Can CRM Finally Grow Up And Deliver?
Industry maturity is typically evidenced through the entry of late adopters, increased fierce competition among vendors to win new business, rapid consolidation in response to changing customer expectations, and buying criteria that only a few can serve on a profitable basis. One can easily note these trends in the CRM industry today. Customer perceptions around CRM have been changing as most are now asking how CRM can serve as a key enabler in todays high velocity business environment. This is understandable as enterprises need to accomplish business objectives faster and cheaper today through functional and enterprisewide process automation.
CRM implementations are improving and demonstrating some ROI success. But does this mean that CRM can live up to its original promise that it can truly and cost effectively help an organization manage complex, changing and challenging customer relationships across an extended enterprise? In this article, we assess the key reasons behind some factors that contribute to this skepticism and look to some answers from Microsofts CRM ecosystem model to help assess if and when CRM may grow up and deliver.
Customer Expectations Of CRM Have Changed
Customer expectations have matured from viewing CRM as a technology useful for solving the problem of how to collect and update customer centric data kept in application silos to viewing it as a solution vital to addressing how to transform this data across applications (front office, back office, enterprise performance management and decision support), thereby weaving an integrated workflow to automate end-toend business processes.
This maturation is not at all surprising because the original promise of CRM was just that: to not only collect, aggregate and analyze useful customer information into a 360-degree view of the customer to the business, but also to make actionable this analyzed information to connect end-to-end business processes for outcomes that would be either too cumbersome, too costly or too late to use without CRM.
The focus on the real-time imperative for enterprise applications, heightened by the economic downturn of recent years, has indeed served as a catalyst for this predicted, although slow-in-coming, maturity. However, the lingering questions about the true utility of CRM applications remain. The party line customers hear most from the vendor community is that CRM applications automate the sales, marketing and services functions to provide a 360-degree view of the customer and enable enterprises to be more customerfocused. Most vendors are sticking to that promise being a reality available today. However, the skeptics remain encouraged, and the lingering questions to the ultimate value of CRM remain for three key reasons:
1. Complexity Is Out Of Control
When CRM technology emerged about a decade ago, it was welcomed by businesses that were finding it increasingly complicated to maintain personal relationships with their customers. Early adopters started using the new technology primarily in the service and support departments to boost service, quality and speed.
As CRM vendors introduced more features and functionality, use of the technology spread across the enterprise applications and functional boundaries, creating a whole new level of complexity and the related integration costs. Companies started experiencing significant challenges. In putting CRM into practice, they started discovering the realities of conforming their business practices to what was technically feasible. Often overwhelming were more mundane issues like speed of deployment, user adoption and basic functionality.
2. ROI Remains Elusive
True, as companies face the challenge of trying to extend business reach and at the same time curtail spending, CRM solutions are helping many customers get more out of their technology investments. However, the frenzied spending on CRM during the IT boom at the end of the last century and the slow digestion since has brought into question the value of the incremental CRM against the intended business goals and performance metrics in every technology investment management review. Whether starting from scratch or expanding an existing CRM implementation, understanding how CRM impacts ROI has become more critical than ever.
3. Vendor Viability Is A Rising Concern
A sign of industry maturity, the consolidation in the CRM independent software vendor (ISV) ecosystem is rapidly pushing the limits of customers sense of security in a good majority of the current vendors. The financial viability concerns of several point-solution providers is a three punch effect of the current macro-economic environment, the fast accelerating move to business process alignment, and the need to differentiate beyond the horizontal CRM application functionality on a profitable basis.
According to analyst predictions, the future holds much promise for renewed CRM growth. Regardless of the analyst cited, the projected CRM growth rates over the next five years are impressive. The reasons for the optimism lie in three key factors: the largely untapped midmarket opportunity; the rising appetite in the installed base for vertical functionality and composite applications; and the lowering price points due to the expanding hardware and software choices at increasingly attractive price points.
Ah, The Potential Of The Midmarket
That roughly only 10 percent of the midmarket has a CRM solution today is probably the best indicator of the largely untapped midmarket opportunity for CRM. The predicted growth due to this factor can be rationalized easily given two key trends in the vendor community. First, the requirement of low footprint of CRM applications in the small and medium business (SMB) space makes it attractive to existing players to go downstream and capture a share in this fast-growing segment. Second, CRM applications in general are also finally coming to terms with what it really means to address the SMB space by slowly moving away from just-reduced functionalities to providing specific features that cater to this segment of the industry.
