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NICE Systems last week announced an agreement to acquire Merced Systems, a provider of business applications for customer service and sales organizations. This acquisition slipped by with little fanfare, but it marks a significant milestone for NICE, a major provider of applications and technology for call centers and a player in their evolution into multichannel contact centers. Building on a good 2010, as my colleague Richard Snow noted, NICE expects to reach almost $800 million of revenue in 2011, which would make it one of the largest companies in its segment. NICE has made multiple acquisitions to build its software portfolio, including purchases of Actimize, CyberTech, eGlue and others mentioned below. It recently won our 2011 Ventana Research Leadership Award in the contact center category with its customer deployment at Alliance Data. NICE Systems plans to have Merced Systems as a foundation of its enterprise systems and a complement to its contact center workforce optimization offering. This purchase builds on its other acquisitions, including FizzBack recently and IEX and Performix in 2006, which helped NICE establish its customer service and back office agent performance management software. That area has not grown as quickly as NICE would like, mostly due to marketing that was not aggressive enough in attracting customers. NICE recently rebranded its NICE SmartCenter for helping agents, as Richard noted, and is leveraging its assets into the back office, which he also assessed. Our benchmark research on contact center technology found that companies’ priorities for future investments match up well with NICE Systems’ focuses on expanding customer service agent applications and analytics applications.

Merced Systems brings to the deal a strong foundation based on analytics and metrics: areas we have benchmarked in the contact center and sales among others. While software for customer service and contact centers motivated this acquisition, NICE Systems plans to expand into sales organizations through Merced’s sales performance management. In agent performance management NICE and eight competitors all have comparable ratings in our Value Index for Agent Performance Management. NICE is rated near the top, but it has struggled in its marketing and sales. This is part of why it needs to retain Merced’s team to continue its market momentum. On the sales side, with a smaller number of dedicated providers, Merced ranked in the middle of the Value Index for Sales Performance Management but is part of a significantly larger organization worldwide with access to a large number of organizations using NICE.

Customers of Merced Systems should look for affirmation that NICE Systems will include their needs in its product roadmap before they make further purchases and deployments. They should look for continued operations of Merced as an entity and availability of its applications. Potential purchasers should restrain themselves to ensure the Merced products they are examining are part of the future NICE enterprise portfolio as the company evolves its application architecture. Existing NICE customers will find a new portfolio in agent performance management and sales performance management, which appear to put NICE’s existing performance management applications at risk or position them to receive lower priority. On another front it will be interesting to see if NICE will continue distributing Merced Systems’ new analytics offering built on an OEM of MicroStrategy, with which the company has built applications that also operate on smartphones and tablets.

NICE Systems made a wise investment in acquiring Merced Systems, especially at the price it paid (approximately $150 million and $20 million in cash), considering the company’s profitability, growth, products and customer success. Now NICE must retain Merced’s key people and grow its investment in the newly acquired company. NICE can extend its current reach to grow its business significantly, pending effective investments in marketing and sales. 

Regards,

Mark Smith – CEO & Chief Research Officer

Salesforce.com’s 2011 Dreamforce conference is under way. If you’re in sales and you use the company’s application, here’s how to gain the most value from your time at the conference. 

Today, For background, we need to note that Salesforce.com is not as focused on the sales force as it once was years ago, now concentrating more on application development, collaboration, mobility, database and cloud computing advancements to address the needs of IT who is readily engaging into this method of software usage. All of these are useful underlying capabilities that a sales force might use, but they are not aligned with the critical sales activities and processes. If you use Salesforce.com for sales force automation (SFA) in managing accounts, contacts and opportunities, we advise you to link it to a larger management and operational process that we call sales performance management and now are doing some new research. Our ongoing research into this topic shows that sales organizations require a portfolio of applications to support this process, but that two-thirds of organizations are not satisfied that SFA is meeting their needs. 

Salesforce.com does have a framework for sales called the Sales Cloud that addresses sales representatives’ basic needs in managing accounts and contacts, entering opportunities and quotes, working through approvals and workflow along with analytics. The company will be introducing some new capabilities, including basic sales forecasting, but that will not match the current class of sales forecasting available from its partners such as Cloud9 that I just assessed. Salesforce does deliver auxiliary collaboration with Chatter, email and calendaring and the ability to augment its contacts in an account with its purchase of Jigsaw. It has been steadily advancing its capabilities for mobile technologies including smartphones and tablets. It also recently released its Account Viewer, an iPad app that lets managers and account sales teams access account and related information as part of a review or visit. 

It’s a good thing Salesforce isn’t standing still, because Oracle and SAP are entering this market with cloud and mobile-based SFA offerings. My analyses of Oracle and SAP found they have covered the basics of SFA and provide more functionality for sales managers and management, which should provide new competition for Salesforce.com. Microsoft is rapidly becoming competitive with its new offerings and move into cloud computing. 

