Perhaps the most coveted position that IT vendors want to attain is a spot on Gartner's famous Magic Quadrant. Partner relationship management (PRM) vendors are no different. I looked at the 2003 Magic Quadrant for PRM, which is available free from Siebel's Web site (a free registration is required to view the document).
I won’t go over all the companies plotted on the Magic Quadrant and their positions (you'll have to view it yourself), but I think we're safe revealing that the reason Siebel is making the document available free is because it is the only company that Gartner placed in the Leaders quadrant.
The rest of the Magic Quadrant is populated by an array of vendors, including pure-play PRM vendors, enterprise application vendors, and niche players who offer a subset of PRM functionality.
ERP vendors coming on strong
Nipping at Siebel's heels are the most recognized names in the ERP software arena: Oracle, SAP, and PeopleSoft. Just as Siebel is able to leverage its strong position as the CRM provider in many companies to convince them to use its PRM solution, the ERP companies leverage their positions as the ERP providers to get customers to try their PRM solutions. This makes it very difficult for the pure-play vendors to get their products into companies that already have an entrenched ERP or CRM vendor in place.
The analyst firm, the451, predicts that the PRM market is "ripe for consolidation." In its article, "PRM still waiting for long-expected consolidation," the451 states, "Small, cash-strapped vendors are looking for cash infusions to fund their paths to profitability. The viability of PRM as a stand-alone technology is constantly being questioned by enterprise application vendors, and this has begun to infiltrate customers' minds."
The451 also says, "The market cannot sustain so many small vendors. Some consolidation has already occurred, including one high-profile flameout and one smaller acquisition. But more such activity seems on tap."
The article claims that the pure-play vendors, such as Allegis, ChannelWave, and Click Commerce, have to expend a great deal of marketing money battling the industry perception that "CRM and ERP suite vendors are going to demolish the need for PRM pure plays—and do it sooner rather than later." The451 lists possible buyers for these pure-play vendors, including ERP and CRM vendors such as J.D. Edwards, Onyx, Pivotal, and Lawson.
Hope for PRM pre-pays?
The451 identifies two ways that it believes the pure-play vendors can survive in the current market. One way is to focus on specific industries. The451 claims that the definition of a "partner" varies from industry to industry, and the needs of those partner channels vary widely. Rather than trying to customize a generic PRM product for each industry, the451 advocates that PRM vendors pick their industry (or industries) and then tailor their product's functionality to meet the needs of the industry. It cites Allegis's recent focus on the chemical industry as an example of a potentially successful strategy.
The second survival technique it recommends is for the pure-play vendors to begin offering "PRM analytics" solutions. Rather than trying to describe this myself, here's an example of PRM analytics that the451 provides:
"A manufacturer has a partner program segmented into silver, gold, and platinum levels. Selling a certain dollar value of product per month is the key criterion for determining the partner's level, along with qualified leads converted to sales and number of certified consultants.
“The analytical application would check to see if a partner has achieved all the benchmarks, and if they have, it automatically upgrades their level. This means that the partner would, without any channel management staff being involved, be upgraded to the next level of support and would be invited to participate in a new marketing campaign. The partner and the appropriate channel management personnel would also be notified of all these changes."
Of the two options, I believe that the vertical market versions of PRM products hold the most promise for the long-term success of the pure-plays. The PRM analytics example sounds like an ideal application for the enterprise application players who already control the back office, where the information about sales by specific partners is already stored. To effectively implement the PRM analytics, the vendors would need to do tight integration with the very vendors who threaten their survival—the ERP vendors.
What about niche players?
The niche players are staking out a number of different plays in the PRM market. Some companies are focusing on individual, lower-cost PRM applications (like a proposal generator or a contract management system), while others are focusing on the SMB marketplace where the giant enterprise application vendors find it difficult to play because of the high cost of their solutions and the complex and often lengthy implementations.
One of the niche players that I am most familiar with, Cierant Corporation, is creating a combination play by offering several PRM tools that are targeted at medium to large enterprises. It offers partner communication management tools, a proposal/quote generator, and several other off-the-shelf and customizable solutions for PRM. By selling individual applications that are offered in an on-demand computing delivery model, it claims it is able to provide rapid implementations and an almost immediate ROI.
I have also seen the emergence of a new class of niche players that have entered the PRM market as a result of their long-term involvement with the sales and marketing functions at various companies. A number of traditional advertising and marketing communications agencies have begun to offer either their own "home grown" PRM solutions to their clients, or in some cases, have begun private labeling and then reselling other vendor's PRM products. Many of these agencies see PRM as a logical extension of the marketing and advertising services that they have been offering their clients.