Watching the CRM pendulum swing over the past 10 years has been a wild experience. When I presented at the first true CRM conference in Boston in December 1994, the event was packed with thousands of attendees and more than 100 vendors. The atmosphere was one of great expectations, with many having the belief that technology represented the answer to all of the sales, marketing and service challenges we faced.
A little over five years later in 2000, when the economy started to hit the skids, for many CRM became a four-letter word. Thousands of companies had spent literally billions of dollars for software, hardware, consulting services, training and support, and CRM project successes were the exception vs. the rule. This caused the expectation pendulum to swing far to the pessimistic side.
And now another five years have past, and many business professionals are wondering, where is CRM today? To begin to explore that issue, as part of CSO Insights’ 11th Annual 2005 Sales Effectiveness Marketplace study, we surveyed more than 1,000 firms worldwide to understand the marketing, sales and service challenges they were facing in finding, winning and keeping more customers. A key component of that research was to assess if and how they were leveraging technology to deal with those issues and what results they were achieving.
The insights we surfaced from this study clearly show that the pendulum is now shifting back toward the center, but where will it go next and how far?
WHERE ARE WE?
To begin to develop a baseline understanding for the CRM marketplace, we need to first acknowledge that today not everyone feels that technology needs to be a critical component of the plans for optimizing the way they market, sell and service. In our 2005 study, only 62.8% of the companies surveyed had formerly evaluated CRM applications. The other 32.2% were more open to looking at alternative ways to improve their performance, such as hiring more/better people, investing in training, improving business processes and the like.
A second trend we noticed is that not everyone who investigates technology ultimately ends up implementing a system. Of the study participants who did conduct a formal evaluation of CRM applications, 26.9% made the decision not to proceed further. For these organizations, the ROI for technology has not proven to be compelling enough to move it higher on their list of priorities.
For those who did move forward with a CRM initiative, only 61.6% of the study respondents found a commercial CRM application that met all of their needs. Of the remainder, 15.6% of firms choose to build their own internally developed application, while 22.8% implemented internally developed programs to augment the capabilities provided by commercial CRM software.
And for those who did roll out a CRM system in their company, the key question was what results did they achieve? The answer was that 29% achieved significant improvements, while 38% achieved minor improvements, and 19% no measurable improvements. (See Fig. 1.)
Clearly, we are seeing that CRM project success is still far from guaranteed. The industry just cannot seem to break through the 30% barrier in terms of the number of CRM projects that are generating significant improvements in performance.
While some might be encouraged by the fact that 38% achieved minor improvements, I don’t buy the argument that “the glass is half-full” for these companies. I personally participated in a number of CRM system selections in 2004, and when the final business case to justify the expense was presented to senior management, not once did I see a project team make the claim that at the end of all their efforts the company would achieve “minor improvements.”
Less I totally sound like a pessimist, I am very encouraged that among the almost one-third who are successfully leveraging technology to optimize performance, we are witnessing some phenomenal achievements. In reviewing projects, we found cases where a distribution firm increased cross-selling and up-selling by 200%; a 600-rep hospitality firm decreased the time to get a new representative fully productive by 38%; an e-business company increased their lead generation rates from 1.5 to 7 leads per call center rep per day; a semiconductor firm decreased order errors from 12% to less than 1%; a financial services firm increased their win rate from 48% to 64%; a high-tech firm decreased their lead to cash cycle for sales by 27%, and a manufacturing firm reduced order errors by 23%.
And those are just some examples that keep me personally excited about CRM. Success, mind-blowing success, is possible.
So why isn’t everyone achieving those types of results? In the mid-to-late 1990s, the cause of CRM project failure rates was often placed at the feet of the software vendors. The applications were not robust enough, stable enough or extensible enough to meet user expectations. This year’s survey participants told us the top three challenges they encountered during their initiatives were: populating and maintaining user data; gaining user acceptance; and matching the technology solution to the business problem. (See Fig. 2.) These of course are not purely technical issues.
Data Population and Maintenance a Challenge
Continuing to be the most-cited challenge facing CRM project teams for the second year in a row is populating these systems with accurate/useful data — and then keeping it current. Two problems continue to crop up that need to be addressed here.
First, implementing a CRM system often means collecting data from other legacy systems and consolidating it within the new CRM framework. To be useful, that data needs to be rationalized to create a single, accurate record for each customer. Once the data is imported into a CRM system, the challenge is then to maintain its accuracy.
In addition to that, another new, data-related issue emerged this year. To increase the value of CRM systems to users, you need to go beyond making just customer and product data available to them. There are numerous information sources residing inside and outside your own organization to tap into when implementing CRM applications.
Another trend worth noting is that people-related issues still hound us. Ensuring that new systems have the right data can help improve user acceptance, but you need to do more. In user satisfaction studies we have conducted for firms regarding usage of CRM systems, two areas that often contribute to low acceptance ratings: lack of training and inadequate ongoing support.
