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Exchange Buy Puts Pressure on CRM Rivals

Analysts are applauding Exchange Applications Inc.'s announcement last month that it has purchased Seattle-based e-marketing software firm GBI for $24 million.

GBI — who's customer roster includes Microsoft Corp. — becomes a wholly owned subsidiary of Exchange Applications, Boston, and all of its 28 employees and contractors are expected to remain with the company. Founder Gino Borland will become chief operating officer of the GBI division, and Exchange's Dan Haley, the former vice president of growth and emerging markets, has assumed operational responsibilities for the division effective immediately.

The software will continue to be sold by GBI for stand-alone use, but Exchange plans to sell the product via its direct sales force as part of its customer relationship optimization solution.

According to Scott Nelson, a San Francisco-based marketing knowledge and technology analyst at GartnerGroup Inc., based in Stamford, CT, the acquisition points to the trend toward CRM support for both offline and online marketing.

“This acquisition provides Exchange with a channel with which it can compete with Recognition Systems' and Prime Response's recently established online channel capabilities,” said Nelson. “Increasingly, such capabilities will separate the leaders in this field from the laggards.”

In addition, he said this is an example of “an established [CRM] vendor expanding its functionality via acquisition, and points to the importance of Exchange's IPO in 1998.”

He said the policy of buy rather then build will allow Exchange customers to have access to this technology faster, as rival solutions will, in many cases, be announced well in advance of their actual availability. “This also puts pressure on new market entrants, especially front-office suite vendors, who have to provide more functionality than simply direct mail capability to compete,” he said.

Exchange Applications' products and services are designed to help businesses optimize the value of customer relationships across channels and product lines. By combining GBI's personalized Web, e-mail and e-messaging capabilities to Exchange's CRM solutions, businesses will be able to acquire, expand and retain customers through the Internet, as well as through additional marketing channels. Benefits include the ability to:

o Use data warehouse information to plan, create and execute electronic customer communications via the Web and e-mail;

o Generate electronic customer communications based on complete, up-to-the-minute customer profiles that capture customer behavior from all channels;

o Better coordinate e-marketing campaigns with other marketing channels; and

o Accurately measure ROI of e-marketing communications.

After an extensive search of more than 50 companies in the e-marketing space over the past eight months, Exchange decided to purchase GBI since it demonstrated production-strength scalability, generating more than 1 billion e-messages over the past 20 months for Microsoft.

“On the scalability side, this is important to our customers,” said Pat McHugh, vice president of marketing at Exchange.

McHugh said that the GBI acquisition should meet the needs of its brick-and-mortar customers who want to go online to better communicate with their customers. The system also will help purely online customers, such as the globe.com, New York, which recently signed on as a customer of Exchange. It is in the process of integrating the combined Exchange/GBI e-messaging and customer optimization tool at its Seattle-based online department store division, shop.theglobe Inc.( www.shop.theglobe.com).

Currently, the company is integrating the e-messaging product for bulk and detailed personalization opt-in e-mail marketing programs. During the first quarter of next year, however, the division will integrate Exchange's database engine to start “doing things like Amazon.com, where the system can recommend what ads you should see when you are browsing through the department store,” said Michael H. Drucker, chief investment officer of shop.theglobe.com Inc.

Down the line, the company will also use the combined system for segmented direct marketing e-mail programs and to integrate its online data with offline data for multichannel marketing.

The GartnerGroup's Nelson said the acquisition of GBI bodes well for Exchange's customers, assuming that the integration of the two solutions is handled adequately.

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