. 1.1 Market Forces The past year in review: Although overall average IT service revenue derived from CRM-specific CSI engagements grew in the single digits in the Americas (i.e., United States, Canada, Mexico, Central and South America), most smaller players experienced revenue declines of 20 percent or greater. However, the news is not all bleak. Overall, vendor participants in the CRM Service Providers 2003 Magic Quadrant process reported more than 2,600 new CRM engagements in Gartner estimates that CRM activity will continue, albeit not at the record engagements sizes that occurred in the late 1990s and early Based on the client reference check responses for this Magic Quadrant analysis, the average services fees for CRM engagements during the past 24 months ranged from $800,000 to $999,000, although more than 60 enterprises reported approximate spending of more than $1 million for CRM initiatives. 20 January

6 A look at the future: Gartner Dataquest estimates that, despite the continued economic downturn of 2002, enterprises will spend approximately $29 billion worldwide on all CRM-specific service segments in The CSI segments account for a significant portion of the forecast at approximately 45 percent of the total forecast (i.e., $13 billion). The Americas region accounts for 48.5 percent of the 2003 forecast ($14.35 billion). Hence, given the significance of the spending, when choosing service providers, it is paramount that the choice be driven by the ability of the service provider to assist the enterprise in obtaining the longterm, promised benefits projected in the business case. Gartner still projects that the largest component of CRM total cost of ownership (TCO) will be services costs, which have been increasing steadily and now comprise as much as 48 percent of overall CRM program and project costs. That is considerably more than the cost of the software, which is typically 18 percent to 28 percent. As a general rule, the cost of services is usually a multiple of the cost of the software licenses. For CRM, the ratio of services to software licenses can range from approximately 2:1 services to licenses on the low end to as high as 7:1 on the high end, depending on a number of factors (e.g., the scope of the CRM initiative, the amount of internal vs. external personnel on projects, the complexity of the business processes and degree of program and change management). Therefore, there is an interesting paradox. Although the cost of CRM software licenses has decreased, services costs continue to be a large share of the TCO as enterprises have divided up their CRM initiatives into smaller "chunks" or phases. On the one hand, the individual project costs are smaller (due to reduced scope in a single phase of a project), but the total number of projects is on the rise. Thus, the overall spending on the services or "people costs," when added together, has increased. In addition, approximately 85 percent of CRM programs and projects undertaken to date use external service providers (ESPs), and that trend will continue but with a twist. As enterprises continue to aggressively find ways to lower the overall cost of CRM CSI, Gartner expects a significant increase in enterprises seeking to explore: Global delivery (i.e., near shore and offshore) options for delivery of CRM solutions Outsourcing options in the CRM arena focused on specific business processes (e.g., contact centers) Those trends will result in even more complexity and risk. Consequently, the overall landscape of evaluating service providers for CRM will become increasingly difficult for enterprises, as U.S. CRM ESPs begin moving implementation components of their delivery models both offshore and near shore as well as expanding their outsourcing offerings. Enterprise buyers of consulting, system integration and outsourcing from CRM service providers must address important competencies in evaluating, selecting and, most importantly, managing these ESPs in as many as four tiers of delivery (on-site, onshore, near shore and offshore). 20 January