Whether you are implementing CRM for the first time, or migrating from one system to another, you need to make sure that users are fully trained on how to use the system. The training should be structured to demonstrate how the applications will help perform everyday tasks more efficiently and more effectively. If people do not see a personal win from the beginning, user acceptance will be handicapped from Day One.
Once you succeed in persuading users that CRM is not only critical to the company, but also to them, you will then need to provide adequate ongoing support. If sales, marketing or support professionals have a problem with the system and cannot make contact with a hotline specialist for help, they will lose confidence in the tools and go back to working the way they did before the systems were installed.
Lastly, the issues you encounter during a project will vary greatly depending on what applications you install. Make sure as part of your technology evaluation process that you talk to other project teams about landmines they encountered after the systems were installed, so you know which areas could be problematic.
So there you have the landscape for CRM 2005. To me, the current state of the marketplace reflects a pendulum somewhat tentatively swinging back to a realistic view center point of cautious optimism. But what will drive the marketplace from here?
Clearly, the study data shows that the horses that drove the industry in the ’90s, large enterprise CRM applications suites, have lost favor with the marketplace. But several key trends encourage me to believe that the momentum is there from other sources to not only reignite interest in, but also confidence in, CRM as being a key part of the equation for optimizing how we work with customers. Let’s explore some of those factors.
What’s Hot Now: The ASP Factor
Are all CRM systems created equal? An analysis of the survey data at the individual vendor level suggests that this is definitely not the case. While the CRM marketplace as a whole may be generating lackluster results, some classes of systems are generating very positive results. The most notable of these is the ASP (application service provider)- class CRM systems: SalesForce.com, Salesnet, NetSuite and Siebel OnDemand.
One of the comments we hear repeatedly from study participants who were turning to ASP-based CRM is that the price of these applications is very attractive. This is not only in terms of cost of the subscription services themselves, but also a lower total cost of ownership.
A second advantage results from the fact that ASP solution providers view CRM as not software, but a service. They host the applications for their customers, so many of the technology headaches associated with implementing and managing the applications are lifted off the end user organization’s back.
We are seeing the customer satisfaction and project success ratings from companies using ASP-based CRM solutions are much higher than the norm. These solutions get high marks not only for the functionality they provide, but also for their user interfaces, which make it easy for professionals to find and share the key customer information they need to do their jobs.
The Quiet Success Factor
Right behind ASP-based systems in terms of high-end user acceptance and satisfaction are the systems that can easily be installed on a PC for use by a single user or professionals working for a small-to-midsize business (SMB). These types of applications would include programs like ACT, Maximizer, Goldmine, Pivotal, SalesLogix, Onyx, etc. While the large enterprise CRM systems — Siebel, Oracle, PeopleSoft and SAP — garner most of the press, these class of systems continue to quietly grow a solid following in the marketplace.
Here, in some cases, for as little as a few hundred dollars, individuals can get access to tools to help make them be more efficient and effective in terms of managing their time and activities, tracking projects, generating correspondence, keeping track of customer records, managing opportunities and the like. These types of capabilities are especially attractive to segments of the marketplace including real estate, insurance, automotive dealerships and retail businesses.
The value of these quiet CRM systems to SMB organizations is clearly being recognized by business professionals, as they continue to buy well over one million copies of these software applications each month.
Technology and Process Factor
Another interesting factor the study surfaced was how the combination of CRM technology and formal sales process can significantly improve the performance of sales teams. As part of the research data analysis, we profiled a segmentation of those firms that had successfully implemented technology, those firms that had successfully implemented a formal sales process, and those firms that had done both. While individually the power of process and technology was seen, the impact on performance of combining them was even more impressive.
Consider the following chart. As part of the study, we analyzed the performance of sales teams across over 100 metrics. A comparison of the firms that successfully implemented CRM to the full study results, showed that the successful firms used the CRM technology to effectively present the features and benefits of their technology; that they sold value and avoided excessive discounting; that they properly qualified sales prospects; and that they effectively introduced new products. (See Fig. 3.)
Every CSO or CEO would get excited about seeing their organization significantly improve their ability to target prospects, effectively present benefits, and cross-sell and up-sell. And here we begin to see a path to achieve those objectives.
The CRM industry and the process industry also are recognizing this fact, and many players are starting to work much more closely together to imbed sales process support into CRM tools. Leading this charge are firms including Salesnet, SalesForce.com, Siebel, ShadeTree Technology, Sales Performance International, Miller Heiman, Customer Centric Selling to ensure that CRM tools support, reinforce and enforce a structured way of selling.
What Will Be Hot Going Forward
The above are trends that started a few years ago that are now helping to keep the CRM industry moving forward, but alone I don’t see them as being enough to fully reenergize the marketplace. However, several new innovations are emerging that also will contribute significantly to helping CRM achieve its true potential. Let’s examine four of these.
