Parature Contends for Industry Leadership in SaaS Customer Service

Parature, which provides a SaaS-based customer service/support (CSS) solution, is a good example of a company that is “sneaking up” on the rest of the CRM industry.

The low-key approach has worked pretty well so far. CEO Duke Chung, who co-founded Parature in 2000, attributes the company’s success to a spirit of “customers first.” As opposed to the “marketing hype first” philosophy that seems to dominate the software industry.

Parature now supports 3,000 portals for 755 customers with 13 million end users. Although most customers would be classified as SMBs (under $500M in annual sales), you’ll find Parature being used in divisions or departments of large enterprises, too.

After launching out of college dorm room with a simple chat solution, Parature now offers a robust and cost-effective CSS solution that also includes incident management, a knowledgebase and community/forums. And there’s more coming. At the recent ParaFest user’s conference in Las Vegas, Chung announced that the Spring ’09 release will include:

• New feedback module to measure and track customer sentiment
• Revamped multi-session chat that leverages queues, routing and prioritization
• New mobile portal support for the iPhone
• New Twitter integration to monitor the twitterverse

When RightNow went public and started moving up-market a few years ago, I thought that it would open up opportunities for more SMB-focused vendors; it’s very difficult for any company to serve small, medium and large customers equally well. Now it’s clear that Parature has seized that opportunity.

I asked Chung if Parature was planning to move the company up-market and/or expand the product line beyond customer service. For now, he says they’ll stay focused mainly on the SMB market and stick to customer service. Chung points out that the SMB opportunity is huge—in the US alone there are 700,000 enterprises with less than $500M in annual revenues, and 80% have no formal customer service solution.

He also says that Parature competes very well with Salesforce.com due to better CSS functionality, and with RightNow with a more SMB-focused and affordable solution. Some of the customers attending the user conference told me much the same thing. One customer said they tried Salesforce.com but found it difficult to use for customer service applications. RightNow was evaluated, too, but it seemed more engineered and priced for large enterprises.

In my view, Parature probably competes more directly with SMB-focused vendors like Fuze or Numara.

Chung says they have had 27 consecutive quarters of growth since 2002, with plenty of cash in the bank due to a $16M “B” round of funding (led by Accel Partners) in 2008. That should tide them over until they reach cash flow break even in the next year or so, according to VP of Marketing Gary McNeil. Some of the money will be invested to expand internationally: a new office in the UK was recently opened.

Although Parature may have been a “best kept secret” the past few years, those days are over. It certainly looks like the company has the strategy, solutions and resources to become an industry leader in CSS solutions for SMBs.