The other day I drank lunch with a table full of salesmen who, in between rounds of Coors and loud, raunchy stories, basically kept working. Cell phones in hand, they made and took calls, structured deals, passed on jokes and generally schmoozed as effectively as if they'd spent the day in face-to-face meetings. The cell phone, clearly, has revolutionized the way they do their thing.
But this is kid stuff compared to what's coming. Say you're one of the salesman at last week's lunch, and a customer calls with a question about his account. With today's technology, you'll answer as best you can, based on your knowledge of the subject and whatever printouts happen to be in your briefcase. Then you'll chat a little, pulling a joke or two from your repertoire or asking from memory about the client's interests.
But a year from now that same call might activate a handheld display of the customer's recent account activity, names of kids, spouse and hobbies, and jokes you've bookmarked for him, along with links to the company database that let you answer virtually any product-related question. Scroll down a little further and you might find a special deal that the system's "decision engine" thinks the customer -- based on his profile and the behavior of similar customers in the past -- is likely to find attractive. So you make the offer, and maybe close the sale. The result: A client who's convinced he's on his rep's front burner, and a salesman with tools that make him feel like Superman.
Now spread this kind of instantly available, continuously updated information across a company's other "touch points," i.e., the people who interact with customers, and you get a marketing machine with a serious competitive advantage.
This is known as customer relationship management, or CRM, and every good-sized company on the planet will have to master it in coming years. But most will face the same problem: Their different departments run incompatible "legacy" systems that don't share information readily. So they'll have to buy a system that extracts this information, slices, dices and makes it available in usable form to each touch point. Worldwide, we're talking hundreds of billions of dollars in new spending here, which explains why virtually every business software company is rolling out a suite of CRM solutions.
So the question becomes: Will the
dominate, or is there room among the gorillas for some newcomers with 10-bagger potential? The answer, tentatively, is that there's room. Every company is unique, with its own product lines, customer base and mix of legacy systems. So a dominant, Windows-like, off-the-shelf CRM system is not in the cards, at least not for a while. In the meantime, there's plenty of work to go around and lots of niches to fill and build on.
Besides Oracle, the biggest CRM vendors are
, with about 20% of the market, and
division, with 6%. Maybe 20 other companies call themselves CRM vendors, so there's no way to cover them all here. But as a starting point, check out the following:
is the biggest player in the e-commerce software space, with revenue that will exceed $200 million this year. It's profitable, and a source inside a fast-growing division of
says the folks there like BroadVision's software a lot better than Oracle's.
is led by a former exec from accounting and consulting giant
, giving it an in with the consulting community. This is important because CRM-hungry companies tend to start by calling in consultants, who then recommend software vendors. Sales jumped from $2 million to $14 million, year-over-year, in the most recent quarter. And the stock, well, this stock illustrates the risk/reward profile of the sector: It shot from 38 to over 324, before giving back 200 or so points in the recent tech selloff.
, another big CRM vendor, and won a contract from
for software to manage the portal's email. So expect big year-over-year numbers in coming quarters.
(JAN:Toronto), based in Ontario, is carving out a promising niche in financial institutions, with a roster of clients that reads like a Who's Who of Wall Street. "We're very quickly becoming the standard for CRM" among big brokerage houses, claims CEO William Tathem.
Once it builds solutions for, say
mutual fund wholesaling operation, "the next step is to work with global partners who can resell the same solution throughout the balance of the market." An interesting strategy, made more so by a stock that's trading with the typical "Canadian discount." Where Kana and E.piphany are losing money and trading at between 70 and 100 times trailing 12-month sales, Janna is marginally profitable and trades at maybe 25 times sales.
As always, I'm leaving out some good stocks here, so send in your favorites, and I'll do a follow-up in a few weeks.
John Rubino, a former equity and bond analyst, is a frequent contributor to Individual Investor, Your Money and Consumers Digest. His first book, Main Street, Not Wall Street, was published by William Morrow in 1998. At time of publication, he had no position in any stocks mentioned. While Rubino cannot provide investment advice or recommendations, he invites your feedback at