By Krishna Roy
GoldMine Software’s secret is out. Even though the sales force automation (SFA) vendor is just beginning to work through a $83m merger with helpdesk software vendor, Bendata, its ambitions stretch much further than transforming itself into customer relationship management (CRM) supplier.
The merged entity may be 80% owned by South African software concern, Ixchange Technology Holdings, but with trailing revenues of $52m and a combined installed base of 15,000 customers it is now bigger than most the competition in this space. And GoldMine claims its ready to flex its financial muscle. Buoyed by its sudden growth and the attendant financial dominance the merger brings, GoldMine seems likely to want extricate itself from Ixchange’s clutches and file for a public listing on Nasdaq. We’re well suited to an IPO, hints GoldMine’s executive vice president, John Ferrara, but that’s not our main focus for now.
GoldMine may have devised a strategy to give it market visibility in mid-market CRM but the execution of its plan rests on an ability to maintain the supposed lead the merger has provided in order for it to attract venture capital funding. And that won’t be easy. Although GoldMine may boast that its coming together with Bendata has catapulted its revenues 60% higher than nearest rival, Onyx, size bears no correlation the breadth and depth of software in the market place, which are equally important factors for success.
If you’re looking for a contact management solution then go for GoldMine, but you need integrated workflow and customer views to offer a true mid-market solution, says Tom Gormley at Forrester Research. Vendors such as Pivotal and Onyx may not be as large or as profitable as GoldMine but they have a technological edge because they already offer an integrated CRM suite combining sales, marketing and customer service applications that goes beyond the entry-level suite that GoldMine is currently putting together. And they have been offering it for some time.
Onyx, for example, launched its CRM suite in December 1994 and has demonstrated turbo charged growth since that time having quadrupled revenues in 1996 and more than doubled them in 1997. In 1998 it reached $31m in sales. Onyx has furthermore achieved something that GoldMine can only plan for – a listing on Nasdaq in February. Fellow mid-market CRM player, Pivotal Software, also offers a true mid market solution, although it is far smaller that GoldMine with $20m in fiscal 1998.
GoldMine has achieved profits that Onyx and Pivotal no doubt envy. But their lack of profitability can be attributed to the characteristic nature of direct sales in the Windows NT market place where margins are considerably lower. Bendata/GoldMine has been able to maintain better margins by producing higher volume sales through a well-established 2,000 strong VAR channel. This has resulted in the still privately-held combine achieving trailing profits of $11.1m in 1998.
GoldMine’s closest competitor is SalesLogix, say analysts. Both companies are racing to build entry level CRM suites through acquisition. SalesLogix, rather like GoldMine, prior to its merger with Bendata, came from the Sales Force Automation side of the sector. It announced plans to purchase product configurator start-up, Enact, for an undisclosed sum earlier in the month. Both companies provide shrink-wrapped software that provide the SME market place with 85% of the CRM tools companies require for 15% of the price, says Chris Fletcher at the Aberdeen Group.
But is that enough? GoldMine’s answer seems to be ‘yes’. Basically CRM packages are just a database and a few tools to manage customer relationships. It’s not rocket science. We provide the core needs which means that the software is cheaper and easier to implement, says Ferrara. The company believes that the entry level CRM space will be worth more than $1bn this year and that, so far, vendors have only achieved 4% penetration into this particular part of the market.
With such rich pickings at stake, GoldMine has put together an integration team to unite both companies and develop an integrated product to capitalize on the market opportunity available to it. And, for the moment, GoldMine is ahead of SalesLogix in that it has at least acquired the requisite service/support modules to build a full-blow CRM suite, albeit at the workgroup end of the spectrum.
The next stage is to integrate the acquired modules to provide an integrated front-office suite, GoldMine Front Office. Initial interface level integration should be achieved by the third quarter, according to Ferrara. Deeper integration between GoldMine sales, marketing, service and support and Bendata Helpdesk Expert Automation Tool (HEAT) to enable all the applications to share the same data tables, will not be achieved until the beginning of 2000.
The integration work will be no easy feat, however. Although GoldMine and Bendata products share common development and operating systems – both were developed on NT and use Microsoft SQL server as the back-end database – the company faces a challenge to merge technologies at both the application and user interface levels as well as the data schema level, analysts say.
GoldMine will continue to develop HEAT as a standalone entry level help desk tool. Around 60% of Bendata’s revenues came from this product and GoldMine clearly recognizes the value of generating additional revenues from selling upgrades into the estimated 60,000 users base that currently use HEAT. It also plans to cross-sell sales force automation modules into this customer base once the necessary interfaces from its sales, marketing and service applications have been developed later in the year. GoldMine’s installed base of 600,000 SFA users will also become strong prospects for upgrades to Bendata’s HEAT help desk software.
But while GoldMine concentrates on its development efforts in a bid to float on Nasdaq, closest rival SalesLogix is likely to continue buying customer support/help desk technology in an attempt to become a more formidable competitor. Furthermore, there is nothing stopping some of the larger enterprise CRM players such as Siebel, Vantive and Clarify from building a channel and moving into this market either, say analysts. There may be more stumbling blocks to achieving a public status than GoldMine might expect.
