CRM on Mid-Market Terms

CRM solutions used to cater to the big dogs that had pockets deep enough to implement these applications. Today's mid-market companies have found their voice, however, and they are demanding that software fit their needs when they want it and at rock-bottom prices  and it's being delivered.

[From iSource Business, November 2001] As e-business project manager of Tricord Systems Inc., Grant Butenhoff was faced with a daunting task. The Minnesota-based server appliance company's contact management system was far too antiquated to support a thriving business, so, desperate to accommodate Tricord's sudden growth as a business, Butenhoff was left with the options of either introducing a top-notch customer relationship management tool, or forever facing the wrath of an over-wrought sales force.


Our ACT database had swollen to almost 50,000 contact records ... and it had become a nightmare. We needed something much more robust, recalls Butenhoff.


However, the solution faced some restrictions - namely, money - because, while there's certainly no shortage of multimillion-dollar CRM solutions, Tricord's status as a mid-market company (annual revenues of less than $500 million) meant adhering to a strict budget. It's for this reason that Butenhoff turned to Interact Commerce Corp. and its mid-market CRM solution, SalesLogix. Customer FX Corp., a SalesLogix certified reseller, began the implementation process on behalf of Interact in February of 2001. Less than five months later, SalesLogix was not only completely installed, but Butenhoff estimates the total cost of ownership will likely amount to just $250,000 - a fraction of the $500,000 fee quoted by larger suppliers.


Welcome to the world of mid-market CRM. No longer are deep-pocketed industry stalwarts monopolizing tools that promise to automate sales leads, increase employee productivity, reduce marketing expenses, streamline fulfillment operations, and track customers' buying behavior. These days, midsize outfits such as Tricord are demanding CRM solutions of equal functionality for bottom-basement prices.


Enterprise software providers have been quick to respond. Earlier this year, midsize companies witnessed a bumper crop of scaled-down solutions as traditionally enterprise-oriented suppliers, such as Siebel Systems Inc. and PeopleSoft Inc., began vying for a slice of today's mid-market pie. Not to mention the enhanced offerings of smaller suppliers, including Interact Commerce, that have long been catering to the CRM needs of nascent businesses. 


In fact, according to research firm Gartner Group Inc., over the next two to three years, the midsize enterprise segment is set to grow faster than the broader market, as the large-enterprise segment pauses to re-evaluate its CRM strategies.  


Why the sudden explosion of mid-market CRM solutions, salesmen and seekers? Simply put, midsize companies can no longer afford to ignore the perks presented by such tools. Awkward, cold calls and one-size-fits-all marketing campaigns might have satisfied yesteryear's consumers, but, these days, successful customer acquisition and retention hinges on a company's ability to build strong relationships. Not to mention the impact a CRM solution can have on a company's ability to forge strategic alliances with key partners and resellers.


Says Ed Hrvatin, a senior consultant for Connecticut-based Peppers and Rogers Group: Typically, especially in the B2B area, mid-market companies have fewer customers, so building stronger customer relationships is that much more important - it's critical to their survival. A strategies consultancy specializing on customer-based solutions, Peppers and Rogers Group also sees some of the greatest CRM growth taking place in the mid-market.


Small Bucks for Big Benefits


Creating targeted e-mail promotions, building brand recognition, increasing customer satisfaction, establishing real-time access to a company's supply chain - these are all key benefits that businesses have come to expect from a CRM solution. That's not to suggest, however, that mid-market companies' CRM requirements don't differ from those of their deep-pocketed counterparts. Financially frugal and growing in leaps and bounds, they are forcing suppliers to deliver more bang-for-the-buck at record-breaking speed.


Mid-market customers are more cost-conscious. They're very interested in shorter implementation cycles and they don't want a busload of Anderson consultants showing up to put their CRM system in, notes Don Nelson, vice-president of Microsoft Great Plains' front office division.


Unlike many enterprise-level companies, midsize operations lack the financial luxury of being able to load-up on CRM licenses to accommodate a five-year deployment process. Typically faced with mounting competition and an aggressive growth curve, they are eager to get the ball rolling.


Just ask Dave Root, chief financial officer of Eagle's Flight, which is a custom training program provider. He spearheaded a high-speed implementation of Microsoft Great Plains' Web-enabled CRM solution, and within a mere six-weeks after the process began the solution was up and running, resulting in repeat sales, well-defined marketing initiatives, sales lead generation, and increased supply chain efficiency.


Speedy implementations might thrill some, but the bottom line rules as far as midsize companies are concerned. CRM-related startup costs, networking systems, administrative salaries and licensing fees are typically accompanied by a hefty price tag. In fact, Gartner Group analysts estimate that a typical CRM installation for a midsize company, including software, consulting fees and company labor costs, runs about $250,000 to $500,000 -all of which can represent a sizable investment to a company whose annual revenues dip below the half-a-billion-dollar mark.


Pat Sullivan, CEO of Interact Commerce Corp., says, Big companies can afford to spend $30 million to $50 million on a [CRM solution]. If it doesn't work, nobody will know and nobody will say anything about it either ... however, mid-market companies can't afford to spend a lot of money on something and have it not work.


It's for this reason that many midsize companies opt to implement a CRM system on a piecemeal basis. The temptation to tackle all corporate divisions in one fell swoop can be overwhelming, but experts say that focusing on a single initiative, rather than enterprise-wide deployment, can mean the difference between realizing a return on investment (ROI) and bemoaning a failed implementation.


Another factor separating today's midsize companies from moneyed competitors is CRM-generated consumer analytics. Flush with capital and a sizable client roster, large corporations boast enormous brand recognition and the power to coast on the strength of their product lines. Mid-market companies, on the other hand, must not only gather information on consumer buying patterns and preferences, but also analyze such data in order to provide tailored customer support and improved offerings.


