Blue Martini Software, Inc. - Company Profile, Information, Business Description, History, Background Information on Blue Martini Software, Inc.

2600 Campus Drive
San Mateo, California 94403

Company Perspectives:

Blue Martini Software is the leading provider of intelligent selling systems. Innovative companies use our software to slash sales costs and improve customer and channel loyalty.

Blue Martini intelligent selling systems deliver the expertise of a company's best sales and marketing people through advisory applications for customers, sales people and partners. Our software uses unique "decide and act" capabilities to monitor key customer events and transactions, suggest optimal multi-channel responses, guide transactions, and measure the effectiveness of each action.

History of Blue Martini Software, Inc.

Blue Martini Software, Inc.'s principal business is to provide software solutions that streamline and enhance the selling process for retailers and manufacturers. The company began in 1998 by offering solutions for electronic commerce, then expanding into customer relationship management (CRM). While the company's first retail customers utilized Blue Martini to run their online stores, they later came to adopt Blue Martini's in-store CRM solutions for their brick-and-mortar operations. Blue Martini first offered support for business-to-business transactions in 2000. Following the acquisition of Cybrant Corporation in the first half of 2002, Blue Martini began to offer more CRM software solutions for manufacturers as well as retailers.

Providing Software for Electronic Commerce: 1998-99

Blue Martini Software was launched in December 1998 by Monte Zweben. Zweben had founded Red Pepper Software Co. in 1992 and served as its president, CEO, and chairman until it was acquired by PeopleSoft, Inc. in December 1996. Following the acquisition Zweben was vice-president and general manager at PeopleSoft. Prior to founding Red Pepper Software, Zweben co-managed NASA's principal artificial intelligence laboratory.

Blue Martini began with a distinguished board of directors that included James C. Gaither, a senior partner in Cooley Godward LLP; Thomas M. Siebel, chairman and CEO of Siebel Systems, which he founded in 1993; Michael Spence, dean of the graduate school of business at Stanford University; and William F. Zuendt, retired president and chief operating officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo Bank. In March 1999, Blue Martini raised $5 million in its first round of venture capital financing led by Matrix Partners.

When it was founded, Blue Martini's mission was to develop a complete software solution for companies selling directly to consumers over the Internet. The company released its E-Merchandising Suite 1.0 in March 1999, followed by version 2.0 later in the year. Levi Strauss & Co. became the company's flagship customer, choosing Blue Martini's E-Merchandising System for its global electronic commerce efforts. The software system integrated a scalable, high-availability commerce server with features for dynamic merchandising, targeted selling, and tailored customer service. It consisted of five modules: merchandise management, customer management, micro marketing, webstore operations, and tools. Pricing for the suite began at $500,000.

Version 2.0 was a major upgrade that offered enhanced capabilities in the same areas and added a sixth module for content management. With the content management module, clients could develop, manage, and deliver personalized images, text, HTML templates, and video content to shoppers. Version 2.0 also added new features such as click-stream analysis, a more detailed enterprise reporting system, expanded rules-based cross-selling and promotional capabilities, enhanced gift registries, and one-click buying.

Blue Martini continued to raise capital, receiving $12.5 million in September 1999 in its second round of venture capital financing led by U.S. Venture Partners. Proceeds were expected to be invested in sales and marketing. The company also announced a strategic alliance with Andersen Consulting to provide advanced business-to-consumer Internet selling and electronic merchandising solutions for manufacturers, retailers, media companies, and telecommunications firms. A partnership with JDA Software Group, Inc. leveraged the two companies' strengths to create an integrated solution that added JDA's merchandising, warehouse, and financial applications to Blue Martini's E-Merchandising System. In November Harley-Davidson, Inc. selected Blue Martini to support a new online, dealer-driver sales effort. The first phase of Harley-Davidson's program was an online catalog, with actual online sales occurring through a group of independent Harley-Davidson dealers.

At the end of 1999 Blue Martini introduced version 3.0 of its software suite, now called the Customer Interaction System. The new solution went beyond merchandising to deliver solutions for marketing and service related to Internet-based sales. Two new modules were added, a TeleConnect module for customer interaction through call centers, and the Customer Collaboration module, which allowed shoppers in different locations to visit online storefronts together and engage in an online dialog while shopping. Pricing for Version 3.0 began at $1 million.

Gained New Customers and Alliances As a Public Company: 2000-01

Blue Martini reported revenue of $11.2 million and a net loss of $10.9 million in 1999. In 2000 the company went public and enjoyed substantially higher revenue. Its first quarter revenue of $10.7 million nearly equaled the previous year's total. However, the company cautioned that it did not expect to be profitable for several years, due to high operating expenses. Blue Martini had about 35 customers when it filed its initial public offering (IPO) registration statement in May 2000. The IPO was held in July and raised $150 million, with 7.5 million shares sold at $20 each. On the first day of trading the stock opened at $40 a share and ended the day around $54.

