2Q2007 was a quarter of mixed, but mostly strong, results among the suppliers of cross-channel, cross-lifecycle customer service products. After a seasonally slow first quarter, most of the suppliers we cover rebounded to record very good to excellent second quarters. Two produced flat results, continuing the soft performance that began the year.

Overall, second quarter was strong across customer growth, products, and company performance. For example, InQuira produced record financial performance. InStranet grabbed a foothold in two new market segments. eGain signed more major deals than in the previous three quarters combined. ATG and RightNow each introduced significant products.

Momentum is building in this space. We feel that growth will continue as companies introduce new products and customer adoption continues to broaden.

CROSS-CHANNEL, CROSS-LIFECYCLE CUSTOMER SERVICE: 1Q2007

Product and Company Viability Factors

This report is the tenth of our quarterly update reports on the products and companies in our practice on cross-channel, cross-lifecycle customer support.

These updates focus on the current state of product and company viability factors, factors that are important in your evaluation, comparison, and selection of customer service products. We examine customer growth, product activity, and company performance. We also examine key product and company events. We want to see continuing improvements in products, and we want to see continuing company growth of the suppliers. We don’t want to change our evaluation based on a quarter’s news, but we do want to raise a red flag when that news deviates from a positive trend, or to wave a green flag when that news is particularly good. For key product and company events, we identify those occurrences that could have a significant impact on cross-channel, cross-lifecycle customer service technologies, applications, and the market landscape.

Note that we also offer a large body of research evaluating and comparing the products against a framework of customer requirements. If you need to or want to know our take on how the products stack up against each other and/or against your requirements, take a look at our research on http://www.psgroup.com/research_cccsv.aspx.

Widely Varied Results in 2Q2007

While 1Q2007 was a seasonally soft quarter for all of the customer service suppliers that we cover, we can’t make a general statement about performance in 2Q2007.

From a customer growth perspective, ATG, eGain, InQuira, and InStranet all had very good to excellent quarters in customer acquisition. RightNow did okay. KANA and KNOVA did not.

From a product perspective, ATG and RightNow made significant product announcements. ATG Commerce Service Center delivers all the functionality of ATG Commerce, including account management and order management capabilities, to assisted-service channels, enabling cross-channel ecommerce. RightNow Federal Government, RightNow Retail, and RightNow Telecom are industry-specific implementations of RightNow 8 CRM. They simplify and speed implementation.

Company performance followed customer growth with eGain, InQuira, and InStranet leading the way. ATG and RightNow had good financial performance, too, but both, along with eGain and KANA, are working their way through a shift to subscription licensing. So their “numbers” don’t exactly reflect their business performance.

The Continuing Impact of SaaS

On the topic of subscription licenses, as a company moves from perpetual licensing, where customers pay a relatively large, one-time licensing fee, to SaaS where customers pay a relatively small, monthly subscription fee, financial performance slips in the short-term before it shows improvements in the long-term. Revenue and license revenue aren’t boosted by today’s big perpetual license fee payments. Net income takes a hit, too, as companies’ cost bases remain steady. Long-term, companies have consistent, predictable revenue streams that grow in proportion to customer growth. They can adjust their cost bases to produce profits.

SaaS is also very good for customers. Small, monthly software fees are easier to justify than those seven-figure perpetual license fees. SaaS licensing, especially SaaS licensing with hosted implementation, also gives customers freedom. They don’t get as invested in a product and in pervasive implementations. Suppliers have to continue to earn their customers ’ business.

2Q2007 Performance

In Table A, we summarize the 2Q2007 performance of the cross-channel, cross-lifecycle customer service suppliers that we track. Results shown are relative to 1Q2007.

Summary of 2Q2007 Results in Customer Service
(Please download the formatted PDF to see the table at http://www.psgroup.com/detail.aspx?ID=841.)
Table A. 2Q2007 results of the leading suppliers of cross-channel, cross-lifecycle customer service are summarized in this table.

Suppliers and Products

Just a reminder, we offer up-to-date research on these leading cross-channel, cross-lifecycle product offerings and their suppliers:

A Good 2Q2007

ATG had a good 2Q2007. Customer acquisition picked up a little. Two significant products were introduced. Considering the shift toward subscription licensing of its products, financial performance was decent, too.

Customer Accounts

ATG acquired 51 new customer accounts in 2Q2007, up from 44 acquired last quarter. On a base of approximately 850 customer accounts, quarterly customer acquisition growth is very strong. Note that customer growth combines new accounts for ATG’s ecommerce and customer service products as well as the for the click-to-chat and click-to-call offerings of ATG’s eStara business unit.

ATG also sold additional products to 27 existing customer accounts. Touching 78 of 850 customer accounts in a quarter is good overall customer growth.

Products

ATG made these two product announcements in 2Q2007:

On June 27, 2007, ATG introduced advanced affinity selling capabilities for its ATG Commerce ecommerce application. These capabilities let merchants automate and personalize cross-sell and up-sell recommendations using several factors including not only the conventional purchase history and shopping cart contents but also customer segment, customer profile attributes, and channel preferences.

On June 12, 2007 ATG introduced ATG Commerce Service Center (ATG CSC), an application suite that essentially delivers the capabilities of the ATG Commerce ecommerce application through assisted service channels. With ATG CSC, your agents can use the same catalog, promotions, coupons, cross-sells, up-sells, and customer information that your customers use with ATG Commerce.
Advanced affinity selling combines personalization of the ATG Wisdom platform with the merchandising capabilities of ATG Commerce. The two fit together quite naturally. On one hand, they let you include the ecommerce context within your merchandising approach. On the other hand, they let you make personalized offers. Either way, they add up to a better customer experience.

ATG CSC is a very important application. We love it. It’s about time that one of the ecommerce suppliers delivered an ecommerce application for the contact center. Seemed for years like an obvious requirement to us. Props to ATG. Make it easy for your agents to make it easy for your customers to do business with you. Together, ATG Commerce and ATG CSC deliver cross-channel ecommerce. Brilliant!

Going forward into 3Q2007, on July 17, 2007, ATG announced advanced searchandising capabilities for its ATG Commerce and ATG CSC applications. Searchandising combines personalization, merchandising, and search, It lets customers, or agents acting on customers’ behalves, search for products that they’d like to learn about and purchase and lets merchants cross-sell, up-sell, and make promotional offers within search results. ATG’s offering leverages the personalization capabilities of the ATG Wisdom platform, the merchandising capabilities of ATG Commerce and ATG CSC, and the search capabilities of ATG Search as well as the new advanced affinity selling capabilities of ATG affinity selling that we described above. These are useful capabilities for you and your customers. Searchandising helps your deliver a better customer experience to customers who prefer to search for products rather than browse your product catalog. With ATG CSC, you can deliver cross-channel searchandising.