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Please enjoy my High Priority Column in the February 2007 issue of Customer Interaction Solutions Magazine.

 

IFS: Another Hat In The CRM Ring

 

The world of software is succumbing to a few forces which seem to be operating in stark contrast to one another. In most industries where we see consolidation, it is due to private equity reasons. There are hundreds of billions of dollars being thrown around, and if your company wants to make an acquisition, there may be a waiting list of private equity firms that will want to give you money to make the deal happen.

 

In addition, the appeal of being a public company has faded for the moment and, as a result, some of the money in the industry has been spent on taking public companies private. One example is the purchase of Aspect by Concerto, creating Aspect Software.

 

One strong force is that of consolidation which, ironically, in the CRM space is being driven more by Oracle than by private equity companies. Larry Ellison has done what few have been able to do and that is acquire successfully time and time again. In fact, the choices in the enterprise software market are dwindling, leaving many organizations with a few choices such as Oracle and SAP. Recently, a rumor has been circulating that Oracle will soon make a bid for SAP, as well.

 

For those of you who paid attention in school, you remember that for every action there is an equal and opposite reaction. In this case, the opposite of consolidation is a move to open-source software. While the open source market hasn’t grown very quickly in the CRM space, the size of the threat does continue to grow.

 

Of course, Oracle has recently gotten into the open source business as well, which is a good hedge for them as they will soon be able to help companies regardless of their needs. But for those organizations looking for choice in the software market, I bring them some hope in the form of a company many readers may never have heard of: IFS (www.ifsworld.com/us). The company’s software solutions are optimized for enterprise resource planning (ERP); enterprise asset management (EAM); and maintenance, repair and overhaul (MRO). IFS also has a focus on CRM and, as such, I thought it would be interesting to readers to share a recent interview with IFS’ Jorge DeFreitas, product manager of CRM for the company.

 

RT: Tell me about IFS.

 

JD: IFS develops and markets IFS Applications, a suite of enterprise applications used by 500,000 users at more than 2,000 companies worldwide. Our global headquarters are in Sweden, but we have 79 offices in 54 countries —  with our North American headquarters in Schaumburg, Illinois.

 

IFS focuses on the needs of middle market companies; that is, companies with about $100 million to about $2 billion in revenue. We further target companies in some specific manufacturing and asset-intensive industries, including utilities and telecom, process industries, service and facility management, aerospace and defense, industrial manufacturing, high-tech and medical devices and automotive. In short, IFS thrives in complex environments and in businesses that must adapt to rapid change.

 

RT: How do your software offerings differ from the larger players in the market?

 

JD: First of all, we are an independent software vendor, and after years of merger mania, we are one of the few ISVs left in the enterprise application space! From a product differentiation standpoint, IFS pioneered and is still the leader in mid-market applications built on a service-oriented component architecture (SOCA). This method of building applications gives end users unprecedented flexibility and allows our customers to implement a small segment of functionality or a comprehensive suite. This means customers can realize a return on their investment more rapidly. Our modular product structure allows customers to phase implementation, addressing their business needs in priority order and avoiding the “big bang” implementation. Oracle and SAP are still trying to catch up with us on this score.

 

RT: How do your products integrate with customer CRM needs?

 

JD: Our customers are looking for an enterprise application that allows efficient support for the customer and product lifecycle. This means that while we have an application module designed to manage customer contact information, our application suite is flexible enough to allow you to view virtually any data — from sales contact information to production to aftermarket service to revenue history — by customer.

 

IFS CRM enables full customer lifecycle and covers the three main CRM-related processes: marketing, sales and service. IFS CRM falls under the category "Enterprise Application Suite Vendor" as opposed to, e.g., Salesforce.com — best of breed. Our view of CRM involves very deep and dynamic connections to back-office functions. This is what allows us to give our customers such a penetrating view into their customers' activities and business patterns.

 

RT: What is the future of enterprise software as it relates to CRM and ERP?

JD: These two disciplines need to become more and more intertwined. Most people and probably most CRM application vendors take a very narrow view of the discipline, and this necessarily limits the effectiveness of customer interactions. Obviously, CRM is often used as a term in the context of a single application, though it is more complicated than this. Technology can be a tool to facilitate the CRM strategy and process. For the most part, CRM represents software and online tools that face outward in three areas: marketing, customer service and sales. But the more data — better data — you can pour into those outward-facing applications, the more powerful your CRM tool will be.

 

In the real world, CRM ranges from niche tools (for example, tools that perform simple things like personalizing corporate Web sites for certain customers) to a large-scale application that captures myriad interactions with all customers, analyzes them with sophisticated reporting tools, and connects to other major functions such as supply chain management and ERP.

