[From iSource Business, April/May 2002] Despite more than a year and a half of project troubles, scope creep and undeliverable promises, customer relationship management (CRM) continues to garner great interest from organizations wanting to improve their customer care strategies. Only recently have companies begun to truly understand CRM and what it can really do.
As customers become more knowledgeable about CRM's potential, analysts emphatically suggest that CRM product improvement must take place, especially as the economy climbs out of its slump. During tough economic times, businesses' desire to find, keep and grow customers becomes ever more critical. Organizations win or lose deals based on how they treat and interact with current customers and potential prospects. In response, organizations now recognize customer care as a strategic business process, not simply as a component of marketing.
In the beginning, the CRM market took off when e-business began to raise customer expectations for service, says Ram Kumar, chief technologist and architect for MSI Business Solutions in Sydney, Australia. This accelerated the trends toward concentrating on share of customer, instead of share of market. Now, in many sectors, the move is to align all business processes to support the customer relationship. This is a major transition and sees the role of CRM move from a marketing or sales support function to being a central component of a broader customer relationship strategy.
And perhaps this move to align CRM effectively to the organization's business processes is one key reason client interest is increasing despite recent implementation struggles. For instance, the Aberdeen Group suggests that CRM spending estimates for the market will remain healthy through 2005. A fresh look at the market gives further clues to why CRM is a priority investment for many organizations.
The Current CRM Market
Talk to any analyst studying the CRM-software market and you'll hear three terms: consolidation, multi-tiered offerings and mid-market packaging. Much of the consolidation comes from the larger players such as PeopleSoft acquiring Vantive in 1999 and Annuncio this year, or J.D. Edwards buying YOUcentric. Multi-tiered or more robust product offerings are represented in such examples as the recent release of Siebel 7. Plus, some players are repackaging their software to extend to the midsize company. J.D. Edwards is poised to build a healthy footprint here since two-thirds of its 6,300-plus customers are already from the small- and medium-sized market.
A recent AMR Research report, Picking the Right CRM Supplier: It's More Than a One Horse Race, provided an in-depth comparison of the top suite suppliers in this space. The report cites Oracle, PeopleSoft and SAP as having narrowed the functional gap with Siebel. In addition, Onyx, Pivotal and Interact Commerce along with J.D. Edwards are still best suited for mid-market or divisional CRM deployments; E.piphany for analytics and marketing; and Nortel Networks for call centers and field service.
The CRM software market was really fragmented throughout 2000 and part of 2001 with buyouts of smaller CRM players at the close of last year, says Kirsten Cloninger, industry analyst of eBusiness Group for Cahners In-Stat Group, based in Newton, Mass. She confirms that a variety of suppliers are going after the mid-market or creating greater offerings, such as analytical tools integrated into their entire CRM suite.
Typically, CRM has been a pricey, enterprise-class suite that often takes years to fully implement, but it carries the promise of better management of sales, marketing, internal employee relationship management and, of greatest importance, customer service. As a result, Gene Alvarez, senior program director for META Group in Stamford, Conn., sees an important and complex part of business requiring simplification by the CRM providers.
We now talk about the CRM ecosystem, says Alvarez. One has to look at the analytical, collaborative and operational aspects of CRM software. You then have to look at retail, manufacturing, healthcare and other key verticals. And finally, we then must examine CRM functionality including sales, marketing, customer follow-up, contact management and feedback capabilities, call centers, customer services, and online-related CRM initiatives. So a CRM ecosystem can be composed of several CRM packages creating a patchwork quilt designed to actually drive value to the customer. You need certain technologies to support the various ecosystems.
Alvarez suggests that such patchworks have created redundancies in the applications. It's also caused some of the core problems with implementations. The market's finally feeling the pressure by users looking for more robust solutions without such patchwork complexities and, as a result, you're seeing consolidation.
Sheryl Kingstone, program manager for the Yankee Group's CRM Strategies Group out of Boston sees all of this as good for the market. For those organizations that must invest in CRM, Kingstone says, [Companies] are slowing down their overall software investments and thinking more effectively and efficiently as it relates to their CRM investments. If you're not paying attention to your customer you're not going to grow revenue. CRM will always be important.
In regard to the software provider, Kingstone points out the biggest CRM footprint comes from Siebel. They're pretty robust and can be seen as the 800-pound gorilla in the CRM market. Companies that are number two and three are building out their functionality, such as PeopleSoft. PeopleSoft brings back-office integration to the market, whereas Siebel has front-office penetration.
Kingstone, like Alvarez, suggests that customers' desire for one-stop options has helped influence the consolidation. Plus, she says that since not everyone is a Fortune 500 company and small to midsize companies want CRM efficiencies, too, the providers are recognizing the opportunities in this market.
Of course, the low-cost CRM providers might outrank the larger software providers in the mid-market. True, suggest Alvarez and Kingstone, low-cost CRM providers can't provide the functionality of a Siebel, but that's not as critical in the smaller markets. The execution of a CRM solution in the mid-market can be more important than too much functionality. A well-deployed, straightforward solution at a reasonable price, say the analysts, brings competitive advantage to a midsize company. Effective, low-cost solutions fill a real need in this market.
What's Still Lacking
According to the analysts, application sales force automation in the CRM space has been tackled really well, and they contend that the providers are gaining momentum with the self service, otherwise known as online, CRM. However, the market leaves users wanting when it comes to such areas as ease-of-use, multifunctional applications and wireless. Says Cahner's Cloninger, A compelling ROI [return on investment] regarding wireless CRM does not yet exist.
Cloninger does suggest, however, that the area gaining ground the quickest does deal with ease of use. Certainly, it's a buyers market, and the providers know this. Those players proving ease-of-use, quick and successful implementation, and ROI are getting the deals.
