CRM Suite Magic Quadrant 2003: Business-to-Consumer

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1 Markets, G. Herschel, M. Maoz Research Note 13 March 2003 CRM Suite Magic Quadrant 2003: Business-to-Consumer Siebel Systems remains the only leader in the customer relationship management B2C Magic Quadrant; others, such as E.piphany and PeopleSoft, rival the leader on vision. Core Topic Customer Relationship Management: Creating Business Value for CRM Key Issue During the next five years, how will skills, architectures and technologies evolve to enable enterprises to develop moreprofitable customer relationships? Note 1 B2C Industries With Strong CRM Focus Financial services: Retail banking, brokerage, insurance Retail: Catalog, brick and mortar, click and mortar Communications: Mobile, fixed land line, cable and Internet service provider Travel and hospitality: Airlines, hotel and resort, car rental Utilities: Power, water Manufacturing: Automotive Since the early days of customer relationship management (CRM), the idea of a CRM application suite has focused on the needs of the business-to-business (B2B) market. In the business-to-consumer (B2C) market (see Note 1), the concept of a CRM suite has taken longer to establish because no vendor offered a solution that could credibly address the analytic and operational aspects of CRM that are particularly crucial in a consumer CRM relationship. This is changing, as the vendors begin to bridge the gap and companies do a better job of recognizing and exploiting the synergy between operational channels and their marketing and analytic systems. Four categories of vendors are competing in the B2C CRM market. The ex-operational CRM suites: True CRM requires the integration of both analytic and operational domains. Most of the vendors have crossed this divide by making acquisitions to serve as the basis for further internal development. Chordiant Software, Kana, Onyx Software and Siebel Systems are all CRM suite players whose origins lie predominately on the operational side of CRM. Their expertise and market presence tends to come from the channels (especially call/contact center in a B2C context), and they are working hard to gain credibility for their marketing capabilities. Most operational suite vendors are also already positioned as CRM suite vendors, so relatively few potential new entrants are in this category. The ex-analytic CRM suite: E.piphany is fundamentally unique in that it came from the analytic and marketing side of CRM. Many other analytic vendors are in the market, but few of them feel a strong desire to follow E.piphany into becoming a CRM suite vendor. Vendors such as NCR Teradata and SAS Institute could make the move if they chose, but to do so would require a huge (and unlikely) change in corporate strategy. 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 The enterprise suites: Oracle, PeopleSoft and SAP all pay varying amounts of attention to the B2C market (arguably, this is not the traditional audience for any of them), and, for the most part, this levels the playing field between them and the other vendors in the market. Although the potential exists for other enterprise suite vendors (such as J.D. Edwards) to try to expand into the B2C industries, they are unlikely to be a significant market factor as a CRM suite before The vertical-domain expert: With the exception of Amdocs (telecommunications), few back-office vendors in typical B2C industries have made much effort to push into the CRM suites market. We may see the CRM initiatives of vendors such as S1 and Webtone (both in financial services) expand into full CRM suite solutions for their target markets, but this is unlikely during Figure 1 shows the CRM Magic Quadrant. Figure 1 CRM Magic Quadrant Challengers Leaders Siebel Systems Ability to Execute Amdocs SAP Onyx Software Oracle Chordiant Software PeopleSoft E.piphany Kana As of March 2003 Source: Gartner Research (March 2003) Niche Players Visionaries Completeness of Vision 13 March

3 The Leaders Quadrant Leaders are vendors that are in a position to drive the direction and pace of the market. Leaders must have a cross-industry vision and broad coverage of the functional market, with market leadership (recognized in the drill-down quadrants, such as field services and sales suites) in specific pieces of functionality with relevance to a consumer-driven business. Siebel remains the only leader in this market. Siebel's breadth of application is unmatched and will remain so until at least the end of 2004 (0.8 probability). Siebel's overall ability to execute also remains unmatched; the strong relationship with external service providers (ESPs) and Siebel's own sales and marketing organizations ensure consistently strong market visibility and make it a difficult vendor to dislodge from the purchase-decision process. Siebel's vision is built on the combination of its broad, well-integrated range of applications and a comprehensive set of business processes that Siebel regards as best of breed. Siebel's application strength lies in its presence in the operational channels, particularly the call center, although over the last year, Siebel's reporting platform has generated a lot of new business and the campaign management application has begun to gain traction, particularly in Europe. Key improvements will be necessary in areas such as large-scale customer service operations in the telecom industry. The Challengers Quadrant Challengers are vendors with a strong presence in key areas of the market, but lack the breadth of solution that would enable them to claim a leadership position. Typically, these vendors have a strong vertical domain, with strong differentiated functionality to address the needs of that vertical, but they are missing key areas of functionality that vendors in other verticals would look for. Currently, there are no vendors that we classify as challengers in the market. During the next few years, this quadrant is likely to be occupied by vendors with expertise and significant presence in financial services, telecom and, possibly, retail. The Visionaries Quadrant Visionaries are vendors that are beginning to drive a distinct view of the future and potential of CRM suites to a B2C audience, but that lack the market visibility and traction of a leader. E.piphany's strong vision for B2C industries is a legacy of its background in the analytic and marketing areas. The integration of analytics into operational channels such as call centers or 13 March