 

For instance, consider the situation faced by a company that sells and services complex industrial machinery. As the company's call center takes service and repair request calls from their customers, it helps if they can access information on which other customers had purchased similar or identical equipment, and whether any of those customers had reported similar problems. Better yet, it would be beneficial if the call center could access the maintenance records for that equipment to determine how those problems were solved. Or, if in the course of repairing a customer’s piece of equipment, modifications or alterations were made, that information may also be important to a service crew, as they may need to bring different equipment with them on the customer call.

RT: What is your take on hosted versus in-house software?

 

JD: It is important for IFS to be able to offer customers both options when desired; thus, the versatility and agility in our product offering. We have delivered IFS Applications in a SAAS environment, but it is not something we see much of a call for. Narrow product offerings like Salesforce.com may be more popular in this configuration. But it seems like middle market companies like the ones we serve want to be more hands-on with their enterprise application. To a certain extent, an in-house implementation may cause a company’s management team to take the type of ownership that can lead them to maximize the possibility of their enterprise application.

 

RT: What can we expect from IFS over the next five years? Can you look out farther than that?

 

JD: IFS’ CRM strategy is to continue enhancing our solution, both feature- and technology-wise, based on market and customer requirements/needs. We will make sure we continue to have a very competitive, out-of-the-box and fully ERP-integrated in-house CRM solution.

 

To a certain extent, our CRM solution will become more and more powerful, along with the rest of our application suite — as the very back-office functions that make up a quality ERP solution. One of our main challenges will be to raise awareness of the fact that CRM is mainly ERP information organized by customer. It takes a true twenty-first century enterprise application — which un-silos information from throughout a company — to deliver on this promise. And this is the point we need to make more clearly in the market.

 

RT: Thank you for your time, Jorge.

 

In the future, the CRM wars may be won by the company that demonstrates not the largest or most "brand name" offerings, but the most flexibility to customer needs, not only in terms of the manner of delivery (premise-based, SaaS or a mix of both), but in terms of functionality, scalability, pricing and ease of integration and administration.

The Real Unified Communications Relationship between Microsoft and Nortel

 

With all the IP communications industry focus on ITEXPO last week it was difficult to get a chance to share my thoughts on happenings from the prior week – especially between Nortel and Microsoft.

 

I really had a great time in New York listening to Steve Ballmer the CEO of Microsoft and Mike Zafirovski the CEO of Nortel talk about their collaborative Unified Communications strategy. What you may not know because you weren’t at the press conference is just how passionate Steve Ballmer is about communications. He is serious about our market and this could be a very good thing.

 

When I asked Steve about educating the market about Unified communications he got animated and his eyes lit up. He said, “When you show people this stuff, they get it. It isn’t something abstract like SOA.” I may have paraphrased a bit but that was the gist of his comments.

 

What is even more amazing about this news is Steve is driving much of the communications vision personally. There will be joint development and demo centers around the world for example. My contacts tell me there are divisions under Ballmer that don’t have the autonomy you would think they have. Steve is calling the shots. For example there are some within Microsoft who think Interactive Intelligence’s Vonexus product line or Mitel’s offerings are currently a better fit for the Redmond-based company. The problem is these other IP-PBX companies can only go so far within Microsoft because they bump up against a “Ballmer ceiling.”

 

I asked a few people why Microsoft chose Nortel and the consensus was that Nortel was willing to work collaboratively with the software giant. The implication was that Cisco and Avaya weren’t as interested.

 

I can see Cisco having less of a need for a Microsoft partnership as they can offer similar solutions without the need for a partner. At Avaya, perhaps the management shakeup last year led to a void which Nortel took advantage of. Time will tell if Avaya made a huge error by not becoming the primary Microsoft partner. History may look back on this as a terrible mistake by the New Jersey-based company but since the management was changing around the time of the negotiations there may be no single person to assign blame to.

 

In addition Zafirovski and Ballmer seem to be close friends as they worked together when the former was at Motorola. The duo had strong chemistry onstage and their speeches intertwined in a sort of verbal choreography. Picture two backup singers in a music video (for the sake of argument we will say Janet Jackson) using words instead of dance moves and you’ll get the idea.

 

Ballmer’s enthusiasm could do wonders for the communications market as there is so much potential to link corporate communications to Xbox-based home communications servers and Microsoft-based smart phones. The ability to use Microsoft development tools to build communications applications is huge news and we can likely expect communications frameworks from Redmond soon. These frameworks will probably abstract much of the communications infrastructure allowing developers to build robust enterprise-class communications solutions.

 

Another reason Nortel makes sense as a partner for Microsoft is that Nortel’s service provider division allows joint unified communications solutions between Microsoft and Nortel to be scaled to hundreds of thousands of ports so as to be provided as a hosted solution.

