John Taschek

By eWEEK Labs  |  Posted 2002-11-18 Print this article Print


Businesses fear losing customers enough that theyll pay for software to help retain old customers and gain new ones.

The outlook for business applications, especially SFA and CRM, is bright for next year-at least its brighter than most other categories of software.

The reasons are simple: Businesses need customers, and they fear losing them. And businesses fear losing customers enough that theyll pay for software to help retain old customers and gain new ones.

And, by the way, sales force automation and CRM applications are getting much less expensive (finally). Vendors in these spaces are also shifting focus from large enterprises to the midmarket.

Its amazing CRM vendors didnt try this before. Well, actually, a couple did. Intel and SAP AG set up Pandesic-basically an Intel server running a scaled-down, pre-packaged version of SAPs R3 ERP (enterprise resource management) package-but Pandesic failed miserably.

At the same time, PeopleSoft Inc., Siebel Systems Inc. and J.D. Edwards & Co. were focusing on the midmarket. They are just now beginning to have some success.

The reason it took so long has less to do with software than with midmarket dynamics. Small-to-midsize companies tend to have informal business practices and fluid operations. This is the antithesis of an SAP R3 implementation, which usually attempts to force-fit company operations into a single model.

In the last two years, however, there has been a change: Midsize companies are standardizing on business processes while the SFA, CRM and ERP vendors have added flexibility to their offerings.

Part of that flexibility comes from pricing. PeopleSofts and Siebels midmarket offerings are less expensive, more modular and otherwise scaled back from these companies enterprise offerings. Because of the economy and the competitive landscape, well see enormous price drops in this space next year.

There will also be substantial differences in software next year. For one thing, Microsofts CRM solution will be available, leading the midmarket CRM space to commoditization. Eventually, Microsoft will incorporate technology from its acquisition of Great Plains Software Inc. and Navision S.A. into its software, making Microsoft the leading CRM vendor in terms of clout.

This will lead the rest of the industry to go one of two ways: Either theyll move to a hosted offering, or theyll target vertical markets with their products. At least one company-Best Software Inc., owner of Saleslogix, Act and Peachtree accounting-will move to a completely integrated solution.

Low cost of implementation, minimal administrative costs and a fairly good feature set make hosted CRM and SFA solutions a good fit. Those solutions will appeal to small companies requiring SFA and CRM and to departments in large companies. Those departments, tired of waiting for IT approval, will simply fund the solution out of the department budget and get up and running in stealth mode.

Next year, well see hosted solutions gain more features. Inc., for example, is adding order/inventory and expense modules to its offerings. Eventually, will be a complete CRM solution.

In the hosted space, 2003 will see hosted systems acting like extensions of the corporate data centers. Instead of being a detached service, theyll become utilities providing integration capabilities via Simple Object Access Protocol and XML.

Once the integration APIs are fleshed out, well see the first hosted tools. Theyll be simple at first, but eventually hosted solutions will offer full-fledged deployment capabilities. This will blur the difference between hosted and installable packaged applications.

Meanwhile, packaged applications themselves will become services. This trend will start next year with large organizations becoming the CRM service provider to their suppliers and extended sales force.

Of course, for all this to work, integration will remain the biggest issue. On the standards front, things such as electronic business XML will gain steam.

Others will follow, eventually providing an application mesh. 2003 will just be the beginning, but its an important beginning.

For now, the midmarket has other things to worry about.

For one thing, there are few best practices that apply to the midmarket, which means vendors will be adding them. (Theyll be integrated into PeopleSoft next year.) Soon after, the rest of the world will follow. How well those best practices apply to the consumer will be the main differentiators among the vendors products.


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