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CRM consolidation leaves midmarket users wary

A recent Gartner research note offers midmarket CRM customers some advice on how to navigate the shifting CRM landscape amidst market consolidation.

An acquisition can mean big changes from your CRM vendor -- or no changes at all -- and that is something midmarket users are figuring out just like their enterprise counterparts.

While Oracle Corp. has grabbed many of the headlines by acquiring Siebel and another major competitor in CRM with PeopleSoft, there's plenty of action in the midmarket as well. In fact, Gartner Inc. predicts that through 2008, one in three CRM application vendors will be involved in a merger or acquisition each year. But that's no reason to overreact.

"Don't panic, that would be the starting point," said Brian Prentice, research director of emerging trends and technologies with the Stamford, Conn.-based research firm. "If you've got a holding company model, there's little happening in that organization. It's still individual assets; there's no channel structure or roadmap changes."

In a recent report, Prentice describes three types of CRM vendors making acquisitions -- holding companies, transitional vendors and ecosystem providers. Holding companies, like M2M with its Onyx acquisition, acquire organizations or products without a public roadmap for integration. That can mean the status quo for a customer. @24173

"Really the first thing customers need to do is look at that," Prentice said. "How is the vendor going to take advantage? If you have a good relationship, you're happy with product, happy with partner, there's nothing to worry about."

However, if it's a transitional vendor -- one that is acquiring multiple products and companies with a public integration plan -- customers need to consider how it impacts their own technology strategy, how it impacts partner relationships and how much of the vendor's message is hype.

"Vendors can be prone to pitching the value of this larger organization when that value isn't really there," Prentice said. "That's where you need the external help. You need to start looking for some external sources to validate that."

Companies can get long-term value from a CRM acquisition if the benefits of migration to new products outweigh costs. Users should be sure transitional vendors have specific migration strategies for all products, and determine how research and development is being integrated across the new products, according to the report.

Ecosystem providers have a flagship product but focus more on ongoing infrastructure engineering and require a strategy for expansion, not integration plans.

In the enterprise market, Redwood Shores, Calif.-based Oracle has taken on the transitional vendor role, making 21 acquisitions over the past two years and integrating them all under Fusion. In the midmarket, Microsoft has established five different product lines under Dynamics.

"Microsoft had these as separate and distinct products they were positioning in the marketplace for different industries, but there was little evidence in their sales process that there was any adherence to those marketing delineations," Prentice said. "Over the last several years Microsoft has been working on Project Green. They're in that transitional vendor phase right now."

Another acquiring vendor is U.K.-based Sage Group plc, which owns SalesLogix, ACT and SageCRM (formerly ACCPAC CRM) under the Sage CRM Solutions division, as well as multiple ERP systems.

"Particularly with Sage CRM solutions, our assessment is Sage CRM is a holding company inside a holding company," Prentice said.

While Sage CRM Solutions was apparently formed as a transition to a CRM ecosystem as the company integrates its front- and back-office applications, there remain issues around channel sales and geographic overlap, he added.

"If I'm a SalesLogix customer, and I'm using it and I'm happy with it and users are happy, there's nothing to worry about," Prentice said. "If I'm trying to figure out how to consolidate my architecture around a comprehensive .NET strategy, then you have to think it just means you're going to have to broaden your view of potential vendors who provide a solution for you."

Ultimately CRM users need to beware of giving too much weight to a vendor's viability and taking into account how companies will integrate products, architecture and deployment criteria.

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