Dreamforce has grown so big that picking out what matters for sales professionals is not easy. There is much focus on cloud computing, collaboration, mobility, analytics and social media at the conference, and these are important topics that we have outlined as the business technology innovations of the decade. The secret behind Salesforce.com’s strategy is its enterprise software in the cloud, and the diatribes on technology-related advancements in cloud computing will be overwhelming.  

Still you need to determine what applications fit best for your sales organization. At Dreamforce you will find a number of sessions that are valuable for sales operations and management staffs. I am looking forward to “LinkedIn for Salesforce: Close Deals Faster with Insights for Your Pipeline” and “Mobile Crash-Course for Busy Sales Executives.” “iPad Revolution: How Going Mobile Will Transform and Boost Sales Efficiency” will get you thinking about the use of mobile technology for your sales organization. I also suggest “Social Selling: Rising Above the Noise to Drive Sales Performance” and “The Future of Comp (Hint: It is not Excel).” If you are trying to see whether Salesforce will go beyond the basic projections of opportunity records and align to the forecasting process, stop into “Forecasting Best Practices and a Sneak Peak at the NEW Forecasting Application.” I would also not miss “Sales Cloud Roadmap: A Sneak Peak into the Future” to see if Salesforce will advance further into sales performance management, and “Roadmap Sneak Peak: The Future of Analytics in Salesforce” to see what the company plans to do about sales analytics, which our benchmark research shows needs serious improvement from the wide use of spreadsheets and generic reporting and dashboards.  

At the Dreamforce expo you can find a wide range of dedicated sales applications, some of which are more likely than others to be worth your time, but the show floor will be chaotic and there is no “sales cloud” area on the show floor. The quick guide below starts with sales-related vendors who have the smallest booths, and works up to those with higher sponsorship levels and investments. 

At the Bronze level, see what Merced Systems is offering in Sales Performance Management 4.0, which I recently assessed. Stop by Qvidian, which has been advancing the art of sales playbooks and proposals in applications, as I just assessed; it could be one of the gems of the show for sales. If you are trying to improve the science of territory and quota optimization, stop by TerrAlign to see how the largest and most complex sales forces optimize their sales organizations. Zyme, which my colleague Robert Kugel recently assessed, helps you gain control of your channel through data integrity. If you care about pricing and profitability, see Vendavo and Zilliant, both of which have been helping B2B organizations for years. 

At the Silver level, ChannelInsight provides applications to help manage channels sales, a critical area of focus for many who depend on distribution and reseller channels. Also Varicent, from our analysis is one of the fastest-growing providers of sales performance management specializing in sales compensation and incentives, along with quotas and territories and sales analytics. 

At the Gold level, Callidus Software is a long-time provider of applications for sales management and operations, and was rated a Hot Vendor in our Value Index for Sales Performance Management. It has been integrating talent management into its sales portfolio through acquisitions that started with that of ForceLogix in 2010. If you care about configuration, pricing and quoting in your sales organization to maximize margins and pricing more immediately, stop by Camelon Software. Cloud9 has just expanded to provide intelligent sales forecasting to complement its pipeline management, as I just assessed. Xactly is showing its rapidly growing suite of sales performance management; we rated the company a Hot Vendor, and it provides a range of applications for the sales organization. My latest analysis of Xactly shows significant growth of capabilities in its 7.1 release. 

At the Titanium level, if you are looking to arm your inside sales and accounts teams with maturing leads that might be ripe enough to sell to, you will find Marketo has expanded its footprint to provide a sales application called Marketo Sales Insight that is worth checking out. 

There will be a lot to cover for sales professionals. I will be busy assessing the latest from Salesforce.com and dozens of its partners as part of my preparation for the 2011 Value Index for Sales Performance Management. Our 2010 version indicated that Salesforce still has a way to go to reach Hot Vendor status. We are also busy with our latest benchmark research in sales to determine your priorities for more efficient sales processes from management to operations to sales teams, all aimed at gaining the best possible outcomes.  

Dreamforce should be a good event for those in sales teams. Make sure to network with your peers in the sessions, as the rest of the event will be chaotic, with attendance well beyond even Salesforce.com’s expectations. I too will be looking to see how I can get the best return on my Salesforce.com investment that we use for SFA, and whether our firm should continue using it. If you are in sales and want to track me down and catch up, find me on Twitter at @marksmithvr, and we can talk about providing you with ways to get inexpensive access to our research and consultations.  

Regards, 

Mark Smith – CEO & Chief Research Officer

Mark Smith – Twitter

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