As the large-enterprise CRM space has consolidated to the Big Two (Oracle and SAP, how boring), the SMB market has been a fragmented, muddled mess.
CDC Software, Consona, and FrontRange would like to change that.
Years ago, the top three vendors of SMB-focused CRM solutions were Onyx, Pivotal, and SalesLogix. And for small businesses primarily looking for contact management and light sales automation: ACT! and GoldMine.
Now SMB leaders are emerging, with Microsoft and Sage at the top of the pecking order. Microsoft on the strength of its global brand, distribution, and a much improved CRM Version 3. Sage by acquiring ACT!, SalesLogix, and AccPac CRM, then executing a great partner program. Both have challenges, but I think they’ll be leading the SMB space for years to come.
But the No. 3 spot is wide open.
The so-called SMB (Small-Medium Business) market is generally considered to be companies with less than 1,000 employees. But there’s a world of difference between companies with 8 and 800 people. So you can find lots of companies competing for different market niches and not running into each other very often.
I recently caught up with Michael McCloskey, CEO of FrontRange, who has done a remarkable job turning around a company that was down and almost out.
GoldMine was a jewel of the industry in the late 1990s. Many ACT! users upgraded to Goldmine for more function and a better design. But then, in 2000 GoldMine was sold to FrontRange, a South African holding company. Over the next few years, the company slipped into a decline, and I expected it to die or get sold off to a consolidator.
Not so fast, said Michael McCloskey, who stepped in as CEO in 2003. At the time, he says, the company was burning cash but going nowhere. McCloskey said the company was only worth about $25 million and was “fairly broken” in product development, management and sales. Employees were dispirited.
McCloskey embarked on an ambitious program to retool products, upgrade management and re-energize the workforce. He took the company private in 2005 (Francisco Partners) and shareholders cashed in to the tune of $200 million. More recently, after the acquisition of PC lifecycle management vendor Enteo, McCloskey says FrontRange is at a $140 million per year run rate with strong profit margins. Next step, a US-based IPO.
Now for the hard part. Keeping it going.
FrontRange’s most direct competitors are Microsoft CRM and Sage, and they’ve hardly been standing still. On-demand solutions (e.g. from Entellium, Salesforce.com and others) are becoming increasingly popular with small businesses, and commercial open source solutions, such as offered by SugarCRM, are growing too.
But FrontRange seems prepared now to hold its own in the lower end of the SMB space, and may have some success moving up-market with a new GoldMine Enterprise offering.
I think the biggest challenge will be polishing the FrontRange brand after a few years of neglect, and convincing enterprise buyers that it’s an appropriate solution. Given what McCloskey has already accomplished, I wouldn’t bet against him.
Next time, I’ll discuss what’s happening at CDC Software and Consona, both of which are using a roll-up strategy to build a critical mass. In the meantime, add your comments below about FrontRange and other vendors that you think will contend for SMB market leadership.