7 2.0 Magic Quadrant Analysis Understanding the positioning of the vendors in Gartner's CRM Service Providers 2003 Americas Magic Quadrant can help an enterprise to evaluate the most-appropriate providers to assist in delivering a CRM initiative and enabling overall CRM goals to be achieved. To assist enterprises with evaluation and selection, Gartner provides a framework (the Magic Quadrant) and defines the evaluation criteria used to assess ESPs in the CRM service market. 2.1 Evaluation Criteria for the Americas Region The needs of enterprises across geographic regions vary. The CRM Service Providers 2003 Americas Magic Quadrant evaluates providers that deliver CRM CSI services in the Americas. As the CRM market changes and evolves, so does the criterion Gartner uses to evaluate CRM service providers (see "Americas CRM ESPs: 2003 Magic Quadrant Criteria," M ). Briefly the criteria are: Completeness of vision CRM practice viability CRM practice strategy and vision Services and methodologies Engagement customization Ability to execute Enterprise and CRM practice viability Partnerships, alliances and joint ventures People and skills CRM experience Geographic and vertical coverage Customer experience The Magic Quadrant process involves primary research with direct client references supplied by each CRM service provider, as well as the service provider s representation of its organization. The analysis involves weighting both sources of information, with a heavy emphasis on direct feedback from clients. 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 the success of an ESP. 2.2 Minimum Criteria for Inclusion To be considered for inclusion in the CRM Service Providers 2003 Magic Quadrant, vendors must have fully participated in Gartner's research process and must meet or exceed the following inclusion criteria: Demonstrate vendor viability: This includes a minimum of $30 million in enterprisewide CRM service revenue (i.e., excluding outsourcing and managed service revenue), with at least $20 million of that revenue derived in the Americas, coupled with solid revenue performance and sufficient financial resources to withstand fluctuations in the economy. 20 January

8 Provide CRM support to at least the three main CRM domains: These domains are sales, marketing, and customer service and support (CSS). At a minimum, vendors must also have provided services across at least three channels (face-to-face, telephone, kiosk, Web or mobile) in one domain. Demonstrate an understanding of what is needed to implement CRM: Providers will offer a full complement of CRM service offerings that enable enterprises to manage the entire customer life cycle (selection, acquisition, retention and extension), including holistic CRM vision and strategy, business consulting, business transformation, development, and implementation at the operational and technical levels. Those services must be offered directly, rather than through partnerships or alliances. Provide support for the CRM "technology sweet spot": Providers need to demonstrate skills and capabilities in several areas (see "Evaluating CRM Application Architecture," DF , and "Technology Decisions Are Key to Enabling CRM Strategies," DF ). At a high level, the skills and capabilities include the following: Mainstream CRM business-to-business (B2B) and business-to-consumer (B2C) software application technologies Web-based toolsets for enterprise application integration (EAI) and middleware development (e.g., Internet Explorer, Internet Information Server, Apache, WebSphere and WebLogic) Database technologies (e.g., SQL Server, Oracle and IBM UDB/DB2) Operating system technologies (e.g., Microsoft and Unix) Demonstrate strategic partnerships: Providers must demonstrate operationally successful partnerships with the CRM software vendors appearing in Gartner's B2B or B2C Magic Quadrants (see "B2B CRM Suites 1H02 Magic Quadrant: Finding the Value," M , and "B2C CRM Application Suites 1H02 Magic Quadrant," M ). Referenceable customers: ESPs must have at least 20 references in the Americas across the three CRM domains and be able to demonstrate CRM capabilities delivered during the past 24 months (i.e., from October 2000 through October 2002). 2.3 Expect More From a Leader Enterprises should expect more than the basics from the leaders, and this should come from the combination of vision and execution with regard to the ESP's ability to meet or exceed the benefits it projects for its CRM initiatives. As the market for CRM services continues to evolve, and CRM becomes more mature, Gartner is "raising the bar" and the criteria by which the leaders are evaluated. Since last year's Magic Quadrant, additional requirements have been added for evaluating the leaders to provide more differentiation between the vendors that offer CRM services. Although many leaders claim to provide "one-stop shopping" for all of an enterprise's needs, deeper understanding of the vendors' true capabilities will enable enterprises to sort through the vendor hype. In addition to meeting the minimum criteria, leaders in the Americas will have demonstrated through discussions and briefings with Gartner analysts, as well as extensive reference checking the following 12 characteristics: Enterprisewide revenue of at least $1 billion and CRM-specific revenue attributable to a dedicated CRM practice of at least $500 million in 2002, excluding outsourcing and managed service revenue A balanced portfolio of strategy and implementation work in each of sales, marketing and service, for B2B and B2C business models, delivered by the provider's core CRM practice 20 January