 

Avaya and Cisco would be poor partners from this perspective. In fact this could be the best explanation for why Microsoft chose Nortel.

 

Back in March of 2002 I wrote an article where questioned why Lucent would spin off Avaya. My thinking was twofold. Joint development is a powerful force in technology and a large campus PBX is not unlike a carrier switch. In addition the enterprise and service provider markets tend to counterbalance each other’s spending. What I did not predict at the time was that not having a service provider division could be a liability for Avaya. Time will tell if this is the case.

 

Alcatel-Lucent could have been a partner for this initiative as Alcatel plays in the enterprise PBX space. The problem is Alcatel is virtually unknown in the US and in the domestic enterprise space they have minimal share.

 

But if Microsoft continues to really spend on communications initiatives as Ballmer threatens to do, what can the smaller PBX vendors expect to see happening to their market share. I admit to being biased but I think the market has nowhere to go but up – for almost all players.

 

As long as IP-PBX makers are innovating and giving customers solutions they want, they will be in good shape. My advice to the small guys is stay focused on being leading edge and don’t lose sight of your customer’s needs and wants. Be sure to have compelling reasons why your solutions still make sense in a world recently dominated by Microsoft and Nortel news.

 

Also, do not stop branding and marketing. You need to be very visible in your key target market(s) or you will get steamrolled.

 

What is perhaps most amazing is that Interactive Intelligence’s Vonexus division integrates more seamlessly with Microsoft products than anything Nortel (or anyone) currently has. One would imagine this unified communications relationship should have been with Interactive Intelligence. But the reason I3 was overlooked was probably because they aren’t as large as Nortel and they don’t have as good a relationship with Ballmer.

 

But I imagine I3 will leverage the Microsoft/Nortel relationship to boost sales by explaining they are years ahead of the larger, slower players. In fact I have witnessed them do this successfully over the past six months at seminars around the US at last week’s ITEXPO where their booth was mobbed for three straight days.

 

But it will be interesting to see how much selling of unified communications products will be done via Microsoft channels. If SMEs start to buy more communications solutions through Microsoft resellers and these products are all based on Nortel’s phone systems then other PBX vendors may want to start buying their aspirin at Costco.

 

It is unclear how effective the Microsoft channel will be in selling telecom solutions. I am sure some resellers will excel in telecom but most will probably not.

 

I mentioned this new relationship puts Nortel on an equal footing with Cisco and Avaya but it is possible it actually gives Nortel an advantage. This could be good for the company as there are many talented people at Nortel who were brought down by the past senior management scandal. It seems like the Canadian-based communications equipment company finally has an opportunity to continue a growth curve that was interrupted a few years back by a financial mess.

 

So I think the result of this new relationship is Nortel will gain more and more share. It is inevitable. They will likely take most of it from Avaya followed by Cisco. The smaller players may not see this relationship hurting them for some time as it will take years for lower end products to trickle down the pipeline.

 

In fact if this new UC initiative is even marginally successful, communications solutions will become more valuable and prices per seat at corporations will increase significantly. So while Nortel gains share, all vendors will likely generate higher average revenue per system/seat sold.

 

Of course there is always the potential that Microsoft will not be so successful with this initiative. After all, their CRM solutions are not setting the world on fire. But then again Steve Ballmer never gave CRM the TLC unified communications is now receiving. As long as Ballmer is at the helm, we will see the unified communications market grow rapidly and we will see Nortel riding the potential tsunami-sized wave created by this new partnership.

 

Oh and by the way, Microsoft’s speech, CRM and mobile device solutions will ride this wave as well.

 

I advise Cisco and Avaya to get on the horn with Oracle and SAP before you finish reading this article and get a similar deal done quickly. My experience in this space over the past 25 years (has it been that long?!) tells me we are seeing a major shift of power in communications towards Nortel and Microsoft – unless of course the other major players counteract this initiative quickly.

 

Some of you who are most experienced in communications will point out these unified communications technologies aren’t new and subsequently I am making much ado about nothing. While technically you are correct – you are dead wrong from a marketing perspective. Remember, Skype’s success is not its technology (much of which they owe to Global IP Solutions) but its marketing. I used products like Skype years before there was a Skype. That is what inspired me to launch Internet Telephony Magazine in late 1997! Ditto for Vonage – It was Jeff Citron’s marketing genius… His ability to acquire capital and spend it faster than he received it -- that made Vonage a household name.

 

Expect ongoing coverage of the unified communications market here on TMCnet as well as TMC’s print publications. In addition there will be significant focus on these developments at Internet Telephony Conference & Expo West this September 10-12, 2007 at the Los Angeles Convention center in California.