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Accenture

A new approach to choosing CRM software helps organizations design and build a lasting foundationfor high performance.

Not long ago, choosing customer relationship management (CRM) software was relatively simple, with one company, Siebel Systems, dominating the market. Even when competing vendors appeared, organizations were able to select their software by simply comparing product features to their checklist requirements.

Nowadays, most organizations that try to follow the classic checklist approach soon find that a decision-making model suited for yesterday’s landscape is insufficient for today’s far more complex marketplace. Today CRM software means not only best-of-breed solutions, but also enterprise platform vendors, numerous niche players and an emerging array of software-as-a-service (SaaS) offerings. With so much variety – not to mention volatility – making good software choices is a lot harder.

Organizations need a new model for evaluating the CRM software options now available and choosing the model – or models – best suited to their business and technology requirements. Accenture has developed just such an approach – one we call the Accenture CRM Software Cornerstone.

The Current CRM Landscape

Long dominated by Siebel Systems – the company that defined CRM best of breed – the CRM market now offers many more choices: enterprise platforms – such as SAP, Microsoft and Oracle; SaaS solutions like Salesforce.com and Siebel CRM OnDemand – increasingly seen as enterprise-worthy; and a growing number of specialized, niche providers – such as Unica and Callidus.

Understandably, CRM buyers are often perplexed by the range of options – not only by what makes them different but also by how they may evolve. Their uncertainty is intensified by the software vendors themselves, all competing for share of voice and each loudly proclaiming that its own solution will set the trend going forward.

Under the circumstances, waiting for another clear leader to emerge might look like a safe bet – yet it actually entails great risk. Current business pressures also demand a long-term strategy for dealing with the changing CRM landscape; particularly in an industry like telecommunications, where commoditization is accelerating and competitors multiplying, organizations are compelled to focus on their front-office functionality. To protect the customer franchise and accelerate growth, they must revitalize sales, marketing and customer service capabilities and re-establish what differentiates them. For these organizations, there is no time to waste.

Accenture research has shown that high performance organizations have mastered a range of factors in multiple disciplines – strategic, analytic and operational – in addition to technology mastery. We use this combined mastery to deliver a more consistently satisfying customer experience that creates loyalty and, in turn, supports profitable growth and high performance. Accenture believes, therefore, that organizations will build a stronger foundation for success by making technology decisions that take into account their overall business strategy and performance objectives, as well as the marketing, sales and service capabilities they need to achieve these goals.

Which Factors Matter Most?

So what are the key factors to consider when choosing CRM software today? First, the CRM business strategy: “How does our back-office strategy relate (or not) with our front-office strategy?” “How will we achieve our customer growth and retention goals?” “What business capabilities will we need in the future?”

In parallel, the CRM technology strategy should be defined: “What new IT development skills and competencies should we develop in-house and which will we source elsewhere?” “Can we leverage secure and reliable externally hosted environments?”

The business and IT strategies will help establish the target end-state architecture and a road map for getting there. Consider issues such as “How broad and holistic does our end state need to be?” “Does the end state need to cover marketing, sales and customer service all at once, or can the end-to-end architecture be developed incrementally?”

People factors are also vitally important: “How does our organization view new capabilities?” “Do we strive for perfection or do we adopt a ‘good enough’ perspective?” “What is the ability of our organization to accept transformational change: at pace or at speed?”

With a firm grasp on these issues, the organization is now ready to ask what we believe to be the key questions, which need to be considered separately for the sales, marketing and customer service functions:

1. What level of company-specific flexibility and uniqueness is desired in the business process?
2. What level of enterprise data density is needed?

The first question considers the degree of company- specific tailoring needed to differentiate business processes from the competition, versus the degree of standardization (industry-specific or cross-industry) desirable for business processes. For example, chemical companies are shifting their recent focus on back-office and supply chain operations to the front office – sales, marketing and customer service. They see highly standardized business processes as key to helping them make this transition with minimal disruption. By contrast, companies in the telecommunications and financial services industries, which are becoming increasingly commoditized, benefit from having unique marketing, sales and service processes that differentiate their business.

The second factor (see Figure 2), enterprise data density, considers the specific enterpriselevel data required to support decision making in customer-facing business processes. Data density is a factor of:

• The types of enterprise-level data required (e.g., invoice data, pricing information, order history, etc.);
• How much and how frequently the data is used; and
• The tolerance for latency – that is, how timely does it need to be? Is it acceptable to use data from last month, or is more recent or even real-time data required?

To understand data density, consider two contrasting examples. In a typical business-to-consumer environment, sales agents need prescriptive, real-time insights, derived from enterprise data, that help them identify appropriate opportunities to cross-sell or upsell during a customer interaction. This kind of enterprise has high data density. In a business-to-business environment, on the other hand, giving sales people this kind of prescriptive insight is typically not an option because the products are more complex and customer needs are more difficult to analyze in real time using an automated capability. By following this decisionmaking method, organizations will create a foundation for building the new CRM capabilities needed, relative to their business strategy and to the dynamic software landscape. Once each functional area within their CRM environment – marketing, sales and customer service – is scored for business process uniqueness and enterprise data density, the results can be then plotted on a matrix to identify the ideal software cornerstone for their long-term CRM strategy.

