Surviving CRM's "Midlife Crisis"

Companies need to rethink their customer relationship management strategies, AMR analyst advises

Tempe, AZ  November 6, 2002  Rod Johnson hasn't given up on customer relationship management, but he said that CRM is in trouble.

"CRM as a strategy or market is far from dead," wrote Johnson, a vice president, general manager and all-around CRM specialist at Boston technology consultancy AMR Research. "However, there is a threat if strategies are not redefined to address performance, extended customer processes and industry competitiveness factors."

In his recent research alert, entitled "What's Wrong with the CRM Market? It's More Than the Economy," Johnson described CRM as being in the midst of a "midlife crisis," with companies that have invested in CRM solutions taking a step back to examine the real value of the applications and how they fit in with the companies' current priorities.

The figures bear out Johnson's hypothesis, with market watchers pointing to declines in CRM spending in 2001 after slowed growth the year before. Analysts have attributed the reversal for CRM suppliers to market saturation in a slowing economy, with fewer companies willing to undertake long implementations before realizing a return on their investment.

However, Johnson also sees a structural change at work, with what he calls "generic, horizontal CRM technologies or strategies" giving way to one of three different variations on the CRM theme.

Those three include department- or function-specific implementations led by executives who will push for projects that meet their immediate functional organization's particular needs. "This requires a shift in supplier product strategy to be able to sell not on the merits of technology or broad, multi-channel integration, but on the products' ability to affect performance or deliver operational excellence," Johnson wrote.

Alternatively, projects will shift from focusing on integrating marketing, sales and service functions to enabling vertical, customer-facing processes that blend data, people and systems from both front- and back-end systems. The winners here, Johnson wrote, will be "suppliers that can cost-effectively define and implement extended composite processes across heterogeneous systems."

Finally, the analyst sees CRM suppliers offering more verticalized solutions tailored to the needs of particular industries. "It's about assisting in projects that directly affect competitive position in the industry," Johnson asserted.

Ultimately, most suppliers will wind up focusing either on a particular function or a certain industry, or on process-centric integration, according to AMR.

Johnson offered several recommendations for companies considering CRM, including a thorough rethinking of the enterprises' strategy in this area, as well as continuous benchmarking when undertaking a CRM project.