Says Jeffrey Read, vice-president and general manager of PeopleSoft Inc.'s mid-market division: [Mid-market companies] need embedded analytics so they can capture a very good snapshot of the requirements of their customers and understand profitability and where their next customer is coming from.


But that's not all. The gathering and analysis of key customer information can translate into increased supply chain efficiencies. After all, a midsize company that is able to collect real-time data on a consumer's buying behavior can operate in accordance with the actual requirements of its clientele base rather than in-house analysts' historical forecasts. The likely result will be inventory reduction and strengthened fulfillment and distribution channels.


Building relationships with your customers will enable you to feed back more detailed information to your suppliers, says Hrvatin of Peppers and Rogers.


Pressure to Perform


It should come as no surprise that the demand for speed, savings and insight is placing enormous pressure on today's CRM suppliers. Midsize companies' simple organizational structures might make them ripe candidates for easy implementation, but they also lay claim to smaller budgets and tighter timelines - features that can frustrate suppliers accustomed to working with multibillion-dollar corporations.


In fact, Tom Siebel, CEO of CRM behemoth Siebel Systems Inc., recently created a stir when he referred to the mid-market as crummy while addressing an audience of analysts and executives at the Enterprise 2001 conference in California. But while such 300-pound St. Bernards as Siebel stand accused of entering the mid-market simply to prevent smaller players from competing in the top-tier, there are those who charge smaller suppliers with using mid-market companies as mere stepping-stones to greater fortunes.


It's a fair criticism that companies like Onyx are looking to go up-market ... Does that mean we're not offering something of value to the middle market? I don't buy that for a second, says Kevin Hoffberg, chief knowledge officer of Onyx Software Corp.


Tony Praza is happy to testify on Hoffberg's behalf. As the chief information officer of Captaris, a Washington-based provider of communications and mobile business solutions, Praza is currently rolling out Onyx's mid-market CRM solution to encompass all of the company's regional branches and satellite sales offices. The ambitious decision was made following a positive assessment of Onyx's impact on the operation of Captaris' fully-deployed Kirkland headquarters.


But the benefits are mutual, according to Praza. Unlike today's top-tier corporations, midsize companies are incredibly nimble, enabling suppliers to implement systems at record-breaking speed with little risk of disappointment. 


In order to deploy technology in an effective manner, you have to have your arms around the group and do it in a group environment. If the group is way too large [as in a large corporation] you're doomed for failure, explains Praza.


Still, midsize companies often find themselves struggling to find a supplier that can satisfy their specific needs. Joseph Godsil, chief technology officer of Flywheel Communications Inc., a provider of secure service solutions for the management of rights among businesses, would know. He led an exhaustive search for an appropriate CRM supplier in preparation for the company's launch in March of this year. In the end, Godsil selected PeopleSoft's mid-market solution to help the fledgling company manage its customer support division.


[Suppliers need to improve] their ability to react quickly and efficiently to customer needs. Most of them had very cookie-cutter approaches. If you don't fit into the box, it's very difficult for software suppliers to relate to you, laments Godsil.


Not to mention the obstacles that can haunt midsize and top-tier companies alike. The rapid implementation of a CRM solution is one thing. Convincing veteran salespeople to abandon their rolodexes for a high-tech tool is a whole new ball game.


Warns Root of Eagle's Flight, who oversaw the company's fast-paced, six-week implementation process: I advise people not to [implement CRM] so quickly ... you miss things. One major thing we didn't do that we should have done better was to get our internal people to buy into the system.


It's for this reason that experts recommend dedicating ample time to evangelize new solutions, aided by in-house training seminars, to ease adoption and curb resistance.


The Real Deal


Midsize companies must also maintain realistic ROI expectations. A recent AMR Research study says that 68 percent of companies that have implemented some portion of a CRM strategy saw a ROI or are on track to see one. But encouraging statistics shouldn't be mistaken for promises of overnight success - a mistake all too often made by midsize companies hoping to capitalize quickly on their investment.


Sandra Gudat, CEO of relationship marketing firm Customer Communications Group Inc., says, It goes deeper to the American value system ... We all want something right now and we're looking for a return on investment in a very short period of time. The good news is, CRM is a process that can be implemented incrementally and you can get incremental returns from it  but you have to pace yourself.


Nor should midsize companies bite off more than they can chew. The long arm of a well-implemented CRM solution can touch countless areas of a company, simultaneously lending greater efficiency to a sales force while helping to streamline supply chain and fulfillment operations. In the end, however, a CRM solution is only as good as the financial and human resources a company is willing and able to commit to it - a reality that is all too often lost on those who mistakenly view CRM as an enterprise-wide panacea.


Admits Don Nelson of Great Plains: [Companies] should think about CRM and supply chains separately ... I wouldn't be thinking about buying CRM to solve your supply chain problems.


Misconceptions aside, there's no discounting the wide-ranging benefits of a CRM solution. Automated sales leads, targeted marketing campaigns, streamlined supply chain operations - they are all perks being realized by today's mid-market companies. Nor does the proliferation of CRM solutions show any signs of slowing down, as larger suppliers make the transition from being primarily top-tier to mid-market solution providers.


What promises do remain the same, however, are the demands of those whose revenues are modestly ranked. Fast-paced implementation processes, reasonable price tags and the ability to gather key consumer data are the very requirements driving today's burgeoning mid-market CRM explosion. Continued growth will pivot on suppliers' success in delivering the goods at record-breaking speed for bottom-basement prices.