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Standalone customer data platforms weather big competition

Standalone CDP vendors got a years-long head start on Microsoft, Oracle, Salesforce, SAP and Adobe. They stand firm in a year when online channels stayed open during the pandemic.

After more than two years of hype, Microsoft, SAP, Salesforce, Oracle and Adobe all now offer customer data platforms native to their customer experience cloud applications stack. Where does such a market shift leave the dozens of independent, standalone CDP vendors that preceded them and their users?

The answer is complicated: For some, like Segment, the time was ripe to be acquired, and that's just what happened when unified communications vendor Twilio bought the company in October for $3.2 billion.

Dale RennerDale Renner

Other CDP vendors are unfazed by tech giants such as Microsoft horning in on their territory, because they had a huge head start and evolved their platforms far beyond the entry-level competition the big vendors brought to market in 2019 and 2020. In the case of Redpoint Global, founder Dale Renner had nearly 15 years' lead on SAP's customer data platform, for example, having launched the company in 2006 and built a customer base in retail, healthcare and financial services.

"When these guys announce CDPs, the question that I have is, 'to do what?" Renner said. Many Redpoint users ingest operational data from sources outside their CRM and marketing applications into Redpoint's CDP to paint a complete picture of a customer and manage privacy compliance and demographic data.

"To drive superior customer experiences, you have to have all the data pulled together," he said.

The plate tectonics of the CDP market move more slowly than headlines might suggest, said David Raab, founder of the CDP Institute think tank. Standalone CDP vendors emerged during the last decade to exploit a weakness of CX platforms from Oracle, Salesforce and Microsoft, and he predicts they will continue to, at least for the next few years.

Built in many cases from acquired companies, large CX platforms spread customer data, in different formats, across multiple applications. CDP vendors built data systems that reconcile all these different sources into one normalized data repository that can update itself in real time. CDP users have come to invest in and rely on these standalone systems to power their marketing campaigns, and it's not likely that a less-evolved tool from a large vendor will make them suddenly rip and replace what they already run.

Davids standing firm against the giants

For now, CDPs from Oracle and SAP are likely to pick up new users who are already invested in those companies' platforms and don't currently use a CDP. Adobe and Salesforce, though, do pose threats to the small CDP vendors because those customer data platforms are built for marketers, Raab said.

"They're not yet quaking in their boots over SAP's CDP, with all due respect," Raab said. "Most standalone CDPs have been focused on marketing use cases, and SAP is clear that marketing is just one of many uses and it's not the main focus. Standalone CDP vendors are more worried about what Adobe and Salesforce are up to."

That said, there are different types of CDPs. BlueConic, Lytics and Segment, for example, almost exclusively focus on marketing. Redpoint Global and Treasure Data are more enterprise-oriented with advanced analytics, B2B sales-specific tools and data management features; those companies might feel some competition from Oracle and SAP's CDP, once users learn more about it and those vendors add features over time, Raab said.

Pankaj TibrewalPankaj Tibrewal

But not yet, said Pankaj Tibrewal, CEO of Treasure Data, which caters to large enterprise users and was acquired by semiconductor manufacturer Arm in 2018 to support its Pelion IoT data platform. A use case for Treasure beyond the marketing sphere, Tibrewal said, is supplying car dealership salespeople with information on customers before they come in, matching their known interests with vehicles available in the supply chain. That requires hooks far beyond CX, including ERP applications and other far-flung data sources in an enterprise IT operation.

Salesforce and its peers entering the CDP market may cause Treasure to lose some deals, Tibrewal said. Overall, though, companies like Salesforce and Oracle shining the spotlight on the need for CDPs will build awareness and ultimately expand Treasure's potential customer base far beyond the number of deals they may lose, he believes.

"We keep investing more and more into the product, because we know how to differentiate," Tibrewal said. "I think CDP is one of those foundational technologies that will become a part of the enterprise stack like ERP, more than just a marketing platform."  

Tasso ArgyrosTasso Argyros

Upstart ActionIQ's customer data platform caters to enterprise users in financial services, publishing and insurance. Tasso Argyros, founder and CEO, isn't worried about tech behemoths entering the market. Microsoft's CDP caters to midmarket customers smaller than those ActionIQ courts, he said. Some of ActionIQ's customers use Oracle databases, but they're not buying into Oracle's CDP yet.

With SAP and Salesforce -- you can definitely make a demo that looks great. But CDPs have different requirements than the other products they have.
Tasso Argyros Founder and CEO, ActionIQ

That leaves SAP and Salesforce to compete with directly. But CDPs are complicated applications, he said. Writing relational database queries that connect to business intelligence applications, which are then connected to data visualization applications, is a lot more complicated than it looks, as Salesforce and SAP will find out if they haven't already.

"With SAP and Salesforce -- you can definitely make a demo that looks great," Argyros said. "But CDPs have different requirements than the other products they have."

Acquisitions always possible

It's been a busy year for CDP acquisitions. Segment, of course, was acquired earlier this fall by Twilio. SAP, which already built a CDP from its Gigya acquisition several years ago, acquired another one in Emarsys, ostensibly not for its marketing CDP but for its personalization technologies.

Who's next? Even Treasure has received inquiries for acquisition, Tibrewal said, despite already being owned by Arm. It has grown out of the midmarket and increased its revenue by selling only to large enterprises. But Treasure still functions as an independent unit, which "attracts some attention" among companies looking to acquire a CDP, he said.

Argyros, who started ActionIQ in 2014, previously had launched analytics technology company Aster Data and sold it to Teradata in 2011 for $325 million, according to Argyros. But this time around, he doesn't think it's going to happen.

"I've spent six years building this product," Argyros said. "If we get acquired, we will be very expensive."  

Furthermore, he believes there will always be room in the marketplace for standalone customer data platforms independent of Oracle, SAP, Salesforce, Adobe and Microsoft. Large enterprises use applications from each one of those in their tech stacks, typically, Argyros said, and those users don't necessarily trust an Adobe salesperson, for example, to give unbiased advice for integrating data from a competing vendor's application into the Adobe CDP.

Renner said that anything is possible when it comes to selling Redpoint, the company he founded nearly 15 years ago, but he's not actively shopping it -- nor will he ever, he said.

"I don't wake up in the morning hoping that we sell Redpoint," Renner said. "I really like the company ... if it happens, it happens, and it would have to make a lot of sense."

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