9 Client engagements demonstrating services across the entire program life cycle, including an enterprisewide CRM strategy; a business-unit strategy in sales, marketing and CSS; and a CRM project strategy. This is in addition to business consulting and systems development and integration. Outsourcing may be provided directly or indirectly through tight strategic partnerships, as demonstrated by solid contractual relationships, where monetary commitments have been made and senior leadership of both parties is responsible for partnership success as part of their performance evaluation. A well-managed, matrixed CRM practice in which a separate CRM practice group coordinates CRM solution and benefit delivery with the ESP's industry practices; plus specific CRM revenue targets within both groups. Leaders demonstrate year-over-year stability in their management teams responsible for the overall success of the CRM practice. The ability, demonstrated via references, to integrate at least three CRM channels (e.g., field, telephone, Web, mobile, and "brick and mortar") in a minimum of two domains (e.g., sales, marketing and CSS) with back-office functions enterprise resource planning (ERP), supply chain management (SCM) and human resources across multiple CRM suite and back-office packages A minimum of 20 referenceable implementations for 2002 in each of sales, marketing and service, including third-party channels (e.g., value-added resellers, agents and distributors) in which targeted return on investment (ROI) is evident and verified by the reference across all the geographies in which the client operates. Work performed for submitted references must have taken place within the past 24 months (i.e., from October 2000 through October 2002). A significant geographic presence in the Americas, with the capability to extend delivery services locally across three geographic regions the Americas; Europe, Middle East and Africa (EMEA); and the Asia/Pacific area to support Americas-based clients' global operations Innovative service offerings that demonstrate "thought leadership" and solutions that enable the evolution of the CRM practice (e.g., alliances, value-added pricing, the use of emerging technologies and being first to market with unique service offerings) CRM program and project management expertise, proven delivery methodologies and tools, and ongoing support (i.e., including training, asset management, system tuning and production auditing) Strong alliance/partnership programs (demonstrated by solid contractual relationships) and delivery experience with at least three software vendors appearing on Gartner's B2B or B2C CRM Magic Quadrants. Partnerships with software vendors appearing in other "drill down" CRM Magic Quadrants must also be demonstrated. In addition, partnering to provide breadth and depth of service beyond the four walls of the ESP and beyond the confines of the CRM practice (e.g., with brand specialists, direct marketing and communication agencies) is also expected. A minimum of five dedicated industry practices with industry business and technical consultants knowledgeable in CRM strategy, business transformation, change management, organizational structures and implementing technology solutions for the leading CRM suite providers A consistently high rate of significantly satisfied clients and evidence of strong client relationships, demonstrated over time and through current and past references Magic Quadrants do not always include all vendors in a given sector. Vendors evaluated are chosen based on their current and potential market impact and how often Gartner analysts receive inquiries about 20 January

10 them. In addition, they must meet the minimum inclusion criteria for placement on the CRM Service Providers 2003 Americas Magic Quadrant. The following sections of this report discuss each quadrant in the CRM Service Providers 2003 Americas Magic Quadrant (see Figure 1) and the vendors contained therein, applying the criteria defined for providers in the Americas. Challengers Leaders Ability to Execute Headstrong EDS Unisys Experio Solutions Answerthink IBM Business Consulting Services Inforte American Management Systems eloyalty Accenture Cap Gemini Ernst &Young Deloitte Consulting BearingPoint Computer Sciences Corp. As of January 2003 Niche Players Visionaries Completeness of Vision Source: Gartner Research Figure 1. CRM Service Providers 2003 Americas Magic Quadrant 2.4 The Leaders Leaders are service providers that are doing well and have strong prospects for the future. They have mature CRM practices, are financially stable, demonstrate long-term management commitment to their practices and have large numbers of CRM consultants that have delivered solutions in a number of industries. They are capable of delivering complete solutions with the proven ability to execute across multiple geographies to support Americas-based clients' global operations. They generally sell into the senior management levels, have long-term relationships and serve in long-term advisory roles. They have solid and long-standing partnerships with the leading CRM suite vendors Accenture Based on Gartner's revenue estimates for CRM specific services, Accenture continues to be the largest of the vendors in this Magic Quadrant. Accenture leads with its "thought leadership" combined with using its strong channel influence to forge lucrative alliances, partnerships with leading CRM software providers 20 January

