There's been a large recent influx of new capital going into EFM vendors, either through private equity, or merger and sometimes by both merger and additional equity. So, I thought I'd revisit my thinking on the consolidation occurring in EFM.
All technology markets undergo consolidation over time. Normally, it occurs as the technology itself (whatever it is) grows and vendors adapt to that growth. This has been steadily happening in the EFM space.
A few months ago I wrote about this in a post titled: "More Consolidation in the EFM space." It outlined the merger and acquisition activity going on with EFM. The discussion was about the business consolidations by Verint (Vovici), ConfirmIT (CustomerSat), SurveyMonkey (CustomerSat and ClickTools) and others, including QuestBack. The post is available here:
At the time, I had three thoughts about the merger activity.....
"Thought #1. The EFM space is getting crowded at the top end of the market. Gartner, Forrester, Aberdeen and others have been beating the drum for Enterprise Feedback Management for a long time, at least five years by my count. Since most of the EFM vendors focus their efforts on selling to "Enterprise" class customers, as time has passed more of them have adopted solutions, leaving less growth available to the rest of the players. Hence, acquisitions of high-end products."
Clearly, the EFM space remains quite competitive at the top end of the market. So much so in fact that EFM vendors are competing with market research consultants, who sit at the top echelon of the market and act as strategic vendors to large businesses. ConfirmIT / CustomerSat and even QuestBack / Global Park seem to be pushing into the project space of traditional market research consultants. Market research consulting firms are reacting by acquiring EFM technology vendors. The Empathica / Mindshare and Maritz / Allegiance mergers look like this kind of combination to me.
I'm not sure how this will play out. Consulting firms typically purport to be "tool agnostic". It may be that these particular companies have vested interests in the survival of Mindshare and Allegiance, having brought those products to customers as part of solutions. If that were the case, it argues against the standalone market effectiveness of those products going forward. Alternatively, it could be that the consultants find a strategic advantage to owning their own EFM products. Potentially they've even acquired significant projects or new customers as a result. From the outside there's really no way to tell.
To me though, when I see technology solutions that require large amounts of consulting support to enable success, the benefits of the solution need to be correspondingly large, usually this means enterprise scale. Ultimately, I think that means the enterprise software guys will be sniffing around at EFM companies too.
"Thought #2. Serving the small and mid-tier customer segments normally requires that companies have either scale or distribution in order to effectively market. SurveyMonkey has scale, QuestBack has distribution (I'm a QB reseller), Vovici has partnerships (Oracle in particular) and ConfirmIt now has scale at the high end of the market."
Since publishing my earlier comments there've been changes at these companies. SurveyMonkey, QuestBack and ConfirmIt have all become more potent competitors via organic growth and acquistions. What's really new is that Qualtrics and Satmetrix have joined the ranks of larger players in the market. The common theme among all these firms is that they now all have scale, breadth of market access and technology competency. It's a good bet that all of them will continue to grow. Some may become targets themselves for the software giants out there looking to acquire saas businesses in the EFM / CXM space.
Thought #3. Many of the smaller players in the EFM market have neither scale nor distribution. They have to rely on organic growth while competing with larger, better funded and more effectively structured companies. It is among this group of companies that I expect to see further consolidations. Some companies on the list: Qualtrics, Medallia, Satmetrix, Allegiance, SNAP surveys and KeySurveys. These firms serve Enterprise customers or mid-tier customers using a direct sales or assisted direct sales model. They could all use more scale, more distribution or both.
Not much new here except that the list is smaller. Some companies have moved up and others have been acquired. The rest, in my opinion, will be bought out or will just continue muddling along.
So what's next for EFM?
I see EFM being subsumed into the Customer Experience Management (CXM) space. Businesses today realize that feedback comes to them via multiple channels and in different forms. CXM has been about finding ways to collect and integrate that largely unstructured feedback with standard and more structured feedback processes. The goal being to produce a coherent view of customer perceptions, issues, advocacy and angst as it relates to products and processes. The point is that EFM / CXM's value proposition has moved largely to back-end analyses and visualizations which document insights and facilitate actions that improve customer experience.
