A big hand from CRM

While many companies use customer relationship management software to keep happy customers and gain an edge over competitors, the systems' high costs and complexity have repelled smaller companies -- until now.

Many companies have turned to customer relationship management software to gain an edge, however slight, over their competitors.

But some smaller companies have not joined in the CRM party, due to its high costs and complexity. Ask a manager if he has thought about deploying sales force automation (SFA) software from Siebel Systems, customer call center applications from PeopleSoft or marketing tools from Oracle, and he'll ask you not to be offended while he laughs.

In many cases, the cost for deploying such systems would be equal to a large part--if not all--of the total annual revenue of a small to midsize company.

"We're just a small professional organization," said Jackson Ratcliffe, vice president of technology of Venture Law Group, a Menlo Park, Calif., law firm that has 216 employees and specializes in technology startups. "We kind of looked at Siebel a little bit, but their price points were just absurd."

Cost is an obstacle not just in terms of the price of the software, but the time it takes to implement it and the manpower required to install and operate the complicated software most large CRM vendors provide.

Ratcliffe found what he was looking for with Interface Software, a CRM company focused squarely on professional services organizations such as law firms and accounting offices.

"We started out delivering solutions to 20- to 30-person shops, and discovered no one was talking about delivering solutions to them," said John Lipsey, Interface's director of communications. Interface sells mostly to small to midsize companies, where it won't compete with the larger CRM companies. "We're not out to be the 800-pound gorilla in CRM, like a Siebel, but we're happy to be the 800-pound gorilla in professional services."

While Interface aims its software at companies that provide professional services, other companies--such as Onyx Software and Pivotal--have packages aimed at more general businesses in the market. FrontRange Solutions' GoldMine first entered the market as a contacts and address book application, but as CRM blossomed, developers added more functionality--especially in the area of SFA. Dave Bellandi, FrontRange's vice president of worldwide marketing, positions GoldMine as a solution for companies that have outgrown the functionalities of Microsoft Outlook, but can't afford the leap to traditional CRM.

"Companies with 100 to 1,000 employees is ... the fastest growing segments in CRM, and that's the segment that wants a poor man's CRM," Bellandi says.

The most recent option for smaller companies has been to turn to the application service provider model and companies such as Salesforce.com and UpShot, both of which are geared toward SFA. These ASPs offer centralized online repositories for sales data that require no software to install on the business end, so a small company can be up and running fast.

The sweet spot for Salesforce is in the 20- to 100-user range, says Clarence So, the company's director of product strategy, but Salesforce's 2,800-customer stable includes large companies such as First Union National Bank and Adobe Systems.

"We're a Web site. There really is zero technology implementation," So explains. "What they have to deal with is business process implementation," fitting their sales organization with the technology processes.

But that's one of the drawbacks of a system such as Salesforce's as opposed to that of a large company such as Siebel. Although organizations can purchase a Siebel application and customize it in numerous ways, with an online system such as Salesforce's, what you see is what you get.

So concedes this, but says that's the trade-off for a solution that can be up and running in days instead of months.

The online model was so enticing that Siebel started Sales.com, but it eventually folded the operation. Industry observers say that Siebel executives realized they were about to cannibalize their existing business.

George Ahn, general manager of Siebel midmarket CRM, says that Siebel felt that it could serve its customers better through use of its traditional SFA software. Meanwhile, Siebel has also built out a successful midmarket solution for CRM, which is currently in its fourth version.

Ahn says that Siebel's midmarket software is similar to the enterprise version, but to enable quicker installation times, it has fewer customizable features.

"What customers want is to buy applications they can use today," Ahn says. "This isn't just a scaled-back version of the enterprise software, but specifically designed for their needs."

Jeffrey Read, vice president and general manager of PeopleSoft's midmarket CRM division, agrees, saying that PeopleSoft's midmarket suite is virtually the same as the traditional one, just configured for quicker installations.

Both Ahn and Read say that as companies expand, they can grow naturally into the larger product suite.

Siebel has also partnered with Great Plains Software, the business software subsidiary of Microsoft, to provide Great Plains Siebel Front Office, a CRM suite customized for a Microsoft IT shop, with tight integration with SQL Server.

"We were already looking at Siebel and drooling at it, saying 'That's what we want.' But we kept hitting our heads against the price point," said Dave Root, chief financial officer of Eagle's Flight, a management training company with 120 employees. "There were some things we'd like to get that are part of the main Siebel software, like vertical applications, but that's the sacrifice."