Customer Service Company and Product Update 1Q2009

After Seven Quarters of Growth, the Recession Catches Up to Customer Service

June 4, 2009

The recession slowed KM-based customer service in 1Q2009. Customer growth and financial performance slipped for all but two of our suppliers—IntelliResponse and Both had record quarters. There were three significant product announcements: eGain Solution-as-a-Service bundles hosting deployment, packaged implementation services, and pay as you go pricing. RightNow February ’09 adds support for product registration. Salesforce CRM for Twitter lets companies search, monitor and join Twitter conversations through the Service Cloud. Company-wise, empolis merged with Attensity and Living-e to become Attensity Group, And, Consona CRM acquired SupportSoft Intelligent Analyst Suite, customer service for supporting complex, high technology products and services.


After seven consecutive quarters of growth, the recession slowed KM-based customer service in 1Q2009. Customer growth slipped for all but two of our suppliers—IntelliResponse and Some of the slippage was significant. Sales cycles have lengthened because buyers have become ever more deliberate in their decision making. SaaS deployments, such as those offered by IntelliResponse and (as well as by nGenera and RightNow), with lower costs and faster returns may be the key to speed these deliberations.

Slippage in customer growth means slippage in financial performance. Suppliers used terms like “weak” and “light” to describe their 1Q2009 and cited the economy as the cause. No argument from us, although the SaaS suppliers, best case, had excellent financial performance and, worst case, were pretty steady.

Product activity was pretty high for typically quiet first quarters. Three announcements bear mentioning. First, eGain introduced Solution-as-a-Service (SLaaS), a bundle of hosting the eGain SelfService software, packaged professional services for its implementation, and pay-as-you-go pricing. It’s the right offering in these times. Second, like clockwork, RightNow announced and delivered RightNow February ’09.
The key new feature of this release is support for product registration. Third, announced Salesforce CRM for Twitter. This offering lets companies search, monitor, and join Twitter conversations through the Service Cloud and further leverages social networking to help deliver customer service.

The biggest company news in the quarter came from empolis as empolis GmbH became empolis, an Attensity Group Company. Attensity Group is a new software supplier formed by the merger of Attensity, empolis, and Living-e. The merger forms an attractive customer service supplier with useful and differentiated offerings. Attensity Group Voice of the Customer automates knowledge creation from unstructured data in sources like online forums, technicians’ notes, and warranty claims. The merger also creates a better presence in North America for Attensity Group E-Service, the former empolis:Service Lifecycle Suite.

Consona CRM’s acquisition of SupportSoft Intelligent Analyst Suite was pretty big company news, too. This is software that provides diagnostics and repair functionality for supporting complex, high technology products and services. This is software that enhances Consona CRM’s offering and expands its market.

The Recession Catches Up to Customer Service, but Seasonality Contributes, too

Two quarters ago, in 3Q2008, while overall growth continued in KM-based customer service, we expressed concern about lower levels of customer acquisition as only two suppliers, eGain and KANA, had new customer growth. In 4Q2008, most firms bounced back, but three suppliers, Astute Solutions, Consona, and KANA, had off quarters. In 1Q2009, only IntelliResponse and had improved customer growth.

Two factors explain customer growth issues—seasonality and the economic climate. For seasonality, fourth quarters are historically very good quarters for software suppliers as their salespeople rush to finish the year making their numbers and their customers spend what’s left of their software budgets while the funds are still available. First quarters are historically soft as suppliers catch their breaths and ramp up for the coming year while customers establish their plans and budgets. We’ve seen this seasonality for four of the five years that we’ve been writing these reports. Only last year did market growth continue without a soft first quarter.

From the perspective of the economic climate, we felt that slowing customer acquisition was a sign that the recession was beginning to affect KM-based customer service. The companies that suffered all spoke about lengthening sales cycles caused by increased customer diligence and formality in their selection processes and the deals that slipped out of the quarter because customers were making their decisions more slowly. Based on 1Q2009 performance, the recession has finally affected customer service significantly.

SaaS Suppliers Have an Answer

The two best performers for 1Q2009, Intelli-Response and, which both had record-setting quarters, are both SaaS suppliers. The lower initial costs and rapid implementation times for SaaS deployments have made it easier for prospective buyers to make selection decisions faster and easier. There’s less to justify for a SaaS deployment—license fees, implementation resources and costs, and ongoing support.

We’ve stated in past report that customer service is a “recession fighter.” Deliver excellent service to retain existing customers; good service improves their satisfaction and ensures their loyalty. Deliver excellent customer service to reduce cost to serve through increased agent effectiveness and efficiency and through more effective self service. We still believe in these benefits. It’s just that the recession has caused organizations to quantify and justify them more rigorously, slowing selection decisions...


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