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February 14, 2000

Focus On Customer Service Fuels CRM Boom
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Clarify should be able to set its own agenda, fueled by cash from Nortel, which has earmarked $2.1 billion for research and development. Still, analysts say, it may be difficult for the two vastly different vendors to align; they speculate Clarify's preoccupation with the pending merger may have chipped away at what could have been an even better fourth quarter than it was.

Still, Clarify's growth is impressive. Revenue for the fourth quarter was $71.6 million, up 73% from the fourth quarter of 1998. Net income for the quarter was $8.4 million, compared with $3.5 million the previous year. Clarify grew 77% to $230.7 million for 1999. Its net income was $20.4 million, up 179%.

Vantive
The waves of fortune that have touched its fellow front-office vendors in the past year have eluded Vantive Corp., which saw flat sales and losses amid strategic confusion and a series of leadership crises. Right before announcing another lackluster quarter in October--$43 million in revenue and a $5.8 million loss showed virtually no growth--the vendor announced it was joining forces with another struggling applications vendor, PeopleSoft Inc.

PeopleSoft's acquisition seems to have benefited Vantive. In preliminary results for its fourth quarter ended Dec. 31, the company grew 68% in license revenue from its third quarter as customers started buying again. "The combination with PeopleSoft was very well-received, and the financial health of the company is no longer a concern," says PeopleSoft acting CFO Steve Hill.

The acquisition gives Vantive cash reserves nearing $1 billion, guaranteeing staying power and continued investment in research and development. It also solves another Vantive problem: strategic direction. Vantive started its downward spiral when its attempt to take on Siebel's sales-force automation software backfired--Vantive's strength is in customer service--and the vendor tried unsuccessfully to come up with a new plan. Now it's touting a single, clear message, and it's one customers understand: tie the front and back offices together.

Photo by Alan Blaustein Of course, that also means Vantive has to integrate with PeopleSoft--and Menconi says there's no natural synergy between the Vantive and PeopleSoft sales forces, as there is at Clarify and Nortel. "It's a whole new set of markets," she says.

Oracle
Oracle is moving into the CRM market faster than any other major player, increasing CRM sales 300% in its most recent quarter and 248% for the calendar year. But it also has the furthest to go. Despite its impressive growth rates, Charles Phillips, an analyst at Morgan Stanley Dean Witter, pegs Oracle's CRM revenue for its fiscal second quarter ended Nov. 30 at $49 million--just $4 million more than Siebel's profit for roughly that period.

Oracle also has more of a product gap. Despite significant gains through acquisitions in 1998 and 1999, analysts say, Oracle won't offer a traditional CRM suite that competes with the likes of Siebel's software until Oracle Applications Release 11i, which has seen its ship date slip from the end of 1999 to spring.

Still, what's coming could change the competitive landscape. Oracle 11i features improved front-office functionality and tight integration with Oracle's ERP and supply-chain applications, making Oracle one of the first applications vendors to legitimately claim such a suite. Analysts say users are anticipating both Oracle 11i's thin-client architecture and its E-commerce applications. "Customers are feeling the urgency to act on E-commerce, and for that Oracle is well-positioned," Phillips noted in a report released after Oracle's most recent earnings announcement.

As the second-largest software company in the United States, Oracle also has something its smaller competitors don't: deep pockets. It makes more in net income from overall software sales each quarter than Clarify, PeopleSoft, and Siebel make in revenue--combined. Oracle can throw a lot of money into R&D and marketing, and it does. It has built its CRM group to more than 900 developers, and CRM gets roughly a third of Oracle's R&D budget: $248.1 million in its most recent quarter. Says Jeff Henley, Oracle's CFO, "If you don't keep reinvesting and moving ahead, you die."

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