Hastie says that as cash has gotten tight, CIOs are getting back to basics. "If you look at the amount of mega millions that CIOs poured into ERP systems, you have to wonder how much further could we have gotten from the true core applications that a company runs on," Hastie says. "And now that IT budgets are getting crunched, those core applications are becoming the focus again."

"We had gotten into a trend where companies were buying massive amounts of stuff, signing a contract for a five-year project, and buying it all up front," says Jim Shepherd, senior vice president of enterprise applications for Boston-based AMR Research. He notes that some CIOs are still paying upward of 15 percent a year in maintenance on licenses they will never be able to use.

"Today, people are buying in much smaller increments than ever before, and they’re not signing a contract for the entire suite of applications or buying up 50,000 seats," Shepherd adds. "Those kinds of projects are a thing of the past."

How to Avoid the Upgrade Headaches

When Rich Clow joined Deutsche Bank in New York City as vice president of eConsulting in June 2000, the financial services company had already decided to standardize on Siebel for CRM; it had invested $10 million on several implementations. So in late 2001 when Clow was looking for a tool that could analyze customer profitability, Siebel was first through the door with a new tool it had acquired from another company. But Deutsche Bank had implemented half a dozen different versions of Siebel CRM in various business units, and all of that software would have to be upgraded before Siebel’s new profitability analytics tool could be installed.

Instead, Clow and his team decided to invest more than $1 million in Alphablox, a privately held, 100-employee business intelligence application vendor based in Mountain View, Calif. Clow found that Alphablox offered a Web-based analytics system capable of connecting the data housed in the existing Siebel systems with the bank’s profit and loss data in a way that would allow employees to analyze each banking customer’s profitability. "We decided it was easier to use Alphablox than to integrate those different Siebel systems implementations," Clow says.

Clow believes that big CRM vendors are less than valuable to CIOs outside their core competencies (which in Siebel’s case, according to Clow, is sales-force automation), though the pressure is often there from the business side to stick with the same vendor. "From a business perspective, particularly in a large global conglomerate, once people have had success with a certain product, contracts are signed and discounts offered, it often becomes simpler to stick with the same vendor even if it isn’t the best solution," Clow explains. "But there’s a point of diminishing return as you continue to invest in a single vendor beyond their sweet spot."