Market Stall

Where the US leads, Europe follows. But the lucrative boom in salesand marketing software across the pond has gone unnoticed in the UK. GuyClapperton asks what it takes to turn a vendor on to an opportunity

Europe's takeup of IT has traditionally followed that of the US.

It had mainframes first, then the UK got mainframes. The US developed PCs, then the UK adopted them. Last year, briefly, it appeared that the differential had disappeared as the whole world picked up Windows 95 at the same time. But this was one product. Overall, the principle of the UK following the US has been adhered to with admirable consistency.

This being the case, Europe can look forward to an influx of sales and marketing system software in the next few years, since the US market has shown sudden growth in this area recently and is still gaining.

Certainly, there is the potential for growth in the UK although there is no sign of a massive uptake yet, and France and Germany have both been slow to accept the systems. But in Holland there are four substantial companies vying with US imports for share of a surprisingly decent-sized market.

What is less of a shock is that four out of the top five sales and marketing software suppliers in Europe are based in the US. The US is the leader in almost every sphere of software, and there is no reason to suspect sales and marketing packages would be any different.

It was therefore instructive to look around Matrix Software's base in Holland. Matrix is the parent company of Matrix Workstations in the UK.

It is Europe's only big player in the sales and marketing game and boasts an international clientele. It is currently selling its first installation to China.

So, what does a sales and marketing system actually do? Automating a business process is far from straightforward and asking why the customer should bother is a key question for any Var considering getting into the business.

Sales and marketing systems can do anything. They can be as big or as small as the manufacturer wants them to be. For instance, Sage's Telemagic contact manager is a sales and marketing system, or at least it can be used as such. Indeed, there are elements of the sales and marketing package in any contact manager package, whether it costs #25 or #25,000.

But these smaller packages are of little interest to the professional Var, which would be more interested in salesforce automation, or software which automates the business process associated with making a sale. This involves contact management, data entry, the tracking and audit of the process of a transaction and the integration of this information with other functions within the company.

A sales and marketing system will monitor the performance of a sales executive and when a problem presents itself it will isolate the difficulty so that the problem can be sorted out. It can be integrated across a company's entire existing IT installation - the term business process re-engineering is over-used, but appropriate if the salesforce automation system is implemented correctly.

So much for the theory. But there is a problem - users don't seem to like the systems very much. It's brutal, but there it is.

According to research by Coopers and Lybrand, the reasons are manifold.

First, any cost benefit has to be calculated on the basis of being intangible. An intangible benefit is not helpful if your department is constantly having to justify even the most obvious benefits.

In addition, sales and marketing software specialist Hewson Consulting Group says 55 per cent of organisations are failing to meet their cross-selling objectives following investments in the systems.

Only 67 per cent of users surveyed by the organisation last year were completely satisfied with their systems. A third of those questioned reported limited functionality, system bugs and poor remote connections.

Another reason for user dissatisfaction must be the fact that many of the companies involved are so unstable. A glance at a sales and marketing software directory from a couple of years ago in the UK would show about 20 per cent fewer companies in the business than are there now.

But this does not mean that 20 per cent have been added, rather that 20 per cent dropped out and 40 per cent were added.

Even in 1996, the market is still carrying a lot of one-person operations, which are really unsuited to serving the corporate market.

None of these, of course, is the sort of multinational operation that many corporate clients want to deal with. This is why a lot of business that could be arriving on the sales and marketing system vendor's doorstep is instead going to the likes of SAP, Oracle and others.

Since a lot of the business is vanishing into the generic 'whole business package' area, it becomes difficult to say exactly how large the potential market is. Again, there is independent research to suggest that it will be substantial.

Hewson Consulting reports that the sales and marketing software market in the UK in 1994 was worth a total of #20 million, but that this will rise to #80 million by 1998. A quarter of this is accounted for by business-to-business products.

Bill Gates is not likely to lose any sleep over not being in this arena.

But most Vars are not in the Microsoft league, and a slice of a u20 million market in two years' time could be a very useful thing to have.

The thing to remember is that sales and marketing systems carry training, implementation and support implications, and should therefore be reasonable prospects for the Var community.

Quite why other countries should differ so much in their takeup of the systems is a mystery. Hans Arnouts, sales and marketing manager for Matrix Holland, points to his country's traffic problems - the roads are often congested, so it is easier to sell by telephone.

