The legal battle between Oracle Corp. and the U.S. Dept. of Justice (DOJ) offered some juicy details for more than just PeopleSoft Inc. customers and Wall Street investors.
Documents revealed during the discovery process showed just how competitive the bidding process is for business application vendors. In the Pleasanton, Calif.-based company's July earnings call, PeopleSoft CEO Craig Conway admitted that discount forms published during the trial showed what companies of similar size were paying, affecting earnings as customers began asking for steeper discounts.
With CRM analysts already claiming the feature function wars are over, does that mean the next battle will take place on price?
The answer, according to vendors and analysts alike, is that while price remains a concern for CRM buyers, it shouldn't be what clinches a purchase.
"Price alone is a stupid reason for a buyer to make a decision," said Chris Selland, vice president of sell-side research with Boston-based Aberdeen Group. "When you're talking SAP and Siebel, you're talking a huge deal. It certainly factors in, but it's about both the total cost of ownership and the benefit delivered."
The Long & Foster Companies, a Fairfax, Va., real estate firm, selected PeopleSoft Enterprise CRM for its field service and support for customer self-service a year ago, even though the other two vendors under consideration had a better price structure, said Mayur Raichura, director of e-commerce and application development.
"Price was only one factor," Raichura said. "The one thing we know is that the cost of the software upfront is not the entire cost. When we looked at the other solutions -- the price was lower -- there were big chunks of functionality missing."
Still, when Long & Foster established the criteria for selecting a software package, price was assigned a 40% weight, Raichura said. Flexibility was assigned 15% and functionality 25%.
Vendors are starting to see price pressures, both from one another and from the growing familiarity with CRM in business at large.
"Microsoft is very aggressive in getting deals and that's putting pressure on price," said Jon Van Duyne, senior vice president and general manager of SalesLogix for Best Software in Scottsdale, Ariz. "Now there are more people involved in the decision. Before it was just IT."
While price continues to be an issue, there are other areas where software providers can differentiate themselves.
"In some categories you could argue that [sales force automation] has been commoditized," said Steve Roop, vice president for CRM product marketing at PeopleSoft. "In the simplest segments, the market understands what's needed for contact management and opportunity management. When you get into specific industry areas, it hasn't been commoditized. Scalability, integration is where companies will differentiate."
Yet, the feature wars do appear to be over. Organizations are more concerned with how software works with their business and processes, said Robb Eklund, vice president of CRM product marketing for Redwood Shores-based Oracle Corp.
"There's a recognition we're near parity," Eklund said. "I could give a list of areas where we're better, and my competitors probably could as well, but it's less about the bells and whistles and more about how it integrates with my business."
The comparable features and a tough couple of quarters for CRM software vendors are good news for software buyers. The fact that the DOJ is challenging Oracle's takeover of PeopleSoft is proof enough that with less vendors there will be less price pressure, Selland said.
By maintaining more than one option deep into the sales cycle, organizations can leverage that pressure and get a better deal for themselves, he said. Though they should remember that once the software is installed, the vendor is a partner and companies will be working together to ensure that the system works.