CRM vendor Kana drops hosted offering
 
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Kana Communications is pulling the plug on its Kana Online service, a decision that will affect the more than 40 customers of the hosted e-mail management and marketing service, the company says.
In addition, former Oracle executive Brett White will become chief financial officer of Kana once its merger with Broadbase Software is complete, the companies announced Thursday.
A player in the customer relationship management (CRM) field, Kana makes Web-based tools for customer service, marketing and sales. Kana launched KOL to host two of the company's products: Kana Response, for managing customer e-mail inquiries, and Kana Connect, a direct marketing tool.
Michael Bettua, vice president of marketing, says Kana made the decision in April to stop hosting and concentrate on its core business - namely, selling and supporting software licenses for companies to deploy the software on their own premises.
"Hosting is better done by people who focus on it," Bettua says. "It's a totally different type of business that requires totally different people skills and totally different IT infrastructure" from traditional software sales.
Kana began notifying its KOL customers in late April that service is being discontinued and will cease by the end of June, Bettua says. The company is offering customers a promotional rate to move Kana's software in-house. Alternatively, Kana is referring KOL customers to its application service provider partners, including eSupportNow of Boston.
J.Crew has been using Kana's hosted service since November 2000 to handle e-mail correspondence with its customers in Japan. The double-bit character set required for Japanese text adds complexity, which is one reason J.Crew opted to have Kana host that portion of its e-mail communications, says David Towers, vice president of e-commerce operations for J.Crew.
"Losing Kana's hosted service was an issue for us," Towers says. But Kana's decision to discontinue Kana Online hasn't diminished his faith in the vendor. "We still feel they have the best e-mail management software on the market, and we intend to stick with them," Towers says. The retailer manages its English customer e-mail traffic in-house, using Kana Response software, and has since 1999. Towers declined to say how J.Crew intends to handle its Japanese e-mail in the future.
Bettua says the vast majority of Kana's 850 customers have deployed its software in-house. Mary Wardley, director of IDC's CRM applications research, says Kana's situation is pretty common. "Among the companies that offer both license and hosting options for their CRM software, most customers go for the licensing option," she says. "The reasoning is that this is very sensitive information to be outside the firm."
Bettua acknowledges that killing KOL "helps us lower our costs and gets us more fiscally secure." Amid earnings warnings, growing losses and missed revenues that have plagued Kana - and many other CRM vendors - this year, Kana has made other moves to gain fiscal security as well. In February, the company let go 220, or 20%, of its staff. Then in April, Kana cut another 300 employees at the time it announced plans to merge with Broadbase, which makes analytic applications and marketing automation tools.
Both companies have been working to beef up their CRM offerings, largely through acquisitions. In the last 18 months Kana has acquired Silknet Software, Business Evolution, netDialog and Connectify, while Broadbase has acquired Rubric, Aperio, Panopticon, Decisionism and Servicesoft. Meanwhile, both vendors have seen their stock prices plummet, Kana's from a high of $175.50 in March 2000 to an April 2001 low of 50 cents, and Broadbase's from a from a split-adjusted high of $82 in March 2000 to an April 2001 low of 53 cents. Both are now hovering in the $2 range.
The merged company is putting its financial future in new CFO White's hands. He will join Broadbase as chief financial officer until the merger closes, at which time he will become chief financial officer of the combined company, to be called Kana. White is a former vice president of finance for Oracle and was most recently managing executive vice president at MarchFirst.
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