Management Update: Gartner's 2003 Customer Service and Support Suite Magic Quadrant

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1 IGG M. Maoz Article 5 March 2003 Management Update: Gartner's 2003 Customer Service and Support Suite Magic Quadrant Enterprises will be frustrated by the lack of competition in the customer service and support suite market. Vendors won t deliver broad offerings, focusing instead on narrow industry solutions that require substantial custom integration. Many CIOs and other executives are looking into customer service and support (CSS) technologies and applications that will effectively support their customer service strategies. However, enterprises will be frustrated by the lack of competition in the CSS suite market. Vendors won t deliver broad offerings, focusing instead on narrow industry solutions that require substantial custom integration. Disappointments and Challenges Enterprises hoping to find three or more competitive CSS suites from which to choose for their industry will be disappointed, because broad cross-industry suites are still three years away. In fact, large enterprises have very narrow options. A major challenge for many vendors is to recover from the poor investment of funds for example, extravagant granting of stock options and grandiose marketing campaigns. Funds should have been used to merge useful service technologies such as , voice recognition, natural-language processing, chat, content management and browser sharing with customer service applications, such as problem resolution, technical support and case/account/activity management. Integrating the two, with the necessary business rules and workflow, will prove beyond the ability of most vendors, leading to even further vendor shakeout during the next 24 months. Buyers are wary of more piecemeal solutions from unstable vendors and the high cost of license ownership from the stable vendors. Until the applications mature in 2004, the market will be a difficult one to navigate. The Gartner 2003 CSS Suite Magic Quadrant To assist enterprises with their selection decisions, Gartner examines the vendor positions for 2003 based on its CSS criteria, and presents its 2003 CSS Suite Magic Quadrant (see Figure 5). Figure 5 Gartner s 2003 CSS Suite Magic Quadrant 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 Challengers Leaders Ability to Ex ec ute Pegasystems* Onyx Software S1* Amdocs* Chordiant Software* SAP Oracle Siebel Systems PeopleSoft E.piphany As of February 2003 Niche Players Visionaries Completene ss of Vis ion * For specific verticals only. Source: Gartner Research Leaders Quadrant Gartner s criteria for leadership are: $150 million in customer relationship management license revenue 60 references into production in latest 12 months across geographies 20 must be call/contact center, and 20 field service automation Integration with a contact center infrastructure vendor, proven by workflow and business rules that pass between the CSS application and the contact center infrastructure vendor Vision/strategy across service channels: field, call center/contact center, partner (e.g., brokers, agents, distributors, resellers) and Web service channels Support for multithread service processes, peer-to-peer collaboration, enterprise-to-mobile field service technicians, Web communities, and customer/enterprise-to-call/contact center Gartner s assessment is that the Leaders Quadrant leaves room for growth.

