Leaders Prevail in the North America CRO Magic Quadrant

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1 Markets, G. Herschel Research Note 7 February 2003 Leaders Prevail in the North America CRO Magic Quadrant Customer relationship optimization is a maturing market. Enterprise suite vendors are improving their CRO offerings, but their momentum has been slow, enabling the traditional players to retain their leadership positions in 1H03. Core Topic Customer Relationship Management: Business Strategies, Technologies and Applications for Marketing Key Issues How will marketing communications evolve to craft optimal dialogues with consumers? How will marketers fill the gap between data and insights that are acted upon? The tendency of large vendors to slow enterprise buying decisions prior to serious market entry is a typical characteristic of a maturing market. This can create a problem for established vendors that are looking to maintain market momentum. It also risks creating a "maturity gap," whereby an increasingly small number of best-of-breed vendors remain ahead of a new wave of vendors with solutions that are not ready for widespread deployment. This is a major issue in the customer relationship optimization (CRO) market, as the traditional leading vendors struggle to maintain their market presence, and the suite vendors attempt to develop strong solutions and market credibility. This situation presents users with a choice between a relatively small number of vendors that have strong solutions and a larger group of suite vendors. The members of the latter group are selling their solutions based on the integration of their limited functionality with the rest of their suites and a vision of deeper functionality for the future. Vendors in the CRO market can be classified into three categories: Note 1 MRM vs. CRO MRM applications are designed to improve the use of marketing resources. The focus is on designing and creating a marketing strategy, determining the best allocation of marketing budgets, managing marketing skills, and effectively tracking and supporting marketing processes (for example, in collateral creation). On the other hand, CRO applications define and communicate the value proposition of the organization to the customer, ensuring the profitable creation, development and maintenance of the customer relationship. "Pure Play" Vendors: Most of these providers have been acquired during the past few years, and those that remain (such as Aprimo, Blue Martini Software, DoubleClick, Unica and Xchange) are moving toward the emerging concept of a marketing suite. Although their application development in CRO is likely to remain strong, they will be targeting audiences in marketing, rather than broadening CRO into such functions as sales, service and business operations. Targeting the marketing function will push their development into other areas of functionality (see Note 1). Analytic Suite Vendors: Providers such as SAS Institute and NCR's Teradata Division combine deep analytics and infrastructure functionality with their CRO capabilities. CRO will Gartner 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 remain a key initiative for these enterprises because it expands their scope into more action-oriented business processes, rather than limiting them to abstract analytic roles. The size of these vendors enables them to achieve a greater vertical focus than their pure-play competitors, particularly in such areas as prepackaged analytics and data models. Customer Relationship Management (CRM) Suite Vendors: This category which includes Chordiant Software, E.piphany, Kana, PeopleSoft, SAP and Siebel Systems was the last to target the CRO market (E.piphany's strong position is due to its origins in this market prior to its expansion to a suite vendor). CRM suite vendors use CRO to provide the business logic and customer insight that can guide their operational systems on how to treat the customer. CRO is of more-variable importance to these vendors than the other categories. For some, CRO forms the strategic underpinning for all CRM activities; for others, it's just another piece of functionality of minimal importance compared to the value of selling thousands of sales or service seats. The maturity of the vendor's vision and its ability to execute on this integrated vision is best reflected in the Magic Quadrants for business-to-business (B2B) and business-toconsumer (B2C) CRM suites. Figure 1 North America CRO Magic Quadrant 1H03 Challengers Leaders Ability to Execute SAP Siebel SAS DoubleClick PeopleSoft Oracle Teradata Unica E.piphany Aprimo NuEdge Kana Blue Martini Chordiant Xchange As of January 2003 Niche Players Visionaries Completeness of Vision Source: Gartner Research 7 February

