During 2007, more than 60% of all new CRM applications deployed within two years of purchase will be from best-of-breed vendors rather than from Oracle or SAP, according to recent research from Stamford, Conn.-based Gartner Inc.
Much of that 60% will be smaller applications installed to enhance CRM deployments, often from SAP or Oracle.
These "bolt-on" applications tend to come from smaller, best-of-breed vendors -- which feature a range of Web analytics, mobile computing, vertical-specific, and geographically specific functionality -- according to Sharon Mertz, CRM research director for Gartner.
There are literally hundreds of companies producing these best-of-breed applications. SAP has taken the approach of partnering with some of these smaller vendors. In theory, Mertz said, this should ease integration when a company is considering implementing one.
However, when selecting a potential best-of-breed "bolt-on" to their SAP CRM installation, customers must remain careful about how they choose software, she warned.
"Potential customers need to take a 360-degree view when choosing a software vendor," Mertz said. Buyers must look beyond just software functionality or technology and make sure the vendor is a good partner and has long-term business viability.
"This is an incredibly volatile arena, with companies being bought and sold all the time," Mertz said. She doesn't see the current acquisition trend slowing at all, mentioning Oracle and Infor especially as companies that have been snatching up best-of-breed software providers.
Potential buyers must therefore consider their strategy if a small vendor is acquired. "Oftentimes with acquisitions there is a 'stall period' while the acquirer decides product direction," Mertz said.
Some acquiring companies have strategies in place that allow the companies they've purchased to continue to operate as individual enterprises, reducing the stall. Still, when negotiating contracts, Mertz suggests including clauses to protect your company if a merger or acquisition occurs.
Mertz also suggests keeping in mind the potential costs of integrating best-of-breed software into a company's existing environment. Services will be required -- whether using internal resources or with a partner -- and these consulting costs can often represent up to 80% of the total project budget.