All technology markets undergo consolidation over time. Normally, it occurs as the technology itself (whatever it is) grows and vendors adapt to that growth. This has been steadily happening in the EFM space.
A few months ago I wrote about this in a post titled: "More Consolidation in the EFM space." It outlined the merger and acquisition activity going on with EFM. The discussion was about the business consolidations by Verint (Vovici), ConfirmIT (CustomerSat), SurveyMonkey (CustomerSat and ClickTools) and others, including QuestBack. The post is available here:
At the time, I had three thoughts about the merger activity.....
"Thought #1. The EFM space is getting crowded at the top end of the market. Gartner, Forrester, Aberdeen and others have been beating the drum for Enterprise Feedback Management for a long time, at least five years by my count. Since most of the EFM vendors focus their efforts on selling to "Enterprise" class customers, as time has passed more of them have adopted solutions, leaving less growth available to the rest of the players. Hence, acquisitions of high-end products."
Clearly, the EFM space remains quite competitive at the top end of the market. So much so in fact that EFM vendors are competing with market research consultants, who sit at the top echelon of the market and act as strategic vendors to large businesses. ConfirmIT / CustomerSat and even QuestBack / Global Park seem to be pushing into the project space of traditional market research consultants. Market research consulting firms are reacting by acquiring EFM technology vendors. The Empathica / Mindshare and Maritz / Allegiance mergers look like this kind of combination to me.
I'm not sure how this will play out. Consulting firms typically purport to be "tool agnostic". It may be that these particular companies have vested interests in the survival of Mindshare and Allegiance, having brought those products to customers as part of solutions. If that were the case, it argues against the standalone market effectiveness of those products going forward. Alternatively, it could be that the consultants find a strategic advantage to owning their own EFM products. Potentially they've even acquired significant projects or new customers as a result. From the outside there's really no way to tell.
To me though, when I see technology solutions that require large amounts of consulting support to enable success, the benefits of the solution need to be correspondingly large, usually this means enterprise scale. Ultimately, I think that means the enterprise software guys will be sniffing around at EFM companies too.
"Thought #2. Serving the small and mid-tier customer segments normally requires that companies have either scale or distribution in order to effectively market. SurveyMonkey has scale, QuestBack has distribution (I'm a QB reseller), Vovici has partnerships (Oracle in particular) and ConfirmIt now has scale at the high end of the market."
Since publishing my earlier comments there've been changes at these companies. SurveyMonkey, QuestBack and ConfirmIt have all become more potent competitors via organic growth and acquistions. What's really new is that Qualtrics and Satmetrix have joined the ranks of larger players in the market. The common theme among all these firms is that they now all have scale, breadth of market access and technology competency. It's a good bet that all of them will continue to grow. Some may become targets themselves for the software giants out there looking to acquire saas businesses in the EFM / CXM space.
Thought #3. Many of the smaller players in the EFM market have neither scale nor distribution. They have to rely on organic growth while competing with larger, better funded and more effectively structured companies. It is among this group of companies that I expect to see further consolidations. Some companies on the list: Qualtrics, Medallia, Satmetrix, Allegiance, SNAP surveys and KeySurveys. These firms serve Enterprise customers or mid-tier customers using a direct sales or assisted direct sales model. They could all use more scale, more distribution or both.
Not much new here except that the list is smaller. Some companies have moved up and others have been acquired. The rest, in my opinion, will be bought out or will just continue muddling along.
So what's next for EFM?
I see EFM being subsumed into the Customer Experience Management (CXM) space. Businesses today realize that feedback comes to them via multiple channels and in different forms. CXM has been about finding ways to collect and integrate that largely unstructured feedback with standard and more structured feedback processes. The goal being to produce a coherent view of customer perceptions, issues, advocacy and angst as it relates to products and processes. The point is that EFM / CXM's value proposition has moved largely to back-end analyses and visualizations which document insights and facilitate actions that improve customer experience.
