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The recession and growing software-as-a-service (SaaS) trend have not been kind to CRM vendor Chordiant Software. But if a planned $161.5 million acquisition announced this week goes through, buyer Pegasystems, a business process management and rules management firm, may end up with a bargain.
Chordiant has been a pioneer in customer experience management and, more recently, an innovator in applying predictive analytics to customer interactions. The company has an enviable list of financial service, insurance, and telecommunications customers, including Citibank, Capital One, MetLife, Cigna, Wellpoint, T-Mobile, and Vodafone.
Amid the recession, however, Chordiant has struggled to land new customers for its on-premises software. For its fiscal year ended September 30, 2009, revenues were down more than 30% to $77.5 million from $113.0 million in 2008. New license revenues sank 34% to $22.5 million, down from $34.1 million in 2008.
Chordiant, which was founded in 1997and is based in Cupertino, Calif., is swimming against a SaaS current that is particularly strong in CRM, with Salesforce.com and Microsoft Dynamics Online, among others, reporting strong growth. Gartner data confirms that SaaS versions of CRM accounted for a fifth of the $9.15 billion worldwide CRM market in 2008, up sharply from 15% in 2007.
What Pegasystems sees in Chordiant is a loyal customer base, a focus on the high-end, enterprise market (where SaaS isn't quite as strong), and robust predictive analytics capabilities. Most particularly, it sees a ripe market with many companies looking to replace aging legacy CRM systems.
"The legacy CRM mission was to provide a 360-degree view of the customer, so those systems had to amass as much data as possible," explained Russell Keziere, Pegasystems' senior director of product marketing, in an interview. "The problem is that these legacy CRM systems are brittle, so you can't support an agile, process-centric approach that can quickly change and bridge new data sources."
Siebel and Vantive, both now owned by Oracle, are leading examples of aging, data-centric CRM systems, according to Keziere. Pegasystems has been going after contact-center deployments as part of its strategy over the last 18 months. Once it integrates Chordiant technologies, if the deal goes through as planned in the second quarter, Pegasystems will add complementary capabilities.
"CRM now has to predict and anticipate what the customer wants, and Chordiant has made wise investments in predictive and adaptive analytics," Keziere said. "It's a great strategic fit that will help us bring accurate, real-time recommendations into customer interactions."
In an encouraging sign for Chordiant, the CRM vendor's results in the most recent quarter showed narrowing losses and an upturn in sales. Prospects could improve if Pegasystems can increase the speed of CRM implementations.
"We use our own BPM tools to manage software deployments, so we believe our methodology and support capabilities will make Chordiant deployments go more smoothly," Keziere said.
Pegasystems and Chordiant have fledgling forays into cloud computing and SaaS deployment. But it would be a stretch to see an integrated Pagasystems and Chordiant mount a serious challenge to Salesforce.com and other cloud-centric CRM offerings. The best prospects for this combination are in delivering agile, on-premise CRM with sophisticated customer analytics.