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Amidst CRM consolidation, vertical applications shine

Siebel dominates many of the vertical CRM markets, but some companies are selecting best-of-breed software even as they're being swallowed up by the major vendors.

No need to tell Randy Halley about consolidation among technology vendors. The senior vice president for branch delivery for the Ogden, Utah-based America First Credit Union (AFCU) has seen plenty since embarking on a project to replace a legacy automated teller application.

Eighteen months ago, when AFCU began its search to replace two proprietary legacy systems by soliciting information, Eontech was one of the frontrunners. It remained that way through a series of acquisitions.

"First it was under the Eontech name, then it was purchased by Siebel -- we were OK with that. Then as we got into it, six or eight months later, Oracle came in," Halley said. "At each point we had to stop and reevaluate. The software was strong enough that the concerns we had fell by the wayside."

The CRM market has seen a great deal of consolidation in recent years with Oracle buying PeopleSoft and thenSiebel, CDC buying Pivotal, M2M buying Onyx, and Epiphany being sold to SSA Global before it in turn was sold to Infor. All the consolidation has left vendors focusing on integrating their acquisitions and on vertical markets.

Buyers in turn are left to determine whether to build an application themselves or go with a best-of-breed vendor with vertical expertise like Eontech, knowing it might be acquired. @29175

"The innovation for vertical-specific functionality always comes out of niche markets," said Mary Wardley, analyst with Framingham, Mass.-based IDC. "A lot of times, the broader horizontal vendors go for what's going to solve 80%, particularly in highly competitive markets."

IDC recently conducted a study of the vertical markets for CRM and found that Siebel dominates the market. It maintains the largest share of revenues in the healthcare, manufacturing, retail, government and financial services industries.

"CRM is old enough as an application area that two things are happening," Wardley said. "Across the broader market, lots of vendors are moving to verticals to expand their footprint. In some of these verticals -- particularly financial services, which was and remains one of the leading segments -- across most categories this is where innovation is going to come, where they can make a bang."

IDC predicts that the most industry-specific growth in CRM over the next five years will come from the manufacturing, communications and media, and healthcare industries, with compound annual growth rates of 8.1%, 8.0% and 7.2%, respectively.

The two leading vendors, Oracle and SAP, have both focused on building out their vertical features, eventually battling over the "hot markets". Yet a recent study by Gartner shows that SAP and Oracle are not competing head to head in many verticals. The decision tends to come down to best-of-breed applications versus organizations building the tool themselves. And with the best-of-breed, seeing the company swallowed up by one of the larger players can be a concern.

AFCU had its reservations. The selection team went with the Eontech product, now called Siebel Branch Teller, partly because it was built for the Web from the ground up, Halley said, while the two other systems it was considering, from Argo Data Resource Corp. and Harland Financial Solutions, were rebuilt for the Web.

"There's always the question of what Oracle's going to do with the product," Halley said.

Not only did the Eontech product change hands twice, but amidst it all, Oracle also bought iFlex, which has another teller processing technology.

"We had some pretty lengthy discussion about where they saw the future of the teller system," Halley added. "Our concern was, we didn't want Oracle saying we're getting rid of this Siebel system and force them into it. They made it clear those are two separate products."

In fact, Halley was convinced it was more likely that Eontech would influence the iFlex than vice versa.

AFCU also considered building a new tool itself, and in fact representatives in IT suggested that approach for a while, dragging out the process to 18 months.

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