11 and long-standing stable leadership team. Its thought leadership is based on a willingness to make investments in new arenas as well as entering into calculated risk/reward deals. Gartner estimates that Accenture maintains the highest investment in CRM thought leadership among the CRM ESP leaders. Customers report some of the largest and most complex undertakings were entrusted to Accenture, while also expressing frustrations at the high costs associated with premium pricing. Accenture has concentrated its engagements on strategy and business consulting with plans to complete the technology transformation. It is also renewing relationships with enterprise CRM suite vendors BearingPoint BearingPoint (formerly KPMG Consulting) has a CRM practice that is characterized by its clients as "the pragmatic vendor that gets it done." However, such positive results tend to be focused on specific industries and packages primarily in the United States, for it is only recently that BearingPoint has expanded its global reach. Each of the past few years has brought new challenges, including past issues related to going public in This coming year, its focus will be on the integration efforts associated with combining the thousands of consultants from the former Andersen Business Consulting practices with the BearingPoint foundation to become one seamless firm able to serve Americas-based clients' worldwide needs. Stability in the senior leadership and the addition of a European leader who Gartner believes will push its vision forward should serve clients well. BearingPoint continues to strengthen its partnerships with CRM vendors, and this has been serving its clients well Cap Gemini Ernst & Young Cap Gemini Ernst & Young (CGE&Y) continues to do solid work in CRM engagements and has all the ingredients to achieve success. However, its ability to bring all of its assets to bear in a consistent manner is still not completely evident in customer feedback. Moreover, the succinct articulation of all of these elements in a clear vision that is supported by client engagement examples as well as CGE&Y's absence in the Central American and South American regions of the overall Americas marketplace remain as key challenges. The new leadership is committed and has crafted several pre-configured CRM offerings (e.g., Fast Pharma and Wealth & Producer Optimization) targeted at specific industries, and it is developing other marketing-related offerings that are promising. CGE&Y clients cite strengths in industry knowledge and technical abilities with challenges in premium pricing and knowledge transfer. Given CGE&Y s considerable size, breadth, large-scale client base and diversity in industry penetration across the globe, it is clearly in a position to bring this all together as it is one of the few firms that will not be involved in a name change, brand shift, separation or major organizational structure change Computer Sciences Corp. Computer Sciences Corp. (CSC), with a pragmatic approach to business transformation and a solid CRM prioritization methodology, joins the Leaders Quadrant this year. CSC's CRM focus is in developing a "portfolio management" approach to its client's customer segments including all customer-related processes throughout the extended enterprise. Its vision is to move past individual programs toward highly customized, tightly integrated solutions (e.g., proactive service, early resolution and individual customer promotions) that address business needs by migrating to analytical CRM from its historical operational focus. Clients cite its process analysis, project and change management approaches as strengths. Conversely, clients cite the following challenges: they perceived cost structures as high, noted issues with bringing to bear deep technical skills in specific CRM applications and also questioned the strength of certain software partnerships. Eventually, CSC will move to a more managed-services model as it plays on its heritage strengths to plan, build and manage client's portfolios. 20 January

