Beagle Research Group

The First Hurrah

If you came to Boston last week for Siebel's User Week conference you might have been disappointed. With the impending purchase of the company by Oracle it would have been easy to regard the event as some kind of last hurrah and what better place than Boston for the atmospherics to pull it off. But instead of a funeral you were treated to something more akin to the technology industry equivalent of an Irish wake. I can explain.

The mood was upbeat, for a couple of reasons. First, we all know there's been a bit of a brain drain in San Mateo, something to be expected under the circumstances, but that only sharpened the distinction that most of the Siebel people who attended were there because they wanted to be there. As one veteran told me, some people who will probably be retained by the new regime wanted to go out as an independent company on a high note and others who might not transition simply wanted to go out on a high note for professional reasons. Whatever the motivation, they achieved the goal.

But it wasnt just Siebel people that made the event. My unscientific survey showed more new customers and more young people in attendance than I had noticed for some time. The importance of new customers is obvious but the importanceof young people may take a little explaining. Early in their careers people look for a place to settle in and grow, if the sector or Siebel was sunsetting as some have suggested I wouldn't have seen so many people who cared about Counting Crows, Tuesday night's entertainment.

New stuff

After many years and many pundits and analysts opining about the importance of accenting the 'R' in CRM, Siebel unveiled what it called the next wave of CRM innovation with its Customer Adaptive Solutions. The new direction included analytic enhancements and introductions such as Real-Time Predictive analytics for in the moment decisioning, a self assessment tool that supports its six step customer focused blueprint for success, and perhaps most important, Siebel Component Assembly which is intended to help organizations develop, customize, and deploy service oriented applications that support these directions.

Siebel has always been known for having a lot of technology, and many competitors have complained or criticized the company for being too technology centric -- in some cases a fair point. But the new direction and the thought leadership that underpins it cries out for technology that goes beyond the business as usual approach to programming CRM solutions and Component Assembly (though still an unglamorous name) provides a point-and-click environment in which business users can bring together the elements needed to make CRM solutions that fit individual needs.

At the same time, Component Assembly reminds us that with sophisticated enterprise applications, there is a lot that goes on below the waterline. Maybe complex enterprise application development will remain challenging for the foreseeable future, but Component Assembly is a good effort at rationalizing the process and will enable organizations to get application support to users faster and with less agita.

Real-time Decisions

Speaking of what's below the waterline, it has been ten years since Peppers and Rogers introduced the concept of the learning relationship and the need for companies to take in customer data, analyze it, and then use it to better service customers and make intelligent offers. Don Peppers was there on Day 2 to talk about return on customer, P&Rs latest thinking on the subject and a perfect lead-in to Siebel's Real-time Decisions (RTD) products. Ten years is a long time in this industry and this introduction especially highlights the great effort it sometimes takes to line up all the technology and influence business culture to implement what seems like a simple idea. Regardless, in an era of relative customer scarcity, RTD, Component Assembly and Customer Adaptive Solutions are exactly the right products and messages to be bringing to market.

Self-Assessment Tool

There were other important introductions but this isnt a Siebel ad so I leave you to peruse the Siebel Web site for other announcements. One last point that is worth talking about though is the Self-Assessment tool. A few years ago I surveyed the Siebel customer base, asking what I thought was a no-brainer -- Did the customer perform self-assessment prior to purchase? It seemed like an innocent question, one for which you could almost predict the data, but if you had made any predictions, you might have been disappointed in the answers.

Less than half the customers in the survey said they did the necessary self-exam before plunking down serious money. This single revelation said much about the state of ROI in the market and all of the needless distractions we've seen over ROI in the last few years. To be clear, ROI is important, and everyone needs to take responsibility for achieving it, so I was pleased that there is now a self assessment tool to complement the life-cycle blueprint Siebel introduced last year.

Lastly

It seems like Siebel is over any funk that could have been expected after the acquisition announcement. That might be due, at least in part, to good vibes coming from the groups working to merge the two entities. Larry Ellison made a cameo appearance via video in George Shaheen's key note and made all the right statements about synergy and the additive nature of the merger. At some point you have to take it at face value at least until someone says or does something to change your mind. The folks at Siebel appear to be holding up their end of the bargain and there is no doubt that the vision and direction outlined last week in Boston will reverberate throughout the industry for some time to come regardless of who owns the Siebel IP.