During 2000 Blue Martini introduced new versions of its e-commerce software, expanded into Europe and Asia, and signed several high-profile customers, including Saks Fifth Avenue and the United States Olympic Committee, both of which utilized Blue Martini software to launch online storefronts. Early in the year the company introduced its E-Business Intelligence Service (E-BIS) to help clients build their brands, increase revenue, and retain customers using Blue Martini's tools and partner resources. The company also opened a training center in Redwood City, California, to train partners and customers in deploying and operating Blue Martini's Customer Interaction System. Version 3.1 of the CIS was introduced in May; it was an internationalized version that supported multilingual, multi-currency web sites. The new version also included a module to support mobile wireless delivery of product and service information directly to customers and in-store sales staff. Other new features included new data visualization tools and an integration suite that linked web site operations with back office fulfillment using SAP, PeopleSoft, and other industry standards-based systems. Version 3.1 was priced at $1 million, plus consulting fees.

While previous versions of Blue Martini's Customer Interaction System focused on business-to-consumer (B2C) e-commerce, Version 4.0, introduced in October 2000, added support for business-to-business (B2B) transactions and processes. The new version incorporated software from Ariba, Inc., called "adapters," which enabled companies to distinguish themselves when participating in online marketplaces. When prospective buyers entered an online marketplace, they could click back to a seller's site, where product data aggregated by Blue Martini software would be available. The software also enabled sellers and buyers to fill purchase orders and agree on a price at the seller's site. From there, buyers returned to the marketplace to complete their purchase. Blue Martini expected the new application would help it enter new vertical markets and sell to more functional groups within targeted accounts, as well as offer more options to its existing customer base.

In the second half of 2000 Blue Martini formed strategic alliances with Hewlett-Packard Co. and Arthur Andersen to deliver customer interaction solutions to enterprise-level clients. Before the end of the year, Blue Martini shipped a version of its Customer Interaction System to run on Hewlett-Packard's HP-UX 11.0 platform for Unix. As part of the strategic agreement, HP's global sales force would offer this package as an integrated e-business solution to enterprise customers worldwide. The agreement with Arthur Andersen focused on business-to-business customers, with Arthur Andersen training its consultants on Blue Martini software and implementing it in their solution centers in the United States, Europe, and the Asia-Pacific region. Under another agreement signed toward the end of 2000, Blue Martini and Intel Corp. agreed to work together to optimize and market the Customer Interaction System for Intel-based platforms.

In an effort to build its brand among business-to-business and business-to-consumer executives, Blue Martini launched a print ad campaign in October 2000, which was estimated to cost between $5 million and $10 million and ran in a variety of business publications. The ads featured photographs of a blue martini and copy promoting the company's ability to deliver a highly personalized, branded experience. In November, Computerworld magazine included Blue Martini in its list of the top 100 Emerging Companies to Watch in 2001.

For 2000 Blue Martini reported revenue of $74.3 million and a pro forma net loss of $29 million. During the year the company's customer base grew to 87, including new customers in strategic vertical markets outside retail, such as those participating in online marketplaces, manufacturing, financial services, consumer packaged goods, technology, and service companies.

The year 2001 was more challenging for Blue Martini in the face of tough economic conditions. Revenue for the year decreased to $57.5 million, while the company's pro forma net loss increased to $45.9 million. After widening losses in the first quarter and a decline in revenue in the second quarter, Blue Martini announced mid-year that it would move aggressively to cut costs, including a 25 percent workforce reduction and a corresponding consolidation in operations. Later in the year Michael J. Borman was hired as president and chief operating officer, reporting to Chairman and CEO Monte Zweben. Borman was formerly with IBM Corp., where he most recently served as vice-president for Unix sales worldwide. Also during the year Zweben was recognized by Brandweek magazine as one of the top ten "Marketers of the Next Generation."

Blue Martini's principal new product release in 2001 was Blue Martini 4. The tightly integrated software suite consisted of four new applications: Blue Martini Marketing, Blue Martini Commerce, Blue Martini Channels, and Blue Martini Service. The marketing application allowed companies to create a unified picture of their customers, analyze customer behavior, and implement those findings through outbound marketing and personalization. The commerce module was an e-commerce application for selling directly to businesses and consumers through multiple touch-points, including web sites and mobile devices. Channels was a complete channel management application that helped companies establish and manage their relationships with partners. It included the ability to drive sales through partner extranets, portals, and online marketplaces. The service module was a customer service application that supported customer service representative activities online and over the phone. Each of the four applications was available separately or as a suite, with pricing for each module starting at $250,000.