12 2.4.5 Deloitte Consulting Deloitte Consulting s success in the past has been premised on its increasingly aggressive approach to competing with other vendors and a lack of internal strife plaguing its competitors because of major organizational changes (i.e., initial public offerings, name changes and separations from heritage firms). In the coming year however, Deloitte Consulting will be challenged to continue to maintain its focus, specifically, to concentrate externally on its clients rather than all of the change that awaits it. The changes include the shift to the new brand name of Braxton (i.e., expected to be completed within the first quarter of 2003, pending finalizing all financing and SEC decisions), the separation from its accounting brethren and the foray of the former partner Deloitte Touche & Tomahtsu into consulting (i.e., likely to cause confusion in the marketplace). In addition, as the overall firmwide gap in size grows between Deloitte Consulting and some of the other megafirms in the Leaders Quadrant, Deloitte Consulting will be challenged to distinguish itself in specific competencies, service lines and solution offerings. To counterbalance these forces, the new CRM practice leadership is keenly focused on creating stakeholder value for its clients by providing a full range of services. Increasingly, it is leading with strategy and has expanded its Value Map (i.e., a specific Deloitte Consulting tool for business value analysis) to better integrate CRM with an enterprise's overall transformation efforts. Clients cite project management and high costs as areas for improvement and note business process, industry knowledge and technical capabilities as strengths IBM Business Consulting Services IBM Business Consulting Services (BCS) clearly made the largest and boldest move of the past year not only in CRM, but also across services with its acquisition of one of last year's Magic Quadrant leaders, PricewaterhouseCoopers Consulting (PwCC). In preliminary releases of integration efforts, IBM BCS seems focused on retaining the legacy PwCC CRM leadership and industry strength to forge the future of the newly combined organization. The challenge that BCS faces is the integration of two very large organizations. Like others that have made acquisitions this past year, Gartner sees the two former organizations working together to proactively integrate the CRM practices and create a standard methodology, newly combined solutions and seamless delivery capability. However, Gartner has predicted that it will take 12 to 18 months before the potential of the combined depth in skills, geographic reach and offerings are a formidable force that can be supported by client feedback; and Gartner believes this to be true for the CRM practice as well. Because the deal was consummated in October of 2002, few examples exist of execution of projects as a combined organization. Early evidence of its potential might is the frequency with which Gartner sees BCS on the short lists of candidates for large, complex implementations. In addition, reference checks with clients that have chosen BCS since the acquisition cite the technology knowledge, business process consulting and industry expertise as strengths. Challenges include bringing conceptual ideas to fruition and the perceived high cost structures. Reference checks with clients that selected PwCC or IBM Global Services prior to the acquisition continue to cite IBM's technical prowess and are looking forward to the business process skills that will be brought to engagements When to Consider a Leader Large multinationals with complex business processes requiring global support that are looking for large numbers of skilled and experienced teams for large, multiyear, multidomain initiatives are the most likely examples to concentrate options in the Leaders Quadrant of vendors. Enterprises with CRM initiatives that center on single projects or that require more flexible and innovative approaches should also consider other, more-nimble providers. 20 January

13 2.5 The Visionaries Visionaries are vendors that have great ideas for tomorrow, but they may be struggling in specific areas of consistent execution. For example, they may be very capable in one or two domains, have solid methodologies and delivery track records, but have marketing budgets that preclude them from calling attention to their capabilities or cause limitations in their sales abilities. They understand business requirements, demonstrate innovation in service offerings with a particular industry focus and tend to have fewer resources focused on CRM American Management Systems American Management Systems (AMS) has continued to emphasize business process outsourcing capabilities and during the past year has more effectively bundled these services with business and IT consulting. This has been effective, as the CRM practice has reported a number of significant wins against a number of the leaders in Gartner's Magic Quadrant as well as other notable firms (e.g., McKinsey & Company). Gartner continues to view AMS as a visionary in a number of focused industries. One important industry where AMS has depth is government/public sector. Gartner Dataquest has reported that this sector is one of the select few that is continuing to increase CSI spending as others are still cutting budgets. AMS's ongoing focus on driving business results through actionable strategies supported by solid methodologies and a good track record for delivery continues to make AMS a very capable option for CRM services eloyalty eloyalty moves into the Visionaries Quadrant for its ability to implement CSS solutions. During the past year, it has refocused its efforts going back to its heritage in building contact centers. Although it has the capability to implement in each of the three domains, CSS has become its primary focus with nearly twothirds of its revenue derived from this domain. It has had visionary offerings that focus on business-case development and measurement. Building on its offerings around business-case development and measurement, new visionary offerings include Value-to-customer, an expansion and extension of Valuefrom-Customer (i.e., formerly known as Loyalty Value Analyzer) and an emerging offering centered on behavioral profiling to describe customer behaviors, primarily in call and contact centers. Geographic, vertical specialization and partnerships with CRM software vendors remain as challenges Inforte Inforte has been one of the few service providers that has continued to be profitable and grow, albeit slowly, during these tough economic times. In addition to the good reviews clients report on its technical capability, Inforte has made progress in strengthening its strategic vision for CRM, which is to integrate supply chain and customer-facing business processes, and move more into business and strategy consulting, thus rounding out its technical capabilities. Inforte has won a number of Fortune 500 clients this past year and is moving to increase its capability to deliver multiple CRM software vendor's products rather than relying solely on one alliance partner. Challenges remain concerning expanding and rounding out partnerships with multiple CRM software vendors; and although quality assurance is key to its delivery methodology, some clients cite the quality assurance process during engagements as a development area for Inforte When to Consider a Visionary Visionaries demonstrate skills in creating and validating CRM initiatives, understand business requirements for fewer industries and offer unique services. Enterprises looking to gain competitive 20 January

