Emerging players helped these companies reach out to customers with technology that their marketing departments use to dig through valuable data and communicate efficiently over the Web.
When Honeywell International Inc., a US$25 billion technology and manufacturing company in Morristown, N.J., drastically cut back on travel spending last year, even sales and marketing trips were curtailed. One Honeywell group in South Bend, Ind., feared that the cutback would jeopardize its work with a prospective customer in England.
But with the help of browser-based Web meeting services from start-up PlaceWare Inc. in Mountain View, Calif., Honeywell was able to meet with the customer virtually, share information daily and win the contract. Since then, the technology has saved Honeywell hundreds of thousands of dollars in travel expenses, and it's now being used for meetings and online learning.
These days, it's hard to beat technology that saves the company money. For marketing departments, that means finding software that helps companies stretch their Web investments. Many companies also want software that can perform customer analysis, guided selling and product configuration to get more out of what they've already spent. And it also means opening the lines of communication between marketing and IT departments to clearly convey expectations and technical realities.
Start-ups are a viable option because they offer niche expertise, personalized attention and lower prices, compared with established players. Here's some advice on the risks and rewards of betting on the newcomers.
Have a Contingency Plan You Could Finish on Your OwnCrossmark Holdings Inc., a consumer packaged goods services and marketing company in Plano, Texas, wanted software that could bridge the separation among its thousands of customer contacts by cross-referencing relationships and affiliations. But speed was a problem.
The marketing department was intrigued by start-up NeoCore Inc. The Colorado Springs-based company has developed an XML database management system that eliminates physical database design and can store and index XML data on the fly. But the IT department was less enthusiastic. The idea of not designing a complete database upfront that would encompass all of its potential uses attacked the fundamental beliefs held in IT, recalls John Thompson, president of Crossmark's performance group.
"Developers say, 'Let's think about all the ways this is going to go, so we can build this in.' In this case, you don't have to do that," he says.
As NeoCore's first client, Crossmark initially struggled with implementation because "you don't know what you don't know," Thompson says. But after a year of work, NeoCore's system is up and running, and Crossmark has just upgraded to Version 2.
The firm has worked with emerging companies before and has taken measures to protect itself. For instance, Crossmark stipulates that if the start-up fails, it keeps the software, license and source code. "We felt confident enough that we could keep the engine running" whether NeoCore survived or not, Thompson says.
Find a Partner That Understands Your ObjectiveMurray Hill, N.J.-based Dun & Bradstreet Inc.'s Zapdata division sells business leads and information to other companies, serving about 6,000 to 7,000 registered users each month. Four years ago, the division developed its own application for sending automatic responses via mail and fax to customers, based on their inquiries. But when Internet services were added in 1999, the old system wouldn't scale.
"We wanted to support a bigger program without adding resources," says Tom Gaither, vice president of customer marketing at Dunn & Bradstreet. He also wanted to work with a company that had "thought this through as much as we had, but had the development organization to put a reliable product together."
After several weeks reviewing the players in this niche mostly newcomers Zapdata went with start-up Revenio Inc. in Burlington, Mass., because its application could handle multiple channels, including e-mail, fax, telesales and direct marketing, and could be installed in-house, not hosted. More important, "they made us comfortable that they understood the full potential of these applications. That ended up making the choice," Gaither says. A solid business plan and adequate funding were also part of the equation, he adds.
Gaither advises companies considering using a start-up's applications to feel comfortable with the leadership of the company, investigate all the options and know what you want. "You can do any company a disservice by not being clear," he says. In return, start-ups give extra attention to clients that understand their application's objectives and provide valuable feedback.
Since installing Revenio's software a year and a half ago, the number of registered Zapdata users who ultimately buy information has gone up 64 percent. But measuring return on investment from a start-up can be tricky. Observers say it's likely that a start-up will either change focus or be acquired between the time it's selected and the point when the customer sees benefits.
"We tell companies, 'If you're going to go with a small vendor, make sure you get payback in 12 to 18 months,' " says Erin Kinikin, a customer relationship management analyst at Giga Information Group Inc. in Cambridge, Mass. "That's how long you can count on that company surviving on their current funding and focusing on the problem you're trying to solve."
Take Low-Cost Risks That Won't Break the BankOther companies with less mission-critical marketing needs are turning to start-ups simply because they're less expensive than more established players.
Teradyne Inc., a $1.8 billion supplier of testing equipment for the electronics and telecommunications industries, was looking for an application for its customer-facing Web site that could provide product specifications, share drawings and access complex documentation and shipping status. The Boston-based company chose NetVendor Inc. in Atlanta because its application was tailored for the electronics industry. Michael Schmidt, IT manager at the Teradyne Connection Systems division, says the firm could have gone with a more established player, but cost was a big factor.
"With most of the other players, you're talking million-dollar investments," says Schmidt. "[NetVendor's cost] was low enough that if it turned out to be a mistake, we would chalk it up to learning about the technology and look at it in another two years." However, NetVendor's product has been working successfully at Teradyne since January.
Schmidt says not to expect a fully baked product from any start-up. Instead, it's important to understand the company's vision, he adds. Also, evaluate the people and understand the financing.
Though there are risks involved by going with a start-up over established players, Thompson says, a calculated risk could be worth it. "Companies migrate to newer technologies," he says. "Whether they're from new or old companies, there are no guarantees."
Collett is a freelance writer in Sterling, Va.
Bend Without Breaking
From a start-up's view, the temptation to snag a Fortune 500 client may be great. But what could bring a young company down is a customer that attempts to change a start-up's vision so drastically that it loses perspective.
"You've got to do your research and know what your site objectives are and how the objectives of a start-up fit in," says the business development vice president at a major news network, who asked not to be identified. "You're going to have the most respect for a company that says, 'That's not part of our mission' and just walks away."
The network was looking for a low-cost, multidimensional application that could measure how visitors at its Web sites use e-mail or print articles and pass them on to others who haven't used the sites. Measuring those additional eyeballs could mean more sponsorship opportunities and more ad dollars.
The marketing staff brought a list of players, both new and established, to the IT department, which evaluated the offerings. Together they chose Clickability Inc. in San Francisco for its low cost and extra attention.
"When you're a big site working with a start-up, they give you their best people to make sure they don't miss the opportunity," says the vice president. Because the product isn't mission-critical, the network was willing to take a chance on a newcomer. "If the product failed or there was a level of overpromising, we could put up a Band-Aid solution or just undeploy," he says.