4 Web sites is proving a significant differentiator in industries such as financial services and telecom, allowing E.piphany to drive its newer call center and sales modules into its client base. E.piphany's Java 2 Platform, Enterprise Edition (J2EE) Web services architecture allows clients the promise of flexible integration into a corporate IT infrastructure, particularly in comparison with the prescriptive business processes E.piphany's competitors often seek to impose on new customers. E.piphany's biggest challenge is to establish credibility and momentum in the market. A strong fourth quarter was a positive end to what had been a difficult year for E.piphany. To rapidly improve its position, E.piphany must verticalize its solution and continue to sell its new CRM suite applications back into its large marketing and analytic customer base. PeopleSoft has pulled ahead of the other enterprise suite vendors to claim a visionary position. Consistent appearance on client shortlists, a strong underlying architecture, a clear focus on developing its consumer-oriented functionality across analytics, campaign management, e-marketing and leveraging the old Vantive customer base gives PeopleSoft a strong set of applications for the consumer market. PeopleSoft is probably the most-flexible vendor in terms of being able to lead with the marketing and analytic capability (against E.piphany) or the operational channel functionality (against just about everyone else). The challenge for PeopleSoft is translating "mind share" and new deals into fully operational customers. Although it is not a PeopleSoft-specific problem, the complexity of companies' migration toward an Internet-based architecture is a contributing factor to their slow implementation of PeopleSoft. Gartner research indicates that a PeopleSoft-specific issue is that the vendor has less traction with the ESPs than Siebel, Oracle and SAP. To improve its position, PeopleSoft must continue to develop its application functionality, must successfully translate its deals into satisfied operational accounts and must improve its traction with the ESP community. The Niche Players Quadrant Momentum is a key issue for niche players. Some niche players are vendors with large, receptive customer bases that will grow their reference lists, partners and market visibility into the challenger space. Others are smaller and are still expanding their functionality presence in the context of a strong overall vision for the market. Understanding the direction and momentum behind the vendor is a key element to the selection of a niche player. The immaturity of this market is reflected by the large number of niche players. 13 March

5 Amdocs has staked a strong claim to market leadership in telecom. The combination of a strong market presence for its billing system and a large professional service organization has given Clarify an almost unbeatable lock on the customer-facing parts of its target vertical. Amdocs' challenge is to extend this dominance into the full range of applications (particularly marketing and analytics) that comprise a true CRM suite and to demonstrate that it can maintain and even extend the nontelecom relationships it acquired with Clarify. The most-likely direction for Amdocs to move is toward the Challengers quadrant as it demonstrates an ability to compete as a full CRM suite in telecom. Chordiant has spent the last several years building a broad set of components on a J2EE and Web services architecture that covers marketing and service functionality specifically for B2C organizations. Chordiant's vision of integration into an enterprise's business process (instead of forcing the customer to adopt its business processes) is supported by flexible integration with back-office systems and vendors. Ironically, Chordiant's flexibility has caused it to struggle to establish a clear value proposition. However, a simplified message of process-driven scalable flexibility is rebuilding traction for Chordiant, particularly in its core European market, but now in the United States as well. Chordiant is now a serious competitor in retail financial services deals, often coming in where other vendors have failed. Chordiant is limited by a small number of trained systems integrators, although new deals with IBM and Accenture may begin to address this issue. Kana is in a relatively stable financial position with small losses and reasonable cash reserves. It has specialized in selling point solutions rather than pushing a strong suite message; however, slow delivery of new functionality is costing the vendor market traction, even in some of its core e-crm areas. To re-establish market momentum, Kana must rebuild confidence in its long-term viability and express a clear and reliable vision for its applications. Onyx's claim to success as a CRM suite vendor is primarily attributed to its operational CRM capabilities. Its analytical capabilities are immature; as such, it is a good complement to some of the pure-play analytic suite vendors (such as SAS or NCR Teradata). It is unlikely that Onyx will be more than a niche player in the large B2C CRM suite market in the next few years unless it addresses some key deficiencies in the marketing and analytic areas. Oracle can draw on a reasonable B2C customer base, but it struggled to maintain development and market momentum during 13 March

6 2002. In many respects, Oracle could be the next entrant into the market leadership spot, because it has a large and B2C-oriented customer base, and much of the functionality presence that B2C companies look for. One of the key challenges for Oracle is its ESP relationships. Although Oracle can claim a large number of trained implementers and significant relationships with all the ESP vendors, the depth of the relationship in terms of the ESP's commitment to Oracle's CRM application (as opposed to its back-office or database lines of business) is more questionable. If Oracle can develop and maintain traction for its current functionality and then deepen and differentiate key areas, it should be a strong competitor, particularly in the retail market. SAP will continue to struggle in the B2C market for exactly the same reason it has been successful in the B2B market SAP's CRM solution makes a lot of sense to its large installed base of predominately B2B customers, but it has little to differentiate it from a non-sap customer in B2C. Although improving, SAP's functionality (in areas such as e-service, analytics and marketing) is still immature by the standards expected by B2C companies. Without a strong focus on the B2C market, SAP will continue to rely on spillover from its predominately B2B-oriented functionality for success. As such, SAP is likely to experience traction in B2C industries in enterprises with a strong back-office and operational focus, such as utilities or manufacturing companies with a directto-consumer relationship. Acronym Key B2B Business-to-business B2C Business-to-consumer CRM Customer relationship management ESP External service provider J2EE Java 2, Enterprise Edition Bottom Line: Siebel continues to establish the competitive bar in the business-to-consumer (B2C) suite market; however, E.piphany and PeopleSoft have begun to demonstrate that compelling visions for the future of the B2C customer relationship management suite can also come from other vendors. Amdocs is demonstrating that even in the B2C verticals, tight integration with back-office functionality can be a huge selling point. Chordiant and Oracle are in strong positions to move beyond their niche market positions. 13 March