14 advantage that are willing to forgo strong viability to achieve service innovation are looking for leadingedge, creative thinking and are looking to work with smaller, but highly capable, partners should consider visionaries. 2.6 The Challengers Challengers are those vendors that execute well, may dominate a large segment, have a less-mature understanding of market trends and directions, or are not able to articulate their vision clearly. It is undetermined whether they have all the elements to be successful in the future, but they have a solid track record of execution, financial resources and staying power. Generally, they are good choices for the specific segments where their track record demonstrates success. The challengers of past CRM Service Providers Magic Quadrants have successfully made the shift to the Leaders Quadrant, either through organic growth (e.g., CSC) or through acquisitions (e.g., IBM acquiring PwCC and BearingPoint absorbing the Andersen professionals). Because of the sluggish economy, there were limited investments in significant growth since 2002 was dominated by the ESPs' need to reduce costs and manage their margins and overhead just to stay profitable during the challenging economic times. As a result, the CRM Service Providers 2003 Americas Magic Quadrant does not have incumbent challengers. However, if the economy rebounds and investments in CRM practice development increases, the Challengers Quadrant will be active again. 2.7 The Niche Players Niche players include vendors that focus on a small segment of the market and do it well and those that have modest horizons and possibilities due to an inability to innovate or outperform other providers that participate in the CRM market. Niche players tend to deliver tactical implementations or strategy related to a single domain or project. They may lack overall vision and execution skills for broader CRM (e.g., partnering with only a single CRM suite software vendor). They tend to serve a smaller part of the CRM market and may be confined to a specific geography or vertical market Answerthink Answerthink has CSI expertise and is beginning to leverage its Hackett benchmarking capability into its CRM offerings by using its databases to help prioritize business imperatives and realistic ROI. Clients cite the depth of skills in specific packaged applications that its consultants bring to engagements and their focus on pragmatic results, while still citing a need for more industry depth and specialization EDS EDS continues to develop its CRM capabilities to offer a broader spectrum of services as it continues to seek expansion beyond its core competency in operations outsourcing. EDS provides CRM within its business process outsourcing framework, executing complex transformations while managing the entire project or program. Clients cite its call center experience and strong technical support as strengths. Challenges cited by clients are centered on project management and approval processes and its sensitivity to change management Experio Solutions Experio Solutions, a Hitachi company, is new to the CRM Service Providers Americas Magic Quadrant this year. It began with the acquisition of Grant Thorton s e-business consulting group in November 2000, and has continued to grow organically and through acquisitions, most recently through hiring a large number of partners and consultants from the now defunct business consulting practice of Arthur 20 January