The Content Management Factor
Directly attacking the issue of populating and maintaining useful information in CRM systems is becoming the mission of a broadening base of solution providers. Focusing on collecting and aggregating information from external data sources that marketing, sales and support people need, are firms like OneSource/InfoUSA, Factiva, DataFlux, Hoovers and Dun & Bradstreet. Taking a similar approach to obtain data, knowledge and insights from internal data sources (within a company) are firms like Involve Technology, Savo and Purisma.
The benefit of this collaboration will be that account teams will have key information imported into CRM applications automatically for them. Beyond just product data and customer contact data they will automatically receive knowledge on competitive intelligence, changes in customer accounts and their marketplace and best sales and service practices.
In effect, CRM system will become a personal research assistant for account teams, gathering and making available the key information they need to do their jobs. With this type of knowledge available easily through CRM applications, we expect user adoption rates to increase as the value of the information they can access increases.
The Verticalization Factor
Another trend driving CRM adoption is the customization of applications to fit the needs of account teams in specific vertical industries. We are seeing three approaches to this issue. The first is vendors that are focusing on optimizing the customization of CRM applications so that end-user firms can modify the applications themselves to fit the uniqueness of their industry. SalesForce.com and Frontrange systems are examples of these types of vendors.
The second approach is vendors delivering vertical industry-focused versions of their systems. Here you find companies including Siebel Systems and Dendrite International in the Pharmaceutical space; Salesnet in commercial leasing, real estate, insurance, and automotive dealerships; Firstwave Systems in sports marketing; and Pivotal in healthcare sciences and home building.
A third approach is vendors delivering a technology framework that people with domain expertise can use to, in effect, build their own semi-custom applications. Two examples are Salesnet’s OEM version of their platform and SugarCRM, which we will discuss later.
The key advantage that verticalization will give account teams is that they get applications that are directly tied to their workflow processes, their marketplace vocabulary and their information needs. We are seeing a direct relationship being the degree to which a CRM application is tailored to a marketplace and the user adoption rate the company achieves.
The Mobile Computing Factor
We also are dramatically seeing the value of CRM with the advent of mobile computing. Up until recently, the two main things CRM helped account teams do was plan for a customer meetings and follow-up on one. But the applications were rarely used during a meeting, with the exception of presentations tools like PowerPoint.
Mobile Computing is changing all that. With the explosion of PDA and smart phone devices, professionals now can tap into a wealth of CRM-based information in their car, at the coffee shop, or even sitting across the desk from a customer. Add to that the development of robust Tablet PC-based applications from solution providers such as MobilePoint, Dovario and Kenetic Data, designed to optimize customer meetings.
With anytime, anywhere access to key information, account teams can avoid saying those dreaded words to a customer or prospect: “Let me get back to you on that issue.” Because of this increased access to information, the value of CRM applications will increase in terms of helping account teams deal with their everyday tasks more efficiently.
The Open Source Code Factor
Finally, saving the newest (and potentially most disruptive) factor for last, I am very excited about the impact that open source programs could have on the CRM marketplace. Because a number of companies still write them own CRM applications, it’s clear that commercial CRM solution providers are not addressing everyone’s needs. For those end-user firms there now will be an alternative to writing applications from scratch — enter the world of open source consortiums.
The premise of open source is that when programmers leverage the work of others — review, repurpose and modify source code for an application — the programs advance quickly. As members of a community work together, enhancements and bug fixes can occur much more rapidly than in the case of conventional development approaches. An area we all should be watching with interest this year is open source communities forming around CRM. An example of this can be seen at www.sugarforge.org.
Here you see the power of innovation. One player, SugarCRM, created a core set of CRM capabilities that they are now making available to other developers in the community. Almost immediately, they started seeing other people add to and augment the work they have done; adding additional language support, functional capabilities modules and enhancements. And in keeping with the philosophy of the open source world, much of the software is available to users for free. This fresh wave of innovation, or low cost alone could be the flame that rekindles excitement in this marketplace.
Summary
So what is the net-net on the CRM world today? I am reminded of an instance where Mark Twain was shown a copy of his own obituary printed in a local newspaper. When asked whet he thought of the piece, he replied, “The rumors of my death are highly exaggerated.” Well the rumors that CRM is not critical to business are also highly exaggerated.
People keep focusing on the 70% that aren’t achieving significant results, while I look at the 30% who are and say “Wow.” Those companies that are breaking the code regarding how to leverage technology to optimize how to sell to the market and service customers are creating a competitive advantage in their marketplaces that goes far beyond the products they sell.
As the factors I have outlined come more and more into play, I expect the promise of CRM to turn into the reality for more and more companies. It will be interesting to watch the pendulum keep swinging through this year and into next.
Jim Dickie is a Partner with CSO Insights, a benchmarking firm that specializes in analyzing how companies are leveraging people, process, technology and knowledge to optimize sales performance. He can be reached at jim.dickie@csoinsights.com.
