November 6, 2000

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Xchange Changes More Than Just Its Name

Vendor moves away from marketing-campaign management into analytical CRM

By Jeff Sweat

More on CRM:

Kana Puts On A New Face (10/23/00) PeopleSoft CRM Upgrade Lags Behind The Competition (10/23/00) Internet Week: CRM Gains A New Outlook (10/23/00)

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hen Xchange Inc. was Exchange Applications Inc., the company was synonymous with marketing-campaign management. It turns out that more than just the name has changed--Xchange is branching out into analytical customer-relationship management, customer-channel management, and more. InformationWeek senior editor Jeff Sweat recently spoke with Xchange CEO Andy Frawley about the vendor's transformation.

InformationWeek: For a long time, people have viewed your company as a campaign-management vendor. How are you evolving?

Frawley: About three years ago, as we were looking at where CRM was going, we saw this collection of capabilities that people today are calling strategic or analytical CRM, which is focused around actionable business intelligence. It's about understanding, from an analytics perspective, the value in the customer base, the trends, and the propensities, and then making that information available to a broad set of users within a company. Thousands of people who touch customers play a role in their relationships. But it doesn't stop there; it focuses on how we take an inside piece of analysis and observation and a hypothesis and drive that out as an action into a channel. It's the brains behind operational CRM. That's where most of the activity has been in CRM over the years--new call centers, new sales-force automation; obviously all the things that have happened on the Web over the last couple of years. And that's great--it's all necessary, it's the appropriate infrastructure. But by itself, it has underperformed. Most companies don't feel like they've had a good experience with CRM. And we think that's because that kind of brain is missing. In addition to strategic CRM, we have a new capability we shipped last quarter, a product called Real Time, which is real-time channel synchronization, real-time decision-making, with real-time data.

InformationWeek: Do you think what you're doing is a new kind of CRM?

Frawley: Absolutely. We're kind of the tip of the iceberg, because you need all the infrastructure or the operational CRM. You have to have a call center; you obviously have to have Web personalization. You have to have all these capabilities. But while they give a company a better ability to interact with the customer, they don't tell you what the interaction should be. And they certainly don't do it on an enterprise basis. Our job is to take all those interactions and not try to replace them--because those systems generally are doing a fine job in interaction--but to make them smarter. Whether that's by giving them the perspective of the other channels, giving them a perspective that leverages more advanced analytics, or integrating information that's in the data warehouse that hasn't gotten into the front office or into the operational channels--those are the problems that we're solving.

InformationWeek: Who did you see as your competitors before, and who do you really see now?

Frawley: This part of the market is going through an evolution. Certainly there are a lot of people who have point solutions in marketing automation and analytics. There really isn't anybody else in the channel-synchronization space right now, but there probably will be at some point. These capabilities have coalesced into a set of things people are buying. So the people who have point solutions are having trouble. We don't get requests for proposals for campaign-management software anymore. That's dying out, frankly. The standalone, marketing-automation campaign-management companies will be gone a year from now. Standalone analytics won't survive, either, because they're not actionable. You've got to bring these things together. It's been companies such as Business Objects, Prime Response, Recognition Systems in the analytic space. But again, our belief is that those companies can't survive as point solutions. And you've got to have the suite of capabilities. So today the competition is E.piphany, primarily.

InformationWeek: Obviously, you're competing more and more against E.piphany. What's the main advantage you have in going into an account against them?

Frawley: Scalability and functionality. People have a complex problem they're trying to solve. For example, we have seven of the top 10 banks in the world as customers right now. If you're actually trying to take 10 million customer records, a terabyte of customer data, and optimize those customers across four or five channels, and you've got a couple of hundred people running those programs, they're very sophisticated users. That's a perfect customer for us. We do very well in those situations.

InformationWeek: Do your customers see you as doing more than marketing automation?

Frawley: I think so. If you look at the numbers, there's proof. They're buying CRM, marketing automation, and messaging from us. Increasingly, they're starting to buy the channel-synchronization capability, and the channel-synchronization piece is the future of at least our part of CRM. That's the problem that companies are trying to solve now: How do they take all of the CRM, the $10 million or $20 million they've invested in customer-relationship management in the last couple of years, and make it productive and valuable?

InformationWeek: Can you explain a little bit more about that? It seems an odd fit with the background that you come from.

Frawley: We see it very much as a natural progression of this kind of strategic world, which has been focused around business intelligence, data warehousing, and marketing automation. That's on one side, and then the operational stuff is on the other side. You'd have our stuff and BroadVision's and Siebel's, and they don't really talk to each other very well. Real Time sits right in the middle. And it will leverage interfaces to the channels, so, for example, we provide real application interfaces so we can reach into a Web site to get traffic information. We can bring that into the Real Time environment where a business person would describe a set of rules about how a customer should be treated across all channels. And so that's inherently what Real Time does--it synchronizes customer information and content. What's particularly unique about it, however, is that we do it in real time. The real power is when you bring all the different sets of information that describe customers together, and all the channels. Because it's a fallacy that people only interact on one channel. What we've seen is that the customers who actually buy in multiple channels are, in some cases, five times more profitable than the customers who buy on a single channel. The cross-channels game is a high-stakes game because it's your best customers who appreciate it.

Informationweek: What major trends do you see in CRM?

Frawley: One of the next big trends in CRM is actually when the "C" doesn't mean customer anymore. The next big evolution will be when the "C" translates to all the constituencies. When we're making these decisions about how to interact with the customers, the constituencies we're considering are the suppliers. The customers, the employees, the partners, and the suppliers all have to come together into an environment where we use all of those different data feeds to make the decisions. And that's the next big iteration.

InformationWeek: That seems to be a fairly big expansion beyond your typical business.

Frawley: We won't go into the supply-chain management software business. But what we'll provide is, again, the decision-making, the application that lets business people describe the rules and the events and what they want to have happen across all these different channels and capabilities.

Informationweek: You're one of the main players in analytical CRM. Do you see that coming together with traditional CRM? And do you see any potential competition in the future from the CRM players?

Frawley: We've made the decision not to go into traditional CRM, at least right now. There's lots of room in strategic or the analytical CRM. There's a lot to do in the analytic CRM part of this market. So at least for the next several quarters, you won't see us crossing into the other side. We'll see some competition from the operational CRM vendors. I think their Achilles' heel is that they start with their channel. Siebel is a long ways away from getting all the information together because although Siebel makes great products, it all starts and ends with Siebel.

Informationweek: What are the biggest challenges for your company?

Frawley: Profitable growth. If you look at companies our size growing at the rate we're growing with 12% operating margins, which is what we've done the last couple of quarters, it's not easy. We're one of the fastest-growing, profitable software companies ever. So it's a lot about execution. It's a lot about growing the business aggressively. And fundamentally, all software companies have to keep reinventing themselves.

Photo of Frawley by Gary Gelb

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