Microsoft Acquires Parature To Better Position Against Multichannel Customer Service Vendors

On January 6, Microsoft announced their intentions to purchase Parature for a reported $100M. This event is a good thing all around. Net, net, it plugs some holes in the  MS Dynamics CRM product, and gives Parature, a 13 year old company, a viable exit strategy.

Microsoft Dynamics is a strong CRM product for customer service. Forrester considers it a leader in our most recent CRM Suites Customer Service solution wave.  Microsoft Dynamics is also doing well. At their recent analyst event, they communicated the following statistics: 12% revenue growth in FY13; Dynamics AX and CRM growing by double digits worldwide and 30% in the Americas and Asia; and CRM Online growing by 80% in FY13, with two out of every three new customers opting for cloud. Microsoft Dynamics has 359,000 customers and 5 million users, while Microsoft Dynamics CRM has 40,000 customers and 3.5 million users. Read more about this event here.

However, the solution had some obvious deficiencies: no agent facing knowledge management or web self service capabilities, no chat capabilities and the solution lacked robust email response management capabilities. This prevented them from effectively competing in multichannel customer service deals against the likes of Salesforce's Service Cloud and Oracle RightNow. And the momentum for multichannel customer service solutions is increasing in 2014, partly due to an uptick in the economy which allows organizations to modernize their customer service solutions, and partly due to the increased focus on customer experience.

Parature is  a small, cloud-based, .NET multichannel customer service solution, with revenues of about $16M, which provide a  robust set of communication channels which include the digital (email, chat), and social channels, very solid knowledge management capabilities, as well as a set of other attributes. They have a solid set of referenceable customers in the commercial and nonprofit space.

Parature has been a Microsoft Dynamics CRM partner for over a year.Today, there are connectors between MS Dynamics CRM and Parature, which several companies already use. This acquisition now allows these connectors to be hardened. In addition, after the acquisition, Parature will also be available as a standalone solution, independent of Microsoft Dynamics, for those companies that need only Parature's set of features. This means that current Parature customers should not worry about being supported.

What does this acquisition also mean? Customer service software is a mature software category. It means that the wave of market consolidation will continue. Best-in-breed multichannel customer service companies will struggle even more to compete against the behemoths of the likes of Oracle, Salesforce, Microsoft who have been maturing their solutions via acquisition for the last several years.

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