Internationally, Blue Martini entered into a strategic alliance with Netyear Group Corp. for the purpose of establishing a Japanese subsidiary. In Europe, Blue Martini announced it had offices in Paris, France; Munich, Germany; Maidenhead, England; Stockholm, Sweden; Milan, Italy; and Amsterdam, Netherlands. The company also offered training in London and Paris. In mid-2001 Blue Martini released localized versions of Blue Martini 4 in German, French, Spanish, and Japanese.

Toward the end of 2001 Blue Martini released the next generation of Blue Martini Integrated Analytics. The suite consisted of an analysis portal, discovery tools, online analytic processing, and an automatically generated data warehouse. Shipped as part of Blue Martini's external customer relationship management (eCRM) application suite, the new software helped companies study and analyze customer behavior, marketing campaigns, promotions, and operations.

Another new release announced at the end of 2001 and shipped in 2002 was Blue Martini Manufacturing, an industry specific solution for manufacturers. The new solution combined Blue Martini's eCRM application suite with business processes specific to manufacturing, including catalog and content management, marketing, commerce, channel management, and service.

Expanding Customer Relationship Management (CRM) Software: 2002-03

Blue Martini's revenue continued to decline in 2002 in the face of a challenging environment for software sales. The company reported revenue of $33.6 million and a pro forma net loss of $30.2 million. During the year the company shipped Blue Martini Manufacturing and introduced Blue Martini 5, in addition to offering new applications for retailers. Early in the year at the National Retail Federation Show, the company demonstrated the use of its marketing and sales applications in physical stores through IBM point of sale (POS) devices. By integrating its software with POS devices, Blue Martini moved offline from its web-based applications to provide in-store customer information to sales associates, allowing them to personalize their service in real time. At the same show Blue Martini conducted a retail survey that showed a majority of retailers could not identify their most valuable customers.

In March 2002 Blue Martini released Blue Martini Retail, the first comprehensive customer relationship management (CRM) solution for retailers. Blue Martini Retail consisted of nine applications that worked in conjunction with its Customer Engine. The Customer Engine was the heart of the solution, collecting data from all channels, segmenting and scoring customers with integrated analytics, and presenting real-time, content-rich offers and information personalized for each shopper.

Also in March, Blue Martini released Blue Martini 5, an upgrade of its flagship suite of applications for personalized marketing, sales, and self-service across multiple channels. The suite consisted of four modules--marketing, commerce, channels, and service--underpinned by content management and integrated analytics. Each of the four modules was priced at $85,000. Later in the year, separate editions of Blue Martini 5 were released for IBM and for manufacturers.

In April 2002 Blue Martini acquired Cybrant Corporation, a company that provided interactive selling applications. Cybrant's applications were used to provide cost savings and streamline operations for companies that sold, priced, and quoted complex products, or who needed to help customers match their needs to the best available products and services. Blue Martini felt the acquisition of Cybrant's interactive selling applications helped them better serve selected vertical markets, including high-tech, electronic, medical instrument, automobile, and industrial manufacturing markets.

Another new release in 2002 was Blue Martini Relationship Marketing, an application that enabled marketers to centrally manage customer communications across all channels and points of contact. The stand-alone application was designed to work independently with any e-commerce, CRM, and enterprise resource planning (ERP) system via industry-standard protocols. Among the marketing initiatives the application could optimize were loyalty programs, gift registries, promotional campaigns, and the returns process.

In 2003 Blue Martini released Blue Martini Clienteling, an upgrade of its in-store point-of-sale customer information system for retailers launched the previous year. Blue Martini Clienteling enabled store associates to access relevant customer information, service-related messages, targeted promotions, event details, and other information through store-based kiosks, POS devices, personal computers, and wireless handheld devices.

Blue Martini's founder, CEO, and Chairman Monte Zweben was honored in 2003 by retail publication Chain Store Age and the manufacturing publication MSI magazine. Chain Store Age cited Zweben and Blue Martini for turning intelligent systems into proven, real-world business applications and helping retailers improve the consumer experience. MSI magazine noted that Blue Martini's interactive selling applications helped manufacturers sell more effectively.

With the overall economy and software spending improving during the year, Blue Martini was able to report that its revenue during the first three quarters of the year increased 110 percent over the same period in 2002. The company also reduced its net loss and cash burn rate. Looking ahead, the company remained focused on improving its execution and expanding its customer base as more companies adopted its intelligent selling systems.

Principal Competitors: Art Technology Group, Inc.; BroadVision, Inc.; E.piphany, Inc.; i2 Technologies, Inc.; International Business Machines Corporation; Microsoft Corporation; Oracle Corp.; PeopleSoft, Inc.; SAP AG; Siebel Systems, Inc.; Trilogy; Unica Corp.; Vignette Corp.


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