The Future of Live Service

Last week in New York, Salesforce.com improved its position in the CRM suite market when it introduced version 2.0 of its service and support offering. The company has quickly come up the curve to a point where it has approximate parity with other companies offering a range of support options including a knowledge base and FAQ capabilities as well as live agent support, though it looks like the agent desktop will come later.

Suffice it to say that there is now a surplus of application software on the market to enable small to medium companies as well as enterprises to service customers at rates that are far below the costs normally associated with buying a lot of call center hardware e.g. IVR, phone switches and all the rest. With this latest announcement the market place has several products from which to choose including those of RightNow, Siebel CRM OnDemand and Salesforce.com. While there are some obvious differences in functionality, company background and hosting philosophy, a customer has a lot to choose from in service and support software that fits a major criterion of low cost and easy implementation.

Which way the market?

Now there are at least two main ways the market can move. Either it can become a buyers market in which customers choose among good alternatives based on the sole criterion of price OR someone will get smart and take service and support to the next level. But first we might need to define what the next level really is. Let me offer one view.

Given all the effort in the last two years to limit the ability of vendors to make outgoing calls, and given the increasingly competent automated systems available to drive down the cost of service and support, you have to wonder what will become of call centers. With so much technology available to place call center technology into the hands of any person with a PC and an Internet connection you have to believe there is going to be excess capacity which will further drive prices down.

In my mind, what's needed is a way to provide high value services through this infrastructure. Doing so would rescue what could otherwise become stranded assets and just might possibly result in a new industry.

Professional help

I think the next move in the service industry could be the evolution of a professional position which I will call the Factotum - somebody employed to do a variety of jobs for somebody else. It's not as far fetched as it might seem. Until recently - i.e. until we invented good, fast, and cheap computing and the Internet - we employed factotums in a variety of situations - anyone who remembers what a real secretary was would understand. And even today the secretary of the CEO in a major corporation still has his or her name on the organization chart and is a power to be reckoned with inside the corporation. Imagine having your own Factotum or the availability of a group of them.

The modern factotum's power and prestige would come not from a position on an org chart but from what he or she knows. How many routine and non-routine jobs are there in our lives that go undone because we simply don't have time? Some of those jobs were the exclusive province of one's spouse back in the day when a single pay check covered all costs. Really, a single pay check.

Your Factotum is on line one

There was a piece on NPR not long ago about a reporter who used what amounted to Factotum services provisioned by a small company in India. The Factotum was like a personal assistant sending notes, arranging meetings, making appointments and the like, all for a monthly retainer fee. While I liked the concept, the execution struck me as too shallow and too much of a throw-back to Edwardian England and it made me ask what a twenty-first century Factotum might be like.

My answer looks more like something Shoshana Zuboff described in "The Support Economy" but with a difference. I don't expect that in the modern world any single person - even with great software - could provide high level factotum services in everything, the world is simply too complex; moreover, too few people would pay for such a service. But what if people specialized and you bought services more on an ad hoc basis, when you needed them?

How it works

For example, there might be people who specialize in healthcare, education, real estate, or entertainment. Suppose you learn you have cancer you'll want to ensure you're getting the most advanced care - that's the easy part. But what about the more inclusive plan that would include treatment, as well as long term care, and negotiating the maze of insurance forms and options, and government programs when you're too tired to do it all for yourself? Too often we only get the services we need by trial and error and sometimes we don't have the energy. We come out of these experiences far wiser, but at what cost?

On a cheerier note, suppose you wanted to plan your entertainment for the next 6 months? Do you have time to peruse the trades to know what plays, movies, concerts, and art exhibits are coming to your area? When is your vacation? Will anything you want to do overlap with something else? Do you have the time to stand in line for the tickets? What if you could work with an entertainment Factotum over the Internet to set all that up? And what if your Factotum could alert you to special events that you might have an interest in?

Frivolous or not?