Selling into different European countries is a problem because of Europe's many different cultures. If companies like SAP have more success selling a whole business system, then it is probably because their international status gives them more clout.

Many players sell only into their domestic market, thus precluding them from the larger contracts. Those that try to sell overseas often run into difficulties, as Arnouts confirms. 'A German company is not going to buy from a Dutch company,' he says, and adds that the French prefer to buy from French companies.

Due to sheer size, US companies in this field will have more success unless, like Matrix, the European can find partners or acquire other companies to address the local market with the same product.

Matrix' experience is that the growth of the market forecast by Hewson is happening. Most of the markets in Europe seem about ready for the automation of the sales process as customers come to realise there is some benefit to be had from shelling out on some such system.

The benefits are starting to become more apparent, and the integration with existing databases within a company are becoming much easier.

But this is not always enough. Indeed software is available but, at this stage it is mostly either generic or developed by a single-industry company - the sort that will sell only to one vertical market. Such a business will typically have only one product with no economies of scale in R&D as they would if they were selling to more. The alternative at the moment is to sell a package whose price includes 60 per cent R&D and 40 per cent consultancy.

This is about to change, and Matrix appears to be taking the lead, although others have done similar things on a smaller scale. The key to Matrix' revised product policy is to have a set of different templates, one for every industry to which it wishes to sell. These will be available worldwide, although some will also be country-specific - so, for instance, the pharmaceutical industry version will sell worldwide, since it is developed in Holland, while the one for the construction industry will be UK-only for the moment.

There are dissenting voices who suggest the whole venture is misadvised.

Co-Cam, for example, one of the US giants, is ploughing its R&D effort into integrating the various databases with which a salesperson will have to work. The company believes that this is what customers ultimately want. If effective, this will enable marketing departments to market to better prospects than they are marketing to at the moment.

Matrix accepts this but believes the customer wants a system that matches his or her business. 'What we are saying is that the customer is right again,' says Arnouts, adding that buying something based on a specific template will reduce the consultancy charge so that it accounts for only 10 per cent of the purchase price instead of the current 40 per cent.

It might be fairer to say that customers would like both those benefits, thanks very much, and different vendors are bound to put their emphases in different places when it comes to R&D.

So why are Vars so uninterested in a market where phenomenal growth has regularly been predicted?

Melanie Badenhorst, marketing director for Matrix Workstations in the UK, believes the Var route would be a natural one to pursue and has tried it in the past. But the uptake was poor and the willingness to master a #50,000-plus package in a market that has to date performed flatly was understandably lacklustre.

Things are not any better in Holland either, which is curious considering the liveliness of the market there. Arnouts confirms that outside of a few partnerships, mostly those with other software companies, but also with consultants, there are no resellers as such involved.

A French distributor mentioned that the Vars in France are interested only in selling hardware, without bundled software, which presumably has more to do with a different cultural understanding of the role of a Var than anything else. But internationally, the Var community's apathy in this area is well-established.

Even if Var interest does pick up, it is becoming increasingly difficult to see a niche into which it would fit. If manufacturers are becoming pretty clued up on tailoring their systems in order to fit a particular industry, they are also aware of the importance of integrating a system into a client's existing set of databases and marrying up all facets of customer information.

Although the businesses continue to look for Vars, they are finding themselves with little choice but to shut them out.

What is most frustrating in all of this is that the sales and marketing software arena represents a growth area, according to more than one independent research firm.

At the moment, says Hewson Consulting, only some 50 per cent of sales staff use salesforce automation, and 50 per cent of those who do believe that their system is underperforming. Every year, the Softworld sales and marketing show grows substantially rather than shrinks.

The opportunity is clear and any Vars worth their salt will be able to see it. As well as this, companies such as Matrix and Co-Cam are looking at integration with existing databases and tailoring software suites to specific markets - all of which ought to be a gift.

The troubles arise when the cost of learning about the system is weighed against selling a product that has a poor track record with resellers into a market that research says will grow - but research in 1992 very clearly indicated that Neil Kinnock would be Prime Minister by now.

What is certain is that the area is underserved and the few companies that have stuck with it are making steady profits. But whether resellers can write themselves back into the equation remains to be seen.