Former Vantive CEO sees return to 'positive cycle' of early '90s

John Luongo is back in the game. After pursuing a second undergraduate degree and spending some quality time with his family, the 26th employee at Oracle Corp. and the former president and CEO of Vantive Corp. (before it was sold to PeopleSoft Inc.) recently joined Menlo Park, Calif.-based Lightspeed Venture Partners. SearchCRM.com asked the one-time CRM insider where the market is going.

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Do you see any candidates out there for consolidation? There's been a lot of talk about that. A lot of the motivation for companies to be acquired has existed because of the drying up of the IPO equity market. I think you'll begin to see that change in 2004. As companies begin to have alternatives other than to be acquired, more and more will go through the IPO route. I think the acquisitions have been there because that's the only...

liquidity option companies have had.

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Article: PeopleSoft tries to bring Vantive users on board

What are some of the things that surprised you about the evolution of CRM?
There's one thing I wouldn't say surprised me. It's something I anticipated, but it happened a little faster than I expected. That's the full and complex sales force automation system. I saw that at the end of the time I was at Vantive. It was a really complex system that really seemed not to be working -- not from a technical point of view but more from an organizational management point of view. For example, probably the biggest transition at Siebel was watching the change in SFA toward more of the full CRM system. SFA systems just don't seem to be working, and I think that's being recognized more and more. What are your thoughts on the rise of hosted applications?
I think that's something that's going to be pretty specialty based. There has to be an application reason for hosting an application, rather than this ... broad trend. I don't think anyone's really reached broad traction there. I've always thought that's been sort of a confused model. Are you doing hosted applications because you're trying to provide an alternate financing model for your customer? Are you doing it so they don't have to deal with their IT organization? Or is there some underlying reason for going in that direction?

I think the great value of that emerged toward the end of the '90s. The wave of the future, the utility approach toward computing, is not going to continue. What you're really going to see is there are certain kinds of applications that need to be hosted just in their nature. That's where I think you'll see the greatest traction. As a general alternative to in-house computing, I don't think it's going to continue. What's in store for CRM in the year ahead, from a spending, trends and new-development standpoint?
I really haven't followed the space all that carefully, but I think that a lot is going to change in the next 18 months, because we're finally coming out of the recession that IT has seen in general. I think that's probably stagnated CRM more than anything else. At Lightspeed, we're investing in early-stage companies. I think you're going to see the whole positive cycle that existed in the early '90s come back in. I don't really sense that there's going to be a lot of dramatic, radical changes in the CRM market.

Certainly, for the last three or four years or so, [CRM] has been dominated by the large companies and, typically, they're not innovators. I don't expect or anticipate anything revolutionary. I think you're going to see more things coming along in terms of integrating applications and building on top of the infrastructure that's out there. What kind of applications will be hosted then?
One company is doing IP geographic locations. They can look at an IP address and they can look at their own databases and see where that IP address is coming from geographically. They're continually updating in real time a very massive database and so, via its very nature, this is not a database you want to replicate at every site. A hosted application like this makes a lot of sense.

That's the kind of thing you're going to see with hosted. The very first industry I was involved in was the time-sharing industry in the '70s, and hosting applications are kind of the reinvention of time sharing. I think it's going to end there the same way time sharing ended in the '70s. Economically, the value of hosting is up front. It's in the early stages of getting an application up and running. Over time, the economics starts to swing back into in-house. So, if somebody has a model that requires selling hosted apps that are going to remain hosted over a long period of time, the economics are going to work against them. What are you hearing from former Vantive customers about their experiences with PeopleSoft?
As far as I can tell, the people I've talked to are very satisfied with the transition. PeopleSoft did an excellent job supporting the systems and maintaining the systems that they had. The new implementations, the new versions that have come out [during] the last year have been well received. Vantive customers landed safely in that transition, and they're doing quite well now. So you're not a fan of Siebel's recent foray into this market?
It may make sense for them, but I don't think it's going to be really revolutionary. I don't think it's going to replace the in-house application. I think that's going to continue to dominate for the foreseeable future.

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