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Vendors focus on midmarket

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Change is afoot in the market for heavy-duty customer relationship management software.

Until recently, big-name vendors such as Siebel Systems Inc. and SAP AG have marketed mainly to large companies with the resources to spend one to two years building CRM applications. But in 2003, "the torch is passing from early adopters to mid-market companies. CRM is mainstreaming," said Denis Pombriant, VP-managing director of CRM research at the Aberdeen Group, a Boston research company.

Accordingly, Microsoft Corp.’s official entry into the CRM market was targeted at midsize companies. Microsoft CRM, which slipped from 2002 delivery to a January 2003 ship date, is aimed at companies with fewer than 500 employees. Pricing starts at $395 per user for the basic module, plus $995 for the server version. A professional edition starts at $1,295 per user and $1,995 for the server version.

A more established player in the mid-range CRM market, J.D. Edwards, followed suit by releasing its CRM 2.0 product. Version 2.0 added more ties between the Denver-based company’s traditional supply chain management and enterprise resource planning applications and the CRM package it bought when it acquired Youcentric Inc. in late 2001. Notable enhancements are improved features for salespeople to use when offline at customer sites. J.D. Edwards had not released pricing by press time.

Also, Siebel Systems, San Mateo, Calif., said it will build CRM applications tailored to IBM’s WebSphere platform. The company intends to deliver these products in the next one to two years.

Rise of hosted CRM

Aberdeen’s research shows that midsize companies are placing more emphasis on CRM software than big companies, which already have rolled out their applications, Pombriant said. This shift may favor hosted CRM companies that base their applications on the Web. In a recent Aberdeen survey, 52% of respondents said they will look at hosted offerings for CRM.

Several hosted companies have enhanced their products. Salesforce.com, San Francisco, made two recent product releases: On Feb. 17, the company beefed up its Enterprise offering, adding better activity management, automated marketing functions and support for attachments for portal users. Earlier in the quarter, it inked a deal with AvantGo to let salespeople use hand-held devices to synchronize data for certain accounts.

Salesforce rival Upshot, Mountain View, Calif., recently released a new MultiProcess Management module for its Upshot CRM system. The new module allows companies to tweak the interface of the software, depending on the specific needs of customers. The new service costs $96 a month per user.

Boston-based SalesNet in January announced it had put new features in its Extended CRM version, including a dashboard management feature and new types of reporting functions. The goal was to encourage users to upgrade from its basic version, which costs $65 per user per month, to the $99-a-month Extended version.

And Clear Technologies, Dallas, recently issued a content management module for its C2 CRM software. The module allows C2 users to automatically update Web sites with live data.

Tough market

Meanwhile, the market continues to consolidate. Applix Inc., Westborough, Mass., sold its CRM business to Los Angeles-based private buyout firm Platinum Equity L.L.C., for $5.75 million and the assumption of $3 million in Applix debt.

Separately, several of the founders of Wheelhouse Corp., a hosted CRM firm, said they had purchased the company’s software and were renaming it AptSoft. They have shifted the business model to software that measures return on investment.

And Xchange Inc., a Boston-based provider of marketing software, shut down, despite average license fees of $500,000 and more than 100 customers.

Pombriant said more consolidation is likely, so companies should look carefully at the financial health of vendors before committing to products.

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