Markets, M. Maoz, G. Herschel Research Note 28 February 2003 CRM Suite Magic Quadrant 2003: Business-to-Business Through 2005, no customer relationship management suite will, once deployed, give a large enterprise a complete solution. This Magic Quadrant evaluates CRM suites that will form the core of a wider CRM ecosystem. Core Topics Customer Relationship Management: Business Strategies, Technologies and Apps. for Customer Service and Support; 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? Strategic Planning Assumption Through 2004, Siebel will continue to lead the customer relationship management suite market in ability to execute, outpacing the competition in delivering CRM application modules that can be integrated for the front office (0.8 probability). Customer relationship management (CRM) applications as stand-alone products are fading in relevance as users look increasingly toward enterprise applications to automate their cross-enterprise functions, cutting across the traditional (and artificial) silos created by these individual solutions. The market is moving toward process-focused solutions that allow enterprises to unite multiple areas more easily (for example, billing, provisioning, parts logistics, inventory and service history). This requires application integration skills and platform skills that will challenge many organizations. As a result, the difference between Type A technology users (those who prefer to build a cutting-edge capability or buy a bestof-breed application) and the mainstream Type B and Type C users (who will forgo early adoption for reduced risk) is becoming more pronounced. The danger for the Type B and Type C users is that they will mistakenly think a lower-cost application is a proven solution which is not always the case. The vendors coming from an enterprise resource planning (ERP) or back-office application heritage (for example, SAP, PeopleSoft and Oracle) have CRM offerings that are often immature in comparison with those of the established CRM vendors, such as Siebel Systems. However, the ERP vendors are tapping into a deepening trend: Enterprises are increasingly realizing that many core sales and service processes require tight integration with an ERP, supply chain management (SCM) or legacy system (such as billing, activation systems or check adjustment) to complete a customer transaction quickly and accurately. Foundation architectures will assert themselves as critical evaluation criteria (see "Defining Architecture for IT: A Framework of Frameworks"). Some vendors, mainly SAP and Oracle, believe that the key is to offer a complete set of 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.
enterprise applications for ERP, SCM and CRM. Others, such as Siebel, prefer to partner to arrive at the complete solution. Either way, this will begin to shift the market from pure features/functions to architectures, as business process flow will be just as important as any individual piece of functionality. There will be increased emphasis on middleware, the database, standards and interoperability. CRM suite vendors that assist in this endeavor will lead in the marketplace by 2006. Large-enterprise sales, service and marketing organizations that emphasize minimizing the number of solutions in the enterprise application portfolio are candidates for CRM application suites. Further decisions must be made as to the appropriateness of extending an installed enterprise application system such as SAP, PeopleSoft or Oracle, compared with a more pure-play CRM application suite from companies such as Siebel. Unique attributes of the business-to-business (B2B) Magic Quadrant (as opposed to the business-to-consumer Magic Quadrant) include: The ability to support many-to-many relationships, including partner-to-partner collaboration Scalable applications for a large mobile sales teams or field technicians Embedded sales methodologies, support for service life cycle management Proposal generation Integration with contract and entitlement management systems Compensation and incentive management The following (see Figure 1) are the results of our CRM largeenterprise suite evaluations for 2003. For more on the Magic Quadrant criteria, see "CRM Large-Enterprise-Suite 2003 Magic Quadrant Criteria." 28 February 2003 2
Ability to Execute Challengers SAP Oracle Amdocs Onyx Software E.piphany Figure 1 2003 B2B CRM Suite Magic Quadrant Leaders Siebel Systems PeopleSoft As of February 2003 Niche Players Visionaries Completeness of Vision Key Leadership Criteria Current ability to move markets. Enables a competitive advantage. CRM functionality for all business models within B2B as proved by user references and Gartner Magic Quadrants. Proven application scalability. Ability to participate in enterprisespanning business processes. Sufficient trained implementers (including business process consultants) in three geographies for the specific industry and functional requirements. Satisfied customers with a deployed and integrated CRM suite showing measurable benefit from each supported industry model. B2B = business-to-business CRM = customer relationship management Source: Gartner Research Only One Leader Through 1H04 Siebel continues to surpass competitors in selling CRM applications, even in a down economy. To compare Siebel with its main competitors, Gartner estimates that