#5 Kana Communications

Surviving in CRM's school of hard knocks

Its good to be the rebel when youre surrounded by the old guard. And thats never more important than when you are in the customer relationship management market.

Its a feeling Jay Wood is very familiar with. As CEO and chairman of Kana Communications, Wood spends most of his time convincing the public Kana is not your everyday customer relationship management (CRM) company.

And its not.

Where its competitors such as E.piphany, Nortel Networks Clarify, Oracle, PeopleSoft, and Siebel Systems focus on delivering end-to-end software packages, Kana delivers contact center solutions with a strength in e-mail, instant messaging and Web-based communications.

Wood says the difference is between providing a customer-centric interface and a business-centric one. "Other CRM packages were designed to assist internal users so they could assist customers," Wood said. "We focus on the customer by leveraging new technology such as the Web and e-mail."

In a market thats chaotic, Kana has managed to grow rapidly. In 2000, Kanas revenue leaped roughly 750 percent from $14 million in 1999 to almost $120 million in 2000.

Wood points out that annual revenue last year was actually $200 million if one counts the portfolio from Broadbase Software, which Kana acquired in April.

The year 2000 was a long time ago, however, and the future isnt as bright as it once appeared to be. Already there have been signs that things are slowing down for Kana, as they are for everyone in CRM.

First-quarter revenue for 2001 was down by nearly half compared to the previous quarter. At the time Kana released the results, Wood stated he was "cautiously optimistic" about Kanas future. Siebel, Kanas top competitor, saw revenue for the same period rise slightly.

Kana also had to lay off 20 percent of its staff in February — 220 employees — to contain costs. The stock has taken a hit as well, diving from its 52-week high of $75 all the way down to 50 cents, before balancing out around $2 where it sits today.

CRM as a technology has taken some knocks. Many companies that bought CRM software are discovering this year that they havent made a dime from their multimillion-dollar investments, giving CRM a bad reputation.

The culprit is largely the difficulty of integrating multiple software packages from different vendors. Analysts and several Kana competitors feel enterprises are looking for a single CRM supplier, and Kana doesnt have all the other pieces such as sales force automation.

"While we may not have everything," Wood said, "we have a heck of a lot more of the new technologies," especially for customer contact centers.