By Siobhan Kennedy and Jo Maitland
Analysts and vendors were mixed in their reaction to Monday’s surprise acquisition of Clarify Inc by Nortel Networks. While most agreed the purchase was a good move for Nortel, others said the acquisition would leave Clarify unable to compete in the market in the short-term and – if managed badly by Nortel – in the long term too.
In a nutshell, Nortel’s plan is to web-enable its call center business by integrating Clarify’s front-office, web-facing applications into its call center portfolio. At the moment, Nortel offers its Symposium call center platform, which comes with low-level, call routing and management software, but lacks any high-level call center application functionality. Hence the need for Clarify, which is very strong in the call center sector. During a conference call Monday, the two companies touted their getting together as the first move into a second wave of e- business that no longer concentrates on the back-end transaction, but instead focuses on the customer.
Clarify president and CEO Tong Zingale said the aim was to conduct business with the customer in the way the customer wants business conducted with them. He said that companies used to build their infrastructure first and then think about the customer. Today it’s about how does the customer want to do business with you? he said.
Peggy Menconi, a CRM analyst with AMR Research in Boston, said that while the intentions are good, the deal could end up making Clarify’s applications just another departmental software sell and not part of a company’s overall e-business strategy, which is where she says CRM applications should be positioned, alongside ERP software. I don’t think Clarify will continue as a standalone CRM contender, it will become more of a Nortel hardware, software sell – a bundle rather than a strategy, she said.
For that reason, Menconi thinks the deal is very good for Nortel, but less so for Clarify, which has worked hard to make itself one of the leading CRM vendors. Clarify has a really powerful application which will push them [Nortel] further into the software market which is where they want to go, she said. But I think Clarify will definitely be folded into Nortel as opposed to staying as a standalone entity. She added: Nortel has a huge installed base so it’ll be a natural for the salesforce to sell Clarify’s applications in there.
Menconi said the most logical fit for Clarify would have been to get together with an ERP vendor, but what with PeopleSoft buying Vantive and Oracle and SAP developing CRM applications of their own, there wasn’t much choice as to who to partner with. Where were they going to go for an ERP vendor? Menconi said.
But Nortel doesn’t see it that way. While Menconi and others push the value of integrating front (CRM) and back (ERP) office software as they key to success in e-business, Nortel said it considered the back office, but decided it didn’t fit in with its strategy. You still need back office integration, said Susan King, VP of customer care at Nortel, but it is easy to tell a billing system to process an order to the inventory system and Clarify has these capabilities. She added: The key part is to capture the customer, whether it’s over the phone, the web, email or via speech recognition, track their buying behavior and turn this into a business-to-business relationship over the web.
When the deal was announced, Nortel said one of the main things it offered Clarify was the ability to offer dedicated bandwidth to CRM applications. But one analyst noted that prioritizing CRM applications at the infrastructure level was fine but did not address the issue of bottlenecks at the server level, which is where most of the problems occur. But King said Nortel was working within the Next Generation I/O group to address those issues too. Nortel, Intel, Compaq and others are working on distributed processing and are moving towards the kind of performance at the server level that can take advantage of the capabilities at the network level, she said.
Gartner Group sales leadership strategies analyst, Michael Maoz, is another one that believes Clarify got the rough end of the deal. He says Nortel has been busy pulling together the technologies to create a contact center core. To that end, it acquired Periphonics, which sells voice response software, back in August. But where the company has been challenged is in its account positioning and CTI business application offerings; two gaps Clarify now neatly fills.
But for Clarify customers he says the picture is not necessarily positive. Moaz says Clarify has executed well in the past but its CRM suite still lacks some key functionality such as customer relationship planning, e-service, campaign management. Clarify customers will benefit from the deal only if Nortel allows Clarify to focus on filling the aforementioned gaps, he said. However, he added that by 2002, the Nortel/Clarify combination will fail to deliver a full suite of CRM applications, even though Clarify will be fully integrated into the Nortel management structure by that time.
What’s particularly significant about the deal, says Menconi, is not what it says about Clarify (that’s pretty much a done deal, she says) but what it says about the CRM market and, more importantly, the viability of standalone vendors. I think the market has made a pretty clear statement, she said. If Siebel looks behind itself now, who’s there? Only vendors worth well less than $100m. Everyone else has either been bought or is under the auspices of a larger ERP vendor.
Menconi said it will become increasingly difficult for Siebel to be the market leader as a standalone vendor with the likes of SAP and Oracle nipping at its heels. Oracle may not have all its CRM suite together now but with the launch of 11i next year I think it will become a real problem for Siebel.
To counter that, Menconi said Siebel will have to think of some truly bold and different things it can do to stay number one. Given that a merger between Siebel and either Oracle or SAP is unlikely in the extreme, Siebel should start to think about a potential partnership or merger within a specific industry where there’s a huge market for CRM software. It needs to do some real out-of-the-box thinking about where to go next, she said. Perhaps the communications market, encompassing things like broadband, home entertainment and movies as well as the traditional carriers, would be a good fit. She added: But it will definitely take something bold and exciting, it can’t afford to just stay put.