Each quadrant on the matrix in Figure 3 maps to a different type of CRM software solution: software as a service, niche (best of breed), enterprise packages and what we term “composite CRM.” Organizations should consider the implications of each quadrant to ensure the software choices best suited to their business strategy and performance goals.

Software as a Service

Although SaaS solutions may not cover the full breadth of CRM functions that large enterprises require, they have been proven effective at supporting many core functions. They appear to be best suited to processes that require less business process uniqueness and involve lower data density. By definition, SaaS solutions provide commodity services; multitenant SaaS models like Salesforce.com provide highly cost effective services because they can leverage a single model across multiple enterprises and industries. Such SaaS services can still be configured to individual customer needs. Indeed, much of the success SaaS solutions have enjoyed comes from the way they have been tailored for each implementation, to increase user adoption. However, the business processes supported (e.g., opportunity management) are more generic.

SaaS solutions are also a good fit for processes with lower enterprise data density. Because data is hosted externally in the SaaS model, data integration is a critical concern for many organizations considering this option. A common fallacy here is that data integration is neither possible nor practical with SaaS. On the contrary, because Web services are now standard, integrating legacy systems with SaaS solutions is usually no more complex than integrating with in-house systems. The key aspect of lower enterprise data density is that the breadth of data, volume/frequency and the level of data latency are kept to manageable levels to avoid spiraling integration complexity (and cost).

Niche

Niche offerings are the best fit for areas that require higher business process uniqueness but lower enterprise data density. Niche offerings are typically classified as “best of breed” in specific process areas. They support a high degree of configuration and customization for creating uniqueness in a business process. Such solutions are often characterized as engines that accept multiple user-defined, company-specific variables to adapt and tune a business process. Examples include pricing, quoting and analytics. One of their key features is the way they can be integrated with custom code. Historically each vendor has created proprietary tools and methods to address this issue; however, greater consistency is now possible with solutions standardizing on common protocols – either J2EE or .NET-based “bolt-ons.” The breadth of data, volume/frequency and the level of data latency remain within manageable levels to avoid spiraling complexity (and cost) of integration.

Enterprise Packages

As enterprise data density increases, enterprise packages become more relevant to a company’s needs. Implicitly the level of enterprise data is more readily available as part of these solutions (e.g., for ERP data used across the organization by the finance, supply chain and HR functions). At present, most enterprise package solutions still hold CRM and ERP data in separate databases – a legacy of creating different modules under an application suite (e.g., SAP and Oracle).

However, predefined “connectors” do exist, as well as common data structures and types to simplify data exchange. The key aspect of enterprise packages is the way business process uniqueness is managed. The golden rule: Stick within the basic application as much as possible to minimize customization. However, following this rule presents challenges to organizations trying to create greater uniqueness in their business processes. Customization has a large impact on maintenance and increases the complexity and cost of upgrades. Higher levels of customization also make the predefined integration connectors less useful, increasing overall integration complexity.

Composite CRM

For situations where business process uniqueness and enterprise data density are both high, composite CRM solutions appear to be the best fit. A composite CRM solution is a solution that enables organizations to move toward service-oriented architectures (SOA). Accenture defines SOA as a business architecture where separate business functions on autonomous systems interoperate to execute a business process. This business architecture is “orchestrated” by a separate mechanism rather than hardwired into applications. This means that highly adapted company-specific services can be created to drive a high level of business process uniqueness for individual business processes, tapping into new custom functions, existing legacy systems or external services. The SOA end state also enables a high level of enterprise data density, with a shift toward increased master data management across a single logical and even physical data repository.

The Evolving CRM Software Ecosystem

An ecosystem is a living thing, always evolving – possibly in unexpected ways. We believe that a key aspect of the evolution of the CRM ecosystem will be the increasing popularity of SaaS offerings and composite CRM solutions.

Enterprise organizations are likely to continue expanding their offerings to support composite CRM. Niche vendors will likely expand into the SaaS space – perhaps on their own or, more likely, by partnering with other established players (e.g., using Salesforce.com’s AppExchange or perhaps leveraging new SaaS platform providers) (see Figure 4).

One implication – organizations must approach their CRM software decision as if they were boarding a moving vehicle. Organizations that today would buy enterprise or niche software may soon find that an SaaS solution or a composite CRM solution may one day be a better fit.

Some early SaaS adopters have been surprised to find the implementation more challenging than they expected. In those cases, they may have customized their business processes to an extent that makes an easy implementation impossible. Other organizations in this situation may need to re-engineer their business processes before trying to implement an SaaS solution.

When it comes to service-oriented architectures, few organizations have completed a successful end-to-end implementation; users may prefer to wait before heading down this path. However, CRM enterprise platform providers are moving their customers in this direction whether they feel prepared or not. Accenture can help these organizations understand the technology, identify which areas of their business will benefit from an SOA and develop a plan for implementing it.

One thing is clear: CIOs and other IT decision makers are moving through a more complex, dynamic and unpredictable landscape when it comes to CRM. The principles and strategies they relied on in the past when making software decisions will no longer serve them well. Accenture believes that by focusing on the factors that matter most, organizations can establish a strong foundation for building CRM capabilities that help them achieve high performance.