Siebel had $675 million in CRM software revenue in 2002. This compares to PeopleSoft, which sold more than $500 million for all of its enterprise applications, including CRM, ERP/human resources, procurement, SCM, portals and analytics. Oracle had perhaps $600 million for all of its enterprise applications, and SAP, with $2.2 billion in software revenue overall, allocates $450 million of its license revenue to CRM applications. The individual Magic Quadrants that comprise the CRM research at Gartner consistently find Siebel as either a leader or challenger, with rare appearances in the niche category (incentive compensation). The company continues to outspend and outmarket all enterprise rivals for its sales and service applications. Key to its success through 2004 will be the results of its Universal Application Network (UAN),.NET and IBM initiatives (see "Siebel Partnership Will Help IBM Target Vertical 28 February 2003 3
Industries"). Siebel will move to support multiple, standard platforms and standards to help protect customer investment. To do this, Siebel (like SAP) is retrofitting its tools and metadata to be compatible with other platforms. With this transition will come an additional performance burden on Siebel. The development team will be stretched as the company: Supports additional layers of abstraction (this will only become clear as future platform decisions are revealed) Works to maintain equality of support, performance and stability on both platforms (Microsoft and IBM) Continues to provide transparent release migration The pace of upgrades from early versions of Siebel to the new platform is evidence of the inflexibility and complexity of the current platform and tools. Despite these challenges, the broad product set and strong integrator partnerships will help Siebel push through this transition. Siebel will continue to thrive through a combination of an extensive set of CRM applications, strong partnerships and marketing expertise, yet rivals such as SAP will erode Siebel's dominance in specific industry verticals (for example, process and discrete manufacturing) during the next 24 months. Through 2004, Siebel will continue to lead the CRM suite market in ability to execute, outpacing the competition in delivering CRM application modules that can be integrated for the front office (0.8 probability). Visionary Vendors Are in Short Supply PeopleSoft will continue to pressure Siebel and the ERP vendors, now that its basic CRM application architecture is solidified for mobile sales and service (although scale and stability will only be proven later in 2003) as well as for contact centers, yet not for partner relationship management (PRM). The references to date have not been either plentiful or complex. We expect to see growing success in head-to-head competition with Siebel, especially in transportation, financial services and government. PeopleSoft is recommended most strongly for enterprises looking for moderate best-of-breed sales or service application requirements, for customers considering PeopleSoft's business application suite, for currently installed PeopleSoft customers whose requirements span multiple sales and service channels, and especially for those interested in adding analytical capabilities. By 2005, PeopleSoft will trail only Siebel in the services and banking industries, and it will have the third-largest market share among CRM suites (0.7 probability). 28 February 2003 4
The Market Is Weighted With Niche Players SAP is the strongest of the CRM application suite vendors in the Niche Players quadrant. Changes in the SAP position will only result from an ability to provide sufficient functionality for more of its installed base with mysap CRM v.4.0 and beyond, and to produce more live references during the next 24 months, especially in the industries where it has its mysap installed base. In the long term, SAP has the opportunity to evolve as the most serious enterprise application vendor for midsize and large enterprises, and the only serious large-enterprise challenger to Siebel. Beyond the functionality gaps (for example, improvement is needed in PRM, field service, complex contact centers for the nonmanufacturing sector, a more scalable mobile platform and unified interfaces among the modules) lies the challenge to win over the large system integrators that determine the pace of adoption of large CRM systems. Currently, there is a substantial difference between the CRM revenue numbers given by SAP and the size of the referenceable SAP CRM user community. Only 40 percent of SAP customers acquiring their CRM applications during 2003 will implement the products within two years of purchase (0.7 probability). The extent, timing and user experiences of the other 60 percent of customers will determine SAP's market acceptance in 2005. We recommend SAP CRM to SAP customers seeking benefits from tight front-office/sap-back-office integration. Oracle has improved its vision with the breadth of its Oracle 11i enterprise customer data model. Oracle customers like the potential benefits of an integrated set of applications, such as increased customer visibility during the entire prospect-to-cash process. The challenge is for Oracle to bring the products into production at a sufficient number of referenceable customer sites. Organizational change has slowed Oracle CRM application