On one level I am sure many people will say that this kind of service is frivolous - after all these are the kinds of services you should expect from family and friends, your network. To them I say two things. First your network is only as broad and far reaching as your personality permits and at some point we all need to ask how we can come to know what we don't know. Second, while we all have families, those people are all too often not in the same city as we are or they are as time starved as we are or the relationship comes with baggage of its own. And lastly, life is more complicated than anyone might have imagined even 30 years ago, who couldn't use a little expert assistance from time to time?

Notice that I have carefully avoided the issues of picking up the dry cleaning and the groceries. Maybe it's my belief that running those errands are an indication of character, but I believe an individual should maintain some basic competency in attending to the basics of sustenance and cleaning, not to mention maintaining the subtle interpersonal skills needed to get along in the world at all levels. Call it a reality check.

So there it is, the Factotum, someone with specialized expertise who can provide the services that make life more interesting, fun, and less complicated all for a small monthly fee. It could be a growth industry full of smart people with heads full of specialized knowledge, a PC, and an Internet connection. I'd love to get a penny for every transaction they do ten years from now.

RightNow User Conference

Going to the RightNow user conference feels like a trip to another world. Aptly called the RightNow Summit, the affair was held last week in Big Sky, Mont. at a lodge whose elevation is about 7,800 feet above sea level. At that elevation, you see nothing but tall pine forests and the occasional deer, elk, or moose. And, yes, it snowed, even in early October, like Mother Nature wanted to make a serious point -- not that she needed to -- when you first get there, climbing stairs carries its own admonition.

If your attention to on demand CRM has been focused on the sales and marketing side of the equation, RightNow comes as something of a surprise because this company's origins focus on service and support -- an important differentiator and well worth remembering as on demand vendors, including this one, continue to converge on the idea of an integrated suite. It's important and probably good timing for RightNow that its focus has been on service since the market focus today is on customer loyalty driving return on customer.

Service and Support

There are really three approaches to on demand CRM and each has been successful. Salesforce.com is perhaps the best known of the bunch for its original focus on sales with its SFA offering.NetSuite may be less well known, but it offers an important value proposition in its integration of front and back office solutions. And RightNow, which started as an on demand service and support offering, approaches CRM from the perspective of the existing customer who is looking for service and/or support. Of course, many other on demand CRM vendors make up this market, but these three seem to be archetypical.

Regardless of each vendor's current position or future direction, each vendor's identity is still closely associated with its origins and that's especially true for RightNow. Historically, customer service and its associated modules have been prized for their ability to hold down costs. Solutions like FAQs and knowledge bases tied to phone systems and Web sites have done a lot to reduce demand for telephone service mediated by a live person and hence to drive down costs.

But reducing costs is only half the equation -- the other half involves maintaining or improving the service level so that the customer feels empowered and satisfied by the lower cost substitutes (if customers are not satisfied, they won't use the alternatives). RightNow has done a good job taking care of both sides of the equation. I was intrigued speaking to customers about how they and RightNow have developed ways to embed support into their combined product offerings and one example in particular shows the creativity involved in bringing service to a new level.

Playing Games

I learned that RightNow has a significantposition in the online game industry. If you're like me, maybe you've heard of online games, probably through your kids or co-workers or maybe you're just a young adult. At any rate, there are games you can play online with literally thousands of otherpeople. The game establishes an alternate reality and you as a player can concoct an identity for that reality. The more you get into it, the more you realize there are myriad rules for playing and for constructing your persona.

At any rate, somethingthat complex will drive even the smartest player a little crazy from time to time and as a player you might need help understanding the rules, checking on your account status, or looking for the cyber equivalent of a striped shirt when some other player does something "against the rules." Guess where you would go in such situations? Yup, RightNow has embedded its FAQ and support engine right into certain games complete with escalation to higher authority when necessary.

On one hand, there is little about this approach to service that would raise an eyebrow if it was part of a washing machine service site. But, on the other hand, somehow knowing this is all connected to an online game, which is in its own way pushing an envelope, made me stand back and think "this is cool." Perhaps I am easily impressed but maybe not. The idea of embedding support this closely into the customer experience is rather novel -- service is part of the product. If the washing machine analogy were to hold true, there would be a button on your washer that brought you help when the thing acts up or when you need to work on a tough stain on a delicate fabric.