3 The Leaders No new vendors have attained market leadership during the last nine months. Increasingly, the challengers (and even some niche vendors) will lay claim to market leadership based on the number of customers they can claim in specific verticals, or by aggressive bundled selling of this functionality in a broader suite sale. However, market leadership implies more than just success at selling it also requires a compelling vision that other vendors seek to match and that supports the desire of customer organizations for competitive differentiation. Only three vendors enter 2003 in this position. E.piphany: This vendor continues to experience strong differentiation through its real-time recommendation engine. The E6 rewrite of the application code base into Java 2 Platform, Enterprise Edition (J2EE) appeals to the many enterprises pursuing a Web services architecture. Ongoing concerns about E.piphany's viability (see "Why E.piphany Has A Future") tend to act as a hurdle, rather than an obstacle to customer selection of E.piphany. During 2003, the company must reinvigorate its marketing capabilities if it is to maintain its industry-leading vision. Teradata: Its CRM applications continue to have strong appeal to its customers, but more importantly, they serve as a testament to the analytic power of the Teradata platform, effectively pulling a small, but growing number of customers into its environment, rather than automatically eliminating Teradata from the shortlist. Its success in the CRM space increasingly depends on the competitive differentiation of the Teradata platform (see "IBM's Regatta Still Lags NCR Teradata in Data Warehousing"). A recent reorganization should result in more-consistent availability of capabilities across verticals and yield better integration of its somewhat disparate application portfolio. Unica: Adroit marketing, solid functionality and problems being experienced by its traditional competitors drive Unica's continued success in the market. Unica's "pull the data from anywhere" concept appeals to enterprises that dislike other vendors' need for proprietary or dedicated data marts, although its value really lies in quick time-to-market and more-flexible access to data. During 2003, Unica will continue to develop its marketing suite, broadening the range of functionality mainly in the area of marketing resource management (MRM) and deepening the integration of its CRO application for a marketing user. 7 February

4 The Challengers Challengers have applications that may be rich enough to support the needs of their established (and typically large) customer bases, but lack the "mind share," experience or functionality to push into the market on a stand-alone, best-ofbreed basis. Challengers may become market share leaders because serving the mainstream of the market requires the ability to execute as a fast follower, rather than the visionary new development required to support visionary customers. DoubleClick: The acquisition of Protagona provides DoubleClick with a dramatic entrance into this market. Protagona had strong functionality, but struggled to establish market presence against larger and more-aggressive competitors. DoubleClick now has an opportunity to sell Protagona into its customer base and then take this renewed momentum to the broader market. Given DoubleClick's history of disparate acquisitions and the difference in traditional target audiences between Protagona (financial services) and DoubleClick (retail), executing this strategy will be the challenge. SAS: SAS continues to target this market, and the acquisition of Verbind (see "SAS Acquires Verbind Assets: Widens Potential for State-Based Analytics") gives it the raw materials with which it can establish "thought leadership." Recent product releases have concentrated on verticalization and improved usability for the business user. However, market visibility is lacking for its packaged applications, even within SAS's customer base. The company's ability to push beyond its traditional analytic users and into mainstream marketing departments will be key to its success in Siebel: The company is beginning to include the components that leading customers look for in its solution, but its ability to communicate this message independently of the overall suite message (that is, to lead with this solution against best-of-breed competition) has yet to be demonstrated. Although Siebel has begun to gain better recognition and penetration in the B2C market, execution is still stronger in B2B, where the needs for such a solution are less complex. Siebel is having increasing success selling CRO into its customer base. The Visionaries Visionaries are vendors with a good story that are struggling to be heard in the market. Building momentum is critical, particularly as the market consolidates and larger challengers blur the market and learn the buzzwords to claim a similar vision. 7 February