development, although the change is positive and will lead to product improvements. Although the development team, several project managers, the head of the CRM program and the sales organization have all undergone significant transition, Oracle benefits from strength in global distribution and implementation, a broad sales and service application presence, and an integrated technology stack. There continue to be too few large and complex references, inadequate external service provider partnerships and limited integration with non-oracle legacy systems. Oracle has not proved it can support a mobile workforce on laptops. Oracle 9i database and 9iAS application server customers will benefit most from this product, as the CRM applications run only on the Oracle application technology stack. As with SAP, Oracle 28 February 2003 5
is to be considered most strongly by Oracle business application customers seeking benefits from tight front-office/back-office integration with Oracle. Through 2004, limited referenceable products and customers will result in Oracle achieving higher ratings for market vision, yet the lowest ability to execute of the major CRM application vendors (0.7 probability). The ClarifyCRM products of Amdocs have continued to improve since the purchase of Clarify from Nortel Networks in late 2001. The Clarify team has consistently beaten competitors (and extended its lead) with superior products in the core market of customer service contact center solutions to the telecommunications and high-technology manufacturing industries, where the focus is on problem resolution and integration with billing and provisioning. For mobile sales and field service automation, the product is adequate, providing basic capabilities. The fat-client, 32-bit mobile application struggles to meet mobility requirements. In marketing, Amdocs is likely to be a significant entrant to the market in 2004, and today offers solid churn analysis within the telecommunications installed base. Through 2004, E.piphany will be an alternative to the larger, more-rigid CRM application suites, because of product flexibility, lower complexity and good technology the application code base has migrated to Java 2 Platform, Enterprise Edition (J2EE) where deep vertical capabilities are not critical (0.7 probability). E.piphany has yet to reach the Visionaries quadrant, because it lacks a sufficient feature set to be considered in either the CRM Sales Suite Magic Quadrant or the Field Service Magic Quadrant. It has the lowest B2B application revenue of any of the entrants in the Magic Quadrant, as we estimate that less than 20 percent of its approximately $34 million in license revenue in 2002 was for end users in B2B. In addition, it has deployed little besides its campaign management and real-time recommendation engine outside of North America and does not have the integrator support to implement large-scale, worldwide CRM suite projects. For B2B enterprises, or those requiring partner management, E.piphany will not have a best-of-breed CRM application suite through 2004 (0.7 probability). Onyx Software, like E.piphany, is on a smaller scale than the rest of the large-enterprise CRM suite vendors, selling approximately $23 million in application licenses in 2002. Gartner estimates that 75 percent of this revenue is in the B2B area. It has few large partnerships among the system integrators, and none that has demonstrated worldwide capabilities. The situation is different on the regional level, where components of the Onyx system are beginning to be used by the integrators. Executing on a successful long-term partnership strategy will be key to its success. Onyx has a fine Internet architecture that leverages 28 February 2003 6
Web services, but the full mobile Web-based technology is not yet released (it is scheduled for release in April 2003). Prospects can expect to wait until 2H03 for large-scale, referenceable implementations. Onyx 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 (but the portal has been successfully deployed in few accounts). The products should be considered for divisions of large enterprises, as well as midsize enterprises in such vertical industries as healthcare, local government, media and financial services. Risk-averse buyers must weigh the continued challenge that Onyx has faced in growing a profitable business, because it has experienced two straight years of losses. Acronym Key B2B Business-to-business CRM Customer relationship management ERP Enterprise resource planning J2EE Java 2 Platform, Enterprise Edition PRM Partner relationship management SCM Supply chain management UAN Universal Application Network Bottom Line: Although the depth of the customer relationship management (CRM) suite vendors' CRM modules continues to improve, the realization that must come to users and vendors is that each enterprise has a specific enterprise architecture within which the CRM vendor must participate. Users must weigh not only the features/functions and viability of the vendor, but also the architectural foundation of the CRM suite for its fit with overall enterprise objectives. The likely scenario for most organizations will be a suite at the core, integrated with multiple additional technologies. Production references will remain the "litmus test" of vendor hype about CRM capabilities. 28 February 2003 7