Like many other corporations, Bankers Bank in Atlanta is paring technology spending. The tech budget was chopped from $2.75 million to $1.6 million this year--down 42%. But Bankers Bank, which provides services for community banks, is still ponying up $360,000 for new software for managing customers. That's because the bank expects to see a 20% to 30% increase in revenues by automating its telephone call center. "This is more than just a piece of software," says S. Shaw Lokey, senior vice-president for marketing. "We plan to transform our sales organization."
The bank's move helps explain why the market for customer-management software is one of the bright spots in an otherwise dark tech industry. Sales of the software were up 15% last year, to $11.8 billion, and are expected to jump 21% this year, to $14 billon, according to AMR Research Inc. Meanwhile, overall sales of business software grew just 9% last year, the worst performance in nearly a decade. And other chunks of technology are even worse off. PC sales are expected to slip 4.3%, to $154.3 billion, this year, according to market tracker NPD Intellect. And chip revenues are forecast to inch up just 6%, to $150 billion, says the Semiconductor Industry Assn.
Customer-management software has remained on the list of must-haves for corporate buyers because it's so powerful. The software automates the entire array of interactions between a company and its customers. It comes in modules, often selling for more than $1 million apiece, that manage everything from sales to customer service to marketing. The salesforce-automation function makes it easier for sales reps to get up-to-the-minute product information. Telephone call-center software puts all info on a customer at the fingertips of service reps so they can solve problems fast. And marketing software helps companies track advertising to see if it's working.
While customer-management software can be just as pricey as other big corporate applications, many customers say they're getting more bang for the buck. This software not only trims costs but also boosts revenues. The result: plenty of customer success stories. New York brokerage Quick & Reilly Inc., for instance, began investing $10 million in call-center and salesforce-automation software starting in 1998. The project was well on its way to paying for itself in a year. Within six months, it boosted the rate at which brokers convert sales prospects into customers by up to 20%. "That's a real return on investment," says Edward M. Garry, vice-president for customer-relationship management at Quick & Reilly.
That kind of payoff has the market bubbling. Suddenly, even small and midsize companies that don't usually buy complex software are getting into the act. At the same time, healthy demand has attracted the giants of corporate software--SAP (SAP
), Oracle (ORCL
) (No. 10 on last year's BW50), and PeopleSoft (PSFT
). All have come out with products over the past year. It's a free-for-all, with longtime market leader Siebel Systems Inc. (SEBL
) coming under competitive pressure for the first time in years.
Customer dissatisfaction, though, could cool demand. About 60% of customer-management projects don't reach all of the goals that were promised, either because the technology didn't work as billed or employees didn't take full advantage of it, according to a 2001 Gartner Group Inc. survey. So now, software makers are trying to make their products easier to use and install.
Meanwhile, not even the slow economy has put much of a damper on Siebel, even though it fell to 96 on this year's list from 75 last year. Last year, the company's revenues swelled 14%, to $2.05 billion. And the company held a 17% market share--more than double its closest competitor.
Siebel has made its name synonymous with its market through top-notch customer service. Kendra Bender, information-technology manager at manufacturer Tipper Tie Inc., says that 18 months ago, she bought Siebel call-center software. Since then, the Siebel rep who made the sale keeps asking how it's working--even though he transferred to a different region. "I would say that any company that does that is destined for success," says Bender.
Now, the software pioneer faces its toughest competition yet. This year, SAP's customer-management software sales are expected to increase 52%, to $961 million, upping its market share from 5.3% to 6.8%, according to AMR. At the same time, Siebel's market share could dip by 0.5%, figures AMR. Siebel "is hearing the footsteps," says analyst Charles Phillips of Morgan Stanley Dean Witter & Co. Corporate-software giants hold one major advantage over Siebel: They offer the gamut of applications--from financials to supply-chain management--so their customer-management software works well with the rest.
A new target for all of the large players is small and midsize businesses. Sales to this group are tiny now, but they're expected to double this year, to $173 million, says Jupiter Research. Only 3% of these smaller companies already have this software. That's attracting new players, including SAP, which in March bought an Israeli company, TopManage Financial Solutions Ltd., that sells applications for smaller companies. And Microsoft Corp. plans to introduce a customer-management product for small businesses by yearend.
Making the scene more chaotic is a new breed of rivals. These upstarts--including Salesforce.com and Upshot Corp.--deliver salesforce, customer service, and marketing capabilities over the Net. Customers can buy licenses one at a time, usually for no more than $100 per person per month. While the online systems lack the sophistication of Siebel's software, they are well-suited to small businesses--easy to use and quick to install. This approach is gaining traction: Salesforce.com says it has 3,800 paying customers.
It could take years for online software to really take hold, but it's already clear that no player can take the status quo for granted--not even Siebel. Faced with pesky challengers from beneath and the giants of the corporate-software industry from above, Siebel will have to prove once again that it knows what customers need better than any other software company.
MARCH 25, 2002 |
Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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