META Group's Alvarez goes further to talk about the next evolution of CRM. The providers will offer integrated solutions to support multiple points of interaction throughout the customer lifecycle and ultimately support multiple constituents.
Another take on what's lacking is what MSI Business Solutions' Kumar describes as solutions for gaps. He identifies several: interfaces based on open-interface standards, fully integrated methods for mapping customer data and customer relationships, and a 360-degree view of customer relationships.
Regarding interfaces, Kumar says, It's time that open standards such as XML [eXtensible Markup Language] for interoperability are adopted by CRM software tools. The recent release of xCRL, a customer relationship standard based on XML by the Customer Information Quality Committee of OASIS in December 2001, is the first step in helping CRM solution providers toward an open environment.
As potentially beneficial as that sounds, however, it's far from clear how quickly enterprises will see the benefits of xCRL, he continues. Big CRM suppliers will do so reluctantly and only under pressure from enterprise customers. This is because it would also make it easier for enterprises to mix and match CRM products, which is the last thing these suppliers want and, moreover, integration of their CRM systems with their client systems is one of their top revenue generating streams.
Kumar also says that CRM software needs fully integrated methods for mapping customer data and customer relationships. Most CRM suppliers steer clear of this important aspect of customer data management, preferring to provide ad hoc solutions for integrating customer relationships, and leaving the entire information quality issue to their customers. This is not sustainable, as enterprises seek more flexible and extendible models of customer relationships.
Finally, Kumar takes issue with the single view of the customer a 360-degree view. Even though CRM continues to propagate the myth of a single view of the customer, there is no such thing. Different lines of business have different customer views, and all these need to be supported by a totally effective CRM strategy. Major enterprises are beginning to seek models that support different views of customer relationships across lines of business and can only achieve this by developing them in-house.
Elusive Customer-care Utopia
Why do companies still struggle with customer care and quality? Often, it comes down to marrying the technology with a very human and relationship-oriented business process.
Several reasons make this difficult, says Kumar. Lack of software integration, politics within the organization, resistance to any change and lack of a customer relationship strategy within the company are the big ones.
But for Kumar, the most obvious problem is data quality. Essential to any effective customer-centric strategy is the need for customer information that meets the highest possible standards in quality and integrity, he says. Current CRM tools do not do this, and, in fact, CRM suppliers do not tell this story to customers, for fear of delaying a sale. It is a hidden agenda that most enterprises discover the hard way.
Kumar explains it's a two-fold challenge, since clean customer data is in big part needed from the enterprise about to invest heavily in CRM. Organizations are ready to invest millions of dollars on the CRM tools, integration, upgrades and ongoing service, but they don't want to spend on or address the structural problems of data-quality issues and therefore give it the least priority. They often assume that data quality will be solved over a period of time or the CRM software can handle it. Even worse, the organization will assume it doesn't have a customer data quality problem.
Cloninger reinforces the data-quality issue by saying, a system is only as good as the data that's in it. In addition, Cloninger says, Customer service and satisfaction is very fluid. Understanding your customers, not just from a demographics perspective, but understanding them uniquely and then enabling them to give real-time feedback is not easy no matter how sophisticated the technology or efficient your customer-satisfaction strategy.
Kingstone, too, suggests that it's as much a business process issue as it is a technology issue. Forget having a strong CRM system in place if you don't have processes in place to deal with your customers. Customer service even more so than products is complex.
Back To the Future
Cloninger's view about the future of the market is a reflection of the current economy. The market has not grown as fast as hoped. You'll continue to see a few leaders, such as Siebel and PeopleSoft, stand out. But, there's lots of room to play, especially in the mid- and small-sized markets.
Kingstone gives a keen market overview with CRM's future, breaking it down by functionality. Spending on Web customer care solutions will grow, led by smaller contact centers. Spending for sales effectiveness solutions will take off. Regardless of the economy, sales management has an obligation to give its sales people the tools. In contrast, demand-chain management will remain more hype than reality through this year. And finally, customer self-service solutions, for the first time, will become a major theme for larger CRM suppliers, accelerating adoption in the enterprise. In an economy in which cost controls and customer retention continue to overshadow customer acquisition, the argument for an effective self-service channel is compelling.
When asked whether the mobile or wireless CRM space will gain ground this year, Kingstone suggests that much still must be done. To date, we have not seen a proliferation of savvy CRM applications leveraging the mobile medium for customer-facing services. The future of mobile CRM will be a world where computing and networking becomes more intimate; where consumers increasingly expect the world to come to them proactively on small but clear displays based on their individual needs and preferences. We won't see savvy mobile CRM applications for at least two to three years.
Customer-care Strategy
Kumar gives organizations advice on their customer-care strategies and how to meld them with technology. First, he says, have a business strategy for customer relationships, including measurable definitions of customer value and risk. Second, develop and align the business systems and processes to support this strategy, including business transition initiatives where necessary. Third, ensure that you understand the data that you have in your organization that is needed to support the customer strategy. Have processes to manage the quality of data and understand that data quality is not an [information technology] problem but a business problem, because data in an organization is an asset of the enterprise.
For Kumar, the key is information. Customer information has developed into one of the most vital assets an enterprise owns. Detailed attention to its inventory, quality, and usage will drive market share, revenues and profitability. He suggests that once you have your business strategy down for customer relationships and clean data, then the technology is ready to be applied.
What will finally take place in 2002 in this market is yet to be seen. One thing's for sure, it looks like efforts must be made on both the buying organization's side and the provider to build a solid CRM solution. Clean data, healthy technology and a good marriage between both what more can one ask?
