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New momentum? Midmarket players try to get back their groove

After some struggles in 2003, Onyx and Pivotal are looking for fresh starts.

It doesn't take a financial wiz to realize that these are tough times for Onyx Software Corp. and Pivotal Corp., two of the larger vendors in CRM's midmarket.

Recent earnings reports tell the tale for Bellevue, Wash.-based Onyx. In 2003, revenue fell to $58.4 million, though the company lost less than it did in 2002, when overall revenue was $69.4 million. It's also searching for a leader to replace CEO and co-founder Brent Frei, who recently announced he's stepping down.

Pivotal, which is based in Vancouver, British Columbia, admits that last year was a transition period. During late 2003, Pivotal was embroiled in an acquisitions tug-of-war, ultimately opting to be bought out by Hong Kong-based CDC Software in a deal finalized Thursday. (Onyx was among Pivotal's suitors.) Pivotal saw revenue drop to $14.3 million in its most recent quarter. (During the same period last year, revenue was $16.1 million.)

Now, both companies are hoping to turn the corner, inject new life into their balance sheets and have a rosier 2004.

Today, Onyx released a new offering for goverment. The company's CitiServe software automates the handling of complaints that pour in via 311 systems -- the telephone service used by about 25 U.S. cities to field non-emergency calls from residents.

"Nobody is more siloed than the public sector," said Patrick Angelel, Onyx's vice president of marketing and alliances. "I'm sure you've had the experience where, not only can they not help you, but they can't even transfer you to the right department."

CitiServe, which is based on an offering that Onyx already is available in the U.K., contains a single database for managing people's requests -- everything from reports of abandoned vehicles to animal control issues. With built-in workflow, the XML-based software lets call center agents route issues to appropriate departments, automatically notify people when their inquiries are resolved, and receive built-in reports to gauge effectiveness. It also features a portal that residents can use to get information on city services and check the status of their complaints.

About two dozen local governments in the U.K. are running a version of the Onyx software (called Eshop there), but CitiServe isn't live anywhere in the United States. It will cost about $750 per public sector employee. Onyx is billing the offering as a replacement for older work order management systems -- and a way for cities to present a consistent face to the public, give people a single point of contact, and improve coordination among departments.

Angelel, who said that Onyx hadn't "seen some of the uptick that some of the other enterprise apps vendors saw" in late 2003, is also hoping to see the bottom line bolstered by this quarter's expected release of version 5 of Onyx's flagship CRM software and by some new vertical offerings that he declined to detail.

John Kost, a managing vice president at Gartner Inc., said that CitiServe is "based on a sound strategy" and should build on Onyx's public sector experience in the U.K. Vendors like Siebel Systems Inc. and Motorola Inc. should be prime competitors, he said.

At Pivotal, CEO Bo Manning said that this week marks a fresh start for the company as a distinct business unit within CDC Software, which is an operating group of Chinadotcom. Now that shareholders and the courts have signed off on the deal, Pivotal is busy spending CDC Software's cash.

Pivotal plans staff increases of 35% in development (including expanding its presence in India, where it has 70 employees) and 40% in technical support. It is hiking its marketing budget by 200%, looking to cross-sell to current CDC Software customers, and the company might tap technology from other CDC holdings in OEM arrangements. Manning said Pivotal has also resumed its acquisitions program and is in talks to buy two companies, though he declined to offer specifics.

"Our customers overwhelmingly wanted one thing from us," Manning said. "And that was long-term financial stability and long-term financial strength, so we could continue to invest in all of the things we need to continue to invest in -- our brand, product, our customer card program, our people."


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