3 Siebel Systems is the only vendor in the Leaders Quadrant. Gartner estimates that 35 percent of Siebel s approximately $700 million in application revenue in 2002 was derived from sales to CSS organizations across industries and across geographies. During the past 18 months, Siebel had as many CSS customers go live as the next five competitors combined. However, customer upgrades to Siebel v.7 remain restrained, with less than 20 percent of the customer base upgraded. This is in line with Gartner predictions. Enterprises point to a lack of proven return on investment on the upgrade, too much complexity in the upgrade process, and uncertainties and confusion regarding the direction of future software versions. Siebel is very strong in high technology, medical equipment, financial services and certain types of telecommunications (front-end customer service). Siebel is not a leading solution for customer support in the areas of problem resolution in utilities and telecommunications, where network awareness and provisioning are key. Siebel remains dependent on partners to deliver large-scale wireless deployments, inventory planning and contracting, and has little demonstrated experience with the complex workflow required in insurance contact centers. With a full application set that includes service analytics, Web self-service, call/contact center and field service, Siebel will continue to be the most widely used packaged application suite for CSS organizations through 2005 (0.8 probability). Small and midsize businesses as well as organizations looking for more-flexible point solutions specifically built for the Java 2 Platform, Enterprise Edition (J2EE) environment will continue to look to alternatives to Siebel until the product matures through Visionaries Quadrant PeopleSoft has demonstrated the beginnings of a more flexible, scalable customer service application, and references are starting to validate its abilities. The CRM v.8.4 release (and early indications on v.8.8 pilots) shows positive signs of supporting broader enterprise business processes, and the integration points with legacy systems outside of PeopleSoft are now easier to maintain because of the maturing AppConnect tools. PeopleSoft s customer service product team members are still in the early stages of working together, but they come with solid industry experience. PeopleSoft has yet to convince a large number of integrator partners, but this will improve during the next 24 months. References are still few in number but growing, clustered in a few industries (for example, financial services and telecommunications), and with single sites of fewer than 250 users. E.piphany, throughout 2003, will best serve business-to-consumer (B2C) enterprises, where personalized call center interactions and embedded analytics are in high demand. In business-tobusiness enterprises, partner management or complex B2C, such as banking, healthcare and telecommunications support environments, E.piphany will not have best-in-class offerings through 2004 (0.7 probability). With the release of E.6, the customer service functionality has deepened, and the architecture continues to improve. The failover and scalability problems of the early versions are now behind the vendor. The J2EE architecture, together with the prototyping and modeling tools in E.6, make E.piphany a good fit for enterprises looking for good customer service (call/contact center) capabilities, native analytics and an ability to interface with certain legacy systems. E.piphany will not deliver a field service solution.

4 Oracle has the strongest vision outside of the Leaders Quadrant, as well as the most-significant gap between vision and execution. The development team, several project managers, the head of the customer relationship management (CRM) program and the sales organization have all undergone significant change. That situation is limiting the company s ability to fulfill on its sound understanding of service management flows in key industries, such as telecommunications, high technology, discrete manufacturing, printing and medical equipment. Oracle s CSS products continue to lack a common look and feel. References report that the Oracle CSS delivers solid but basic customer care, order fulfillment and delivery of contract information, primarily to networked workers. Enterprises find the pre-defined business flows overly specific for use in customer service, which demands flexibility in following customer behavior. Oracle database and 9iAS application server customers will benefit most from this product, as the CRM applications run only on the Oracle application technology stack. It will take two years for Oracle to put the processes in place (sales teams, implementers, professional services, third-party technology partners and business consultants) to take advantage of improvements to the CSS products (0.7 probability). Recent wins suggest Oracle is making progress, but few of those customers are live and referenceable. Oracle continues to improve integration with other vendors enterprise resource planning applications. Challengers Quadrant Amdocs, through 2004, will continue to offer the strongest products to the telecommunications and high-technology manufacturing industries of any of the application vendors for problem resolution (0.7 probability). In its core vertical, Amdocs provides a leading, highly scalable CSS solution. It is built on a J2EE-compliant architecture with pre-built integration with its own billing system. Amdocs has stated its commitment to other industries, including financial services and retail, and has customers in each. However, an inability to articulate a vision for those vertical industries, a lack of best-practice processes and few new references will slow non-telephone company penetration through 1H04. In late 2002, Amdocs introduced v.11, a new browser version of its call-center, sales, support and e- mail response management system products, as well as an integration gateway driven by Extensible Markup Language (XML), although various functionality gaps remain. Amdocs has a large and strong professional-service division (more than 700 people) but needs to improve its mind share with system integrators. It will lose some of its older installed base of Clarify customers outside the telecommunications industry during the next 18 months to better-focused competitors during upgrade evaluations, although it continues to succeed in signing customers to new maintenance programs. Pegasystems has a strong business rules and workflow engine, but its core CSS capabilities are less developed. Most references are in the financial services and healthcare sector and using Pegasystems for back-end processes, such as money transfer investigations, rather than for core CSS functions. Indeed, Pegasystems was typically used to complement other CSS vendors software. Although the vertical understanding and the rules engine are strong, Pegasystems must target its offering specifically for CSS. Despite the lack of a packaged, Web-based customer service

