Roxane Richter,
Customer Systems Editor
In a recent Forrester Research report, aptly entitled “The Demise of CRM,” analysts predict that the traditional model of customer relationship management (CRM) will give way to e-relationship management (eRM), a new approach used to leverage the Web in capturing and publishing a single view of customers. The study cites that traditional CRM doesn’t help companies form personalized, cross-functional relationships on the Web and only manages customer records and workflow, without ever forming a “whole-relationship” customer view (including past transactions and credit history).
But while more and more companies are looking for ways to Web-up their CRM system, the CRM market-an estimated $40 billion industry-continues to rise. According to AMR Research, the industry is expected to grow from $4.45 billion last year to $21.8 billion by 2003-a growth rate nearly five times that of the overall software market. Large companies engaged in CRM projects spend an average of $3.1 million on CRM hardware, software and services and expect annual revenues to grow by eight percent within one year of CRM implementation, according to a recent Cap Gemini and International Data Corporation (IDC) study.
“The future of CRM is extremely promising with analysts forecasting more than a 40 percent growth rate in the CRM industry per year during the next five years,” said Barton Goldenberg, president of ISM, a CRM research and consulting firm. But what exactly is CRM? And who needs it and why?
Slippery as a greased pig
Defining CRM is a bit like herding cats or nailing Jell-o to a wall-as a hip industry “buzzword du-jour,” it seems to hold different meanings for different companies and professionals. For our purposes, we’ll define CRM as a business application used to manage complex sales, marketing and customer service functions. In many ways, CRM is seemingly an extension of enterprise resource planning (ERP) applications popularized by companies such as SAP and Peoplesoft.
“Companies are being pretty cautious with CRM compared to the big-bang approach they took with ERP. Underlying this caution appears to be the confusion many companies have of what CRM is. A lot of our clients are having a difficult time figuring out all the different products that fall into CRM,” said Andrew Wilson, CRM director at Cap Gemini America.
Speaking of industry buzzwords and chic IT trends, Pivotal Corp. recently coined the term eBRM-a fusion of CRM, eCommerce, business portals and Internet business services. Most of the current and “hot” corporate CRM trends, though, seem to run along two major facets: increased integration with ERP software and the expanding role of the Web.
Why CRM or eRM at all?
Generally speaking, CRM provides tools primarily to enhance, protect and retain relationships with consumers. The top four reasons cited by enterprises for implementing CRM are: gaining customer fidelity; providing personalized service to customers; acquiring better knowledge of customers; and differentiating from competition, according to the Cap Gemini/IDC survey. Plus, spending is focused primarily on a step-by-step integration of CRM-related elements within organizations, such as the field sales force, call centers, Internet/Web sites and other so-called front office applications.
If you’re wondering if the cost of CRM is, in fact, worth the substantial initial investment, experts say yes. Based on its surveys of six industries, Andersen Consulting estimates that with a modest 10 percent improvement in customer management operations, a $1 billion-dollar business can reap $40 million to $50 million a year in pre-tax profits alone. As for cost-cutting measures, Business Week reported that one company, Automatic Data Processing Inc., used Clarify Inc.’s call center software and improved customer retention by 5 percent while shooting revenues up by $100 million in a single year.
But the lack of a seemingly comprehensive, user-friendly and integrated Web-based CRM solution can force IT shops and companies to cobble together bits and pieces of software from a diverse set of vendors. One such company is Conectiv Communications, a provider of local and long distance voice and data services to business and residential customers in the mid-Atlantic region. Its parent company, Conectiv, was formed as a result of a merger involving Delmarva Power and Atlantic Energy. In July, Conectiv Communications plans to launch a multi-vendor operations support system (OSS), with a provisioning system (TBS version 4.2) from MetaSolve, a billing application (CBP version 3.3) from Saville, and an electronic interface from Bell Atlantic (DSET).
“It’s a complete revamping of our OSS system. The whole nine yards,” said Glenn Moore, Conectiv Communications vice president of business and customer operations. “What we focused on was connecting these stand-alone systems. We’ve spent a tremendous amount of time and effort making sure they’ll work together. Our two main goals are to get a quicker flow-through and to get a billing engine that can adapt quickly in a changing marketplace.”