What I think I saw in Montana is the evolution of concierge service. It might be only in a game today, but as a future direction this idea has legs. Obviously, RightNow does a lot of other things, but so do a lot of other vendors who can offer on demand sales, marketing, service, support and call centers. An important part of RightNow's future thought leadership might bein its ability to see service opportunities more clearly than some of its competitors. It might be a small idea, but like a snowball rolling down a mountain, it could start an avalanche.

Who's your (data) daddy?

I had a wide ranging conversation the other day with a software company CEO in Silicon Valley. If anyone could have insights into what's been going on lately in the software industry it would be this guy. He's a former Oracle executive - that doesn't exactly limit the field much does it? - and a keen observer of the front office software market. I won't use his name because we were discussing something else for background, mostly the future of the enterprise software business.

For our purposes, the relevant part of the conversation was about consolidation in CRM. Perhaps his most cogent observation was that whoever controls the basic customer information controls the front office. By customer he meant someone who has bought something, not "customer" in the retail sense of "What can I do for you?"

His point, and it's a good one, is that in order to have the customer information, you need to have a data schema that can support it. That means a schema that supports things like products, invoices, purchase orders and much more. If you think this is beginning to sound like the kind of data stored in an ERP system, that's because it is and it exposes one of the greatest challenges for CRM in the immediate future.

Until now the most successful CRM companies focused on their core applications and left integrating with the accounting and customer data to integrators. In that era integration was the way things got to work together. Many customers objected and resented the high costs of integration but there were not many choices. There were no grand "uber" applications that brought the front and back office data together. In fact for a good long time in CRM, getting marketing to talk to sales or getting CRM to behave in consistent ways across different channels was a big deal and just about everyone with pretensions of having a suite worked very hard on that data model.

In that view, on demand CRM might be seen as a side show. Customers who wanted to reduce the cost of CRM deployment went with a solution that virtually eliminated hardware and functioned more or less in standalone mode. On demand didn't integrate with much else initially but it gave the manager - especially the sales manager - the ability to get a handle on his or her universe. All that's changing but the question that is on a lot of minds is, can it change quick enough.

Now, however, the last few weeks have dramatically brought home the importance of having all the customer data integrated and available. With Oracle buying up PeopleSoft and, soon, Siebel, the game is changing and I am not sure everyone sees it. Oracle will soon own some very large pieces of back and front office technology as well as the underlying stack which will position it astride of the enterprise software industry.

To paraphrase my CEO friend, the best way to integrate in enterprise software is to do so sparingly. Rather than trying to bring together numerous smaller applications in a best of breed approach, he believes you should start with a larger suite and only integrate when necessary - and then only around the edges of the applications where innovation is most rampant. That logic seems to support the continuing consolidation we have seen in the CRM market over 2005, led by Oracle.

But what works for the enterprise may not work so well for the SMB for numerous reasons. SMBs have similar needs for front and back office solutions, but they are much smaller and for them integration of myriad applications is much less an issue, if only because they have fewer people to use the applications. Cost is a paramount concern at the SMB level - no one wants to shell out big bucks for a soup-to-nuts suite of software and there are no deep pockets to fix an integration that goes wrong. For these reasons a different logic operates.

SMBs seem to naturally gravitate to pared down applications that offer value that is intuitively obvious. Perhaps that's why Sage Software is doing so well. In its recent annual awards program, CRM Magazine gave top honors to Sage's entire CRM suite including ACT!, SageCRM, and SalesLogix. Most importantly, the company offers pre-built integration between its CRM products and a big stable of accounting software providing to the SMB market what Oracle wants to do for the enterprise.

With literally millions of users of its combined product families and well over one billion dollars in revenue, Sage has developed a commanding position in the SMB market. Moreover, Sage's revenues actually understate its reach given that its sales model is completely oriented to the channel. And its channel partners supply a good deal of added value with services, support and most important, domain expertise. Front office, back office, domain expertise - that seems to be everything you'd want in a software company partner. But it is taking a long time to get there.