5 system, deep domain expertise and workflow will limit the ability of competitors to displace Pegasystems. Limited system integrator resources are also a concern. Niche Players Quadrant SAP has the long-term opportunity to evolve as the most serious CSS application vendor for midsize and large enterprises, and the only serious large-enterprise challenger to Siebel. Enterprises must look beyond the reported revenue for CRM in general and focus on the availability of production reference accounts matching the specifics that will be required from the system. SAP has strong engineering talent in its call/contact center team and will develop stronger partner relationships to build the product during the next 12 months. To date, few compelling examples exist of complex call/contact center capabilities. SAP s improvements in the user interface, workforce management (for the call center) and integration with computer-telephony integration vendors (particularly Genesys Telecommunications Laboratories) need to be matched with investments in e- service and advanced field service. However, SAP is successfully selling the concept of engineered integration within its enterprise application suite into its installed base. System integrator partners will be key to further success, and SAP has yet to succeed in securing resource commitments for the CSS products. Overall, SAP is well-positioned to deliver solid CSS offerings in Onyx Software has successfully sold into vertical industries such as healthcare, local government, media and financial services. With the latest software release, Onyx Enterprise CRM v.4.0, it has a good call center offering and customer portal. Executing on a successful long-term partnership strategy will be key to its success. The product has matured in the past 12 months and extended beyond the Microsoft environment, making it a strong alternative for divisions of large enterprises, as well as midsize enterprises. S1 has yet to have a significant impact in the market for packaged CSS applications, but it is consolidating its capabilities in the financial services market. Although it has acquired Ireland-based Point Information Systems and Edify (an interactive voice response vendor) and has about $300 million in revenue, it still lacks a cohesive vision or market reach in the CRM market broadly or the CSS market specifically. The impact of the potential spinoff of the Edify/Point business must be assessed if and when that becomes a reality. Chordiant Software sells on the strength of its open Java architecture, the JX platform, rather than the breadth or depth or the packaged functionality, and on the depth of its domain expertise in insurance and retail banking, particularly in Europe. It is stronger in Europe, the Middle East and Africa than in the United States particularly the United Kingdom and especially in high-volume B2C call centers where a flexible framework approach is valued. Customers can configure or re-express processes and drive them through existing databases. New references for 2002 in North America were few in number, but they were positive about scalability, back-end connectivity and workflow between complex legacy systems. Chordiant promises integration with broader CRM capabilities through its Marketing Director product, and a handful of customers have done this so far.

6 Chordiant is challenged with solidifying relationships with the most-significant large business consultancies (Accenture, IBM, Cap Gemini Ernst & Young) and has relied so far on regional relationships. Chordiant is not yet profitable. Success will depend on the uptake of the integrators, such as IBM and Accenture, and the ability of competitors to match the integration capabilities Chordiant offers. Bottom Line CSS application suites are immature and incomplete, with no vendor offering a compelling cross-industry solution. The large-enterprise application vendors (SAP, PeopleSoft and Oracle) offer pieces of a solution, primarily to their installed bases, whereas Onyx Software and E.piphany have chosen to offer more-general applications. Siebel Systems continues to have the broadest set of applications. Industry experts, such as Amdocs and Pegasystems, will continue to excel within their industry domains. Enterprises should determine how much of a trade-off between superior functionality and vendor viability they are willing to make when evaluating some of the vendors. Written by Edward Younker, Research Products Analytical source: Michael Maoz, Gartner Research For related Inside Gartner articles, see: Management Update: Gartner Presents Its Customer Service and Support Hype Cycle for 2003, 15 January 2003 Management Update: 2003 CSS Predictions Stress Value of Customer Service, 4 December 2002