15 Andersen, mostly in the western half of the United States. Clients consistently mention the strength in its technical skills relating to Siebel Systems. Challenges include its relatively small size and limited ability to deliver globally Headstrong Headstrong has evolved from a methodology and business process based firm into a system integration company with a strong focus on business integration, Headstrong understands the challenges of integrating CRM within the enterprise as it has success stories in large complex organizations. Headstrong works with a relatively smaller number of CRM clients. Typically, however, its clients are leaders in their industries, and they are global companies. Not surprisingly, clients cite technical skills, methodology and industry business expertise as strengths, while they mention the relative size of the firm and the desire for more optimized pricing structures on overall engagements as challenges Unisys Unisys, with a new global leader at the helm, is beginning to expand its CRM capability beyond its historic strength in transaction processing outsourcing. Unisys has undergone a major organizational change and has developed more than a dozen front-office solutions tied to its back-office offerings. It has created industry-specific solutions for the sectors it serves and is aggressively building CRM talent. Clients cite commitment to its business success as a strength but mention post-implementation support as a challenge, along with perceived high cost When to Consider a Niche Player Enterprises should consider niche players for their particular strengths and their ability to focus tactically and deliver. Niche players are often the best partners because they are focused and can deliver rapidly. 3.0 Industry Expertise Matters It is important to note that the realization of business results is premised on the combination of defining executable strategies enabled by robust technologies that together truly enable business process change specific to the industry. Examples include the deregulation in the utilities industry and the nuances of CRM in the government and public sectors. When evaluating an ESP's vertical capability, it is not just a matter of how many industries it claims to have expertise in but, rather, the level of depth in that particular industry and its proven track record as supported by referenceable clients. For example, it is not enough to claim expertise in "financial services" because this is a broad industry sector comprised of more than 10 different sub-segments. Enterprises evaluating CRM service providers must dig deeper into the specific industry sub-segments and determine the real expertise with which the ESP can truly provide domain expertise. To begin this process, Gartner examined the ESPs' vertical capabilities for delivering CRM (see Table 1). Table 1 lists key industries for each provider and the associated percent of CRM revenue these providers derive from work in each of their top three industries. 20 January

16 Table 1. CRM Service Providers: Top Three Industries Served as a Percentage of CRM Revenue Firm Accenture AMS Answerthink BearingPoint CGE&Y CSC Deloitte Consulting EDS eloyalty Top Three Industries Served 1.Communication (e.g., communication, electronics and high technology, and media and entertainment) 2. Financial services (e.g., banking, capital markets, insurance and healthcare) 3. Resources (e.g., chemicals, energy, forest products, metals and mining, and utilities) 1. Financial markets (e.g., retail banking, insurance and wealth management) 2. Communication (e.g., telecommunication and media) 3. Government/public sector Firm does not go to market by vertical industry or is not organized by industry verticals; therefore, this information is not available. 1. Products industries (e.g., high technology, discrete and process manufacturing, automotive, chemicals, consumer goods, retail and transportation) 2. Telecommunication 3. Government/public services 1. Telecommunication 2. Pharmaceutical 3. Financial services (e.g., asset management, banking, brokerage, insurance and wealth) 1. Discrete manufacturing (e.g., high technology, pharmaceutical and consumer goods) 2. Financial services (e.g., asset management, commercial and retail banking, institutional brokerage and property, casualty and life insurance) 3. Government/public services (including defense services) 1. High technology 2. Distribution (e.g., consumer packaged goods, pharmaceutical and retail) 3. Communication (e.g., high-technology communication infrastructure, service provider and telecommunication segments) 1. Government/public services 2. Consumer goods and services 3. Manufacturing 1. Telecommunication 2. Financial services (e.g., asset management) 3. Health (e.g., insurance and pharmaceutical) % of CRM Revenue 52.0* 18.0* 14.0* January