5 Aprimo: With a traditional customer base within B2B-oriented verticals, Aprimo's lead management capability and process support for campaign management yield good differentiation in the market. During 2003, Aprimo will have to expand its current functionality to meet the expectations of B2C campaign management. Chordiant: An enigma in this market, Chordiant has demonstrated strong recognition for its marketing solution in the Europe, Middle East and Africa (EMEA) region, but this has not translated to North America, where the company is oriented toward big CRM suite deals, including accompanying services. During 2003, Chordiant is refocusing the North America direct sales channel for its Marketing Director product to focus on specific high-end B2C accounts. Xchange: Because of its installed base, Xchange remains a market factor; however, even its strong Value In Play (VIP) concept for real-time customer interaction has done little to reassert its presence in the market. Without drastic action to address concerns over short- and long-term viability, Xchange will continue to suffer from relatively slow migration of customers to Xchange 8 and a lack of traction in new deals. The Niche Players Niche vendors can be divided into three categories. The first includes the "true" niche players, providers with the vision and functionality to support a specific target market. The second category is new entrants that are still building the functionality, vision and mind share that will drive them into the Challengers or Visionaries quadrants. And finally, there are those vendors that are retreating back to niche appeal, because their vision and market presence have failed to keep up with the evolution of the market. Blue Martini: Blue Martini enters this quadrant as a good option for enterprises with a retail or direct-to-consumer orientation, including companies in such verticals as manufacturing or consumer packaged goods (CPG). Within its target markets, Blue Martini is an increasingly strong candidate and should be included on users' shortlists. Kana: Having done little to move its acquisition of Broadbase Software beyond its e-marketing origins, Kana struggles in broader, multichannel marketing deals outside the contact center. Without a significant effort to improve its functionality, Kana will be limited to e-marketing deals within its customer base. 7 February

6 NuEdge: With its market strength coming from its marketing services (sold in conjunction with a solid but undifferentiated product), NuEdge appeals to midmarket enterprises in the retail and financial services industries that are seeking support and guidance after the sale, as opposed to a more-traditional software engagement. Oracle: Arguably building on the most solid marketing foundation among the enterprise resource planning (ERP) vendors, Oracle's vision extends beyond its traditional strength as an e-business suite into the broader multichannel marketing space. However, Oracle must still prove its ability to deliver the product and the market position against this vision. PeopleSoft: The most interesting of the enterprise suite vendors, PeopleSoft is building a vision of its product as part of a total ERP suite. This is compelling, and some elements of this, such as the Advisor and Dialog Marketing components, are now visible in the product. However, PeopleSoft is still working on the full integration of its Annuncio acquisition, with different user interfaces belying the underlying data integration. SAP: Although its solution is unlikely to find acceptance outside its installed base, ongoing enhancements to its functionality make it increasingly difficult for competitors to displace SAP within their installed base. Honorable Mentions Amdocs: The combination of Amdocs' pre-existing campaign management system and the ClarifyCRM suite should have resulted in more market visibility, but Amdocs has not been able to build on the call center traction it had in the telecommunications market and extend it into marketing. Amdocs is likely to be a significant new entrant to the market, but this will not take place during DataDistilleries: E.piphany's strongest direct competitor in the area of real-time recommendations, DataDistilleries has expanded its functionality to include campaign management, but has de-emphasized its goals for U.S. expansion in favor of paying more attention to its European base. Marketing Service Providers: A variety of vendors provide an alternative, service-driven approach to this functionality. Particularly interesting vendors in this space include Acxiom, Epsilon, Experian Information Solutions, Harte-Hanks and Seurat. 7 February

7 Acronym Key B2B Business-to-business B2C Business-to-consumer CPG Consumer packaged goods CRM Customer relationship management CRO Customer relationship optimization EMEA Europe, Middle East and Africa ERP Enterprise resource planning J2EE Java 2 Platform, Enterprise Edition MRM Marketing resource management Bottom Line: Many vendors are developing solutions in this market, but users looking for best-of-breed functionality from strong market players have relatively few options. Among bestof-breed vendors, consider E.piphany or Unica. Enterprises willing to operate within a Teradata environment should consider Teradata, which has best-of-breed functionality. Business-tobusiness (B2B) enterprises should have Aprimo on their shortlists, and retailers should consider Blue Martini. DoubleClick and SAS have the potential to become market leaders during the next six to 18 months, but they are not appropriate for all clients at this time. PeopleSoft has done the most to develop traction for its marketing application as a stand-alone solution; however, applications from Oracle, SAP and Siebel have all matured to the point where they could be considered by their current customers. 7 February