Not every company, though, wants software to handle the whole enchilada of customer services. There can be many instances when a company wants only a single software module to answer a specific problem or need. Often, clients only want software to integrate with another new or existing system, bridge the Web chasm or provide a narrowly focused application for a user-specific need. Then compact systems can answer the need-smaller, faster and cheaper.
The e-way or the highway
Willingly or unwillingly, companies continue to be propelled into “the world of e.” But just because the technology is available doesn’t mean the corporate infrastructure is ready to purchase or implement the new IT solution. But in this case, it does seem as though the majority of companies planning CRM investments possess the major building blocks already: 73 percent of companies surveyed have call centers, 69 percent have Web sites and 61 percent operate front office software applications, such as sales, marketing and after-sales support automation, according to the Cap Gemini/IDC study. Also, more sophisticated CRM technologies, such as interactive Web sites, data warehousing and computer telephony integration systems are on the CRM “wish list” for the next two years. And most notably, 79 percent of enterprises plan to construct interactive Web sites within the next two years, with 68 percent are planning to implement data warehousing.
“The Web economy forces companies of all sizes to choose between E-business or E-limination. To survive, executives must focus all energies on getting and keeping customers. Traditional business measures, such as internal efficiency, return on investment and profitability, will come as a result of building strong relationships with customers and providing superb customer experiences across physical and online worlds,” said Jay Wood, President and CEO of Silknet Software.
So just how much does it cost to “e”? It’s about $1 million to build a capable e-commerce Web site, said Marketing Database Associates Director of Interactive Services Ann Pollack. But e-commerce applications are much more cost-effective when targeting individual consumers, she explained. “We’ve heard from several ESPs who said: ‘We’re not profitable whatever we do.’ So anything we can do to keep them from putting out more money is welcomed by them.” Pollack added that buying a plug-in solution (rather than building an in-house application) could save some hard-earned dollars too. The cost of her company’s e-commerce solution is about 10 percent of what it would cost for a client to build the application from scratch, she noted.
Soup-to-nuts integration
Campaign management. Sales force automation. Customer service. Inventory Tracking. Shipping. Call centers. Field service. Help desk. Marketing ellipse and the list goes on. How can all of these diverse (often product-oriented) systems work as a single, seamlessly integrated (more customer-oriented) unit-or should they even?
“The only trend I see is that companies want these systems, but I don’t see a great level of interest in the market for systems integration. The market is young and they’ve just never thought of the possibilities and benefits of integration. They know they have to be aware of their customers, but they’ve just not seen the seamlessly integrated view,” said Chuck Miller, Zland.com director of CRM/ERM operations, “The two biggest benefits of seamless integration is if you don’t have different systems, there’s a big ease-of-use factor there. And when you have a high level of integration, your entire system is easier to maintain.”
For instance, when companies integrate customer, finance and logistics/operational software systems, clients can choose items from an actual real-time inventory of goods or services, negating the odds of customer dissatisfaction with out-of-stock choices and unnecessary customer calls.
Not surprisingly-considering the complex, nascent market and the storm of CRM-wannabe’s-less than two percent of companies today have a unified view of their customers across sales, marketing and customer service channels, according to Forrester Research.
With all of the misgivings, missteps and misinformation out in the market on CRM, choosing a robust CRM package among the vendors vying their wares can prove both time-consuming and frustrating.
Whatever the shape and path your CRM infrastructure, one thing is certain. The latest advances in IT are enabling companies to amass detailed profiles of their customers, offer them the products and services they’re likely to purchase, reward them for their loyalty and quell their customer service frustrations.
Perhaps Pat Sullivan, the creator of SalesLogix, most succinctly summarizes the industry and it’s future: “Companies who get control of their front offices and enable selling advantages across the highest-impact medium and channel are going to be the winners in the next decade … We think it’s pretty simple. It’s all about the Internet and it’s all about selling.”
INNOVATIVE CUSTOMER SERVICE, SALES INTEGRATION AND NEW E-SOLUTIONS
Editor’s note: Due to space limitations, not all customer care solution providers could be included in the following list. Vendors were selected for inclusion based on industry market share, innovation, new products, core functionality and niche performance (such as Web-based architecture).