17 Experio Headstrong IBM BCS Inforte Unisys 1. Energy (e.g., utilities, refining and oil field services) 2. Technology (e.g., communication, software, media and high technology manufacturing) 3. Consumer products (e.g., consumer goods manufacturing, retail and hospitality) 1. Financial services (e.g., investment, retail and commercial banking, institutional brokerage, private banking and insurance) 2. Pharmaceutical 3. Utilities 1. Financial services (e.g., banking, securities and financial markets, and insurance) 2. Communication (e.g., telecommunication, media, utility and energy) 3. Distribution (e.g., retail, consumer packaged goods, travel, hospitality, pharmaceutical and life sciences) 1. Business services (e.g., travel, business process outsourcers and information providers) 2. High technology 3. Financial services (e.g., insurance) 1. Government/public sector 2. Financial services (e.g., retail banking) 3. Consumer goods Source: Vendor reported data unless otherwise noted; * = Gartner estimate * 20.0* 20.0* Additional Vendors Beyond the Magic Quadrant Gartner analysts reviewed a number of other vendors for inclusion in the CRM Service Providers 2003 Americas Magic Quadrant. However, they do not appear because they were not able to meet one or more of the minimum inclusion criteria. A provider s lack of presence on the Magic Quadrant does not imply that enterprises should not consider the provider for various CRM initiatives. Three notable examples include: Akibia Consulting. This firm has demonstrated solid planning and implementation services around Siebel Software focusing on sales force automation and CSS. Its clients report a focused pragmatic approach to achieving desired outcomes premised on efficiency and gross value. Akibia Consulting has a good portfolio of mid-market clients and reports healthcare, insurance, retail banking, asset management and consumer goods as its core industries. C3i. Enterprises in the pharmaceutical and life sciences industries considering the implementation or ongoing support of Siebel epharma should consider C3i as a viable candidate with a solid track record in North America. C3i is optimized around Siebel s applications, has a core strength in sales force automation and reports it has implemented more than 15 Siebel epharma projects and currently provides end-user support services to 30,000 of the estimated 90,000 pharmaceutical sales personnel across the largest pharmaceutical companies in the United States and Canada. Peppers and Rogers. This focused firm has expertise in CRM strategy, program development and program management. Firms seeking help with enterprise CRM vision, business process expertise and change management capabilities should consider it. Its clients cite strengths in vision and thought leadership, but point to limited geographic reach and technical skills. However, it does partner with several ESPs for technical delivery. 20 January

18 4.1 Other Emerging Vendors In 2003, the majority of U.S. enterprises will see global sourcing services (i.e., near shore and offshore) as a mainstream alternative. They will demand low-cost services from ESPs with a proven global "virtual" delivery model. This change in buying behavior will change the sourcing landscape, with new vendors gaining market share and established global ESPs modifying their delivery models. Gartner predicts that global sourcing (i.e., near shore and offshore) of IT services will move into the mainstream purchasing patterns; therefore, it is only a matter of time before CRM initiatives are evaluated as viable candidates for potential delivery through near shore or offshore options. As Gartner predicted in January 2002, U.S.- based ESPs (i.e., many of which appear in the Leaders Quadrant) have already expanded their offshore delivery capabilities throughout In addition, a number of the largest IT service providers headquartered in India are likely candidates, including such firms as: Tata Consultancy Services Infosys Wipro Satyam Currently, most of these firms' forays in CRM are limited to technical skills in Siebel, programming efforts in specific CRM analytics projects and some call center work. However, many of these firms have aggressive growth strategies to expand their portfolios. Hence, Gartner predicts that a number of these near shore and offshore ESPs will emerge as contenders for consideration in future CRM ESP Magic Quadrants. 5.0 A Final Word About the Magic Quadrant Selecting a leader may not always the best choice, because all providers that appear in the Magic Quadrant have demonstrated positive business results for their clients and may be a viable option for an enterprise's specific CRM needs. Enterprises are also advised that the service provider landscape in North America is extremely fragmented, so at times it may be appropriate to look beyond the Magic Quadrant. Besides understanding positions in the Magic Quadrant, enterprises must conduct due diligence and always check references to ensure that the cultures of the service provider and the enterprise are synergistic. All other things being equal, the most critical criteria are often the ability for providers to work within an enterprise's culture, work with its people and effect the organizational change that is key to a successful CRM program. 20 January

19 Appendix A: Acronym Key B2B B2C AMS BCS CGE&Y CRM CSC CSI CSS EAI EMEA ESP PwCC ROI TCO Business to business Business to consumer American Management Systems Business Consulting Services (IBM) Cap Gemini Ernst & Young Customer relationship management Computer Sciences Corp. Consulting and system integration Customer service and support Enterprise application integration Europe, Middle East and Africa External service provider PricewaterhouseCoopers Consulting Return on investment Total cost of ownership 20 January

20 20 January