Rising Appetite In The Installed Base For Vertical Functionality And Composite Applications
CRM vendors are beginning to focus on verticalized applications to increase rich functionality as well as to reduce the implementation and customization cost. CRM vendors, especially in the SMB space, are pursuing a microvertical strategy that brings very specific vertical functionality be it manufacturing vertical solutions offered by SAP, a health care microvertical offering by Pivotal or a 3-1-1 government solution by Onyx. To achieve a rapid, cost-effective and scalable differentiation strategy, vendors are adopting horizontal platforms like Microsoft CRM as the engine to provide the base functionality and adding vertical domain extensions on top of the core engine to get to market in the quickest possible time.
Lowering Price Points Thanks To Moores Law
Finally, thanks to Moores Law, the hardware price points continue to shrink and become attractive to new segments of users. Key accelerants also include the migration from mainframes to workstations and change the tide from specialized workstations running on proprietary chip-based computing solutions to the less-expensive and easy-to-upgrade Wintel architecture offering workstation performance at much lower PC price points.
However, does growth mean it is accompanied by the delivery of the CRM promise? It should be clear at this point that for customers to truly believe in the credibility of the CRM promise that above all else vendors need to address the complexity, ROI and viability questions.
Looking For Some Answers In Our Partner CRM Ecosystem Model
Along with other industry enterprise infrastructure technologies, Microsoft recognizes the importance of supporting CRM vendors. Microsofts CRM ISV recommended partner ecosystems are specifically defined to support businesses of every size and all aspects of business operations from call center players such as Aspect Communications to salesforce automation and everything in between, including Kanas approach in the service resolution management category. They leverage the .NET Platform to connect customers, partners and employees in a seamless network that can be accessed any time, any place and from any device. In addition, we are working closely with some key developing partners to provide more compelling CRM solutions in the marketplace.
As part of our partner CRM ecosystem model, we work with CRM ISVs that have demonstrated revenue leadership position or potential in their market segments, committed to drive significant MS product revenue and critically enabled by MS technology (see Figure 1).
Our learning in applying and using this ecosystem model suggests that the ability of CRM to get closer to delivering on its true promise is, in part, quite dependent on the adoption of a few key trends: flexible user experience, moving away from point tools to enterprise application suites and using pre-built components and Web services.
Flexible User Experience To Appeal To All Users In The Most Compelling Ways
User interface requirements are quickly outgrowing the scope and capabilities of Web-based applications. CRM applications are looking to smarter clients both on the desktop PC as well as mobile devices such as smart phones and tablet PCs to provide a better user experience. Smart clients enable applications to provide offline functionality and better responsiveness to users. Smart clients that leverage the richness of desktop applications and the connectedness of Web applications are gaining acceptance as the preferred mechanism of addressing this need.
Traditionally we have been talking about integration of data in the back-end systems to enable better forward-looking decisions. Now, we are actually talking about the presentation of actionable data in the front end tied to the core system through Web services. Soon this will also be propagated to systems beyond MS Office. For example, being able to view CRM data from Pivotal from your Lawson Healthcare application in real time through Web services is a powerful notion that turns enterprise application integration (EAI) on its head. Using this approach, one would find only few real incentives to do full-scale data integration other than to generate reports or observe key decisionsupport information through the use of portal-based dashboards.
Wireless And Mobility Of Data And Services To Appeal To Any Device At Any Time
As wireless connectivity becomes more ubiquitous, providing fresh data in a meaningful form factor to mobile users is becoming very important for CRM applications. Some vendors are also investigating ways to offer actionable data that will enable mobile users to take simple decisions based on a finite list of two or three choices.
Vendors, having finally realized the futility of cramming the same amount of information offered in desktop versions into small form factors, are now trying to scale the information down to be accessible through the mobile versions of the CRM applications. This is hastening the adoption of wireless and mobile versions of CRM applications by mainstream CRM users yielding more productivity in both the always-connected power and disconnected or often connected lite users across the wide spans of a geographically dispersed enterprise.
Cross-Application Integration Using Web Services To Ease The Integration Pains And Costs
The shift in customer preference toward enterprise application suites is becoming more pronounced as these solutions provide end-to-end integration of data, thus greatly simplifying the implementation and maintenance of the software.
No enterprise application is an island of data anymore and the glue that brings disparate systems together is the XML-based standard of Web services. Applications designed using the principles of serviceoriented architecture (SOA) aid in easier assembly of disparate systems and facilitate cleaner flow of data from one system to another. Web services greatly reduce the complexity involved in enterprise application integration by providing an open and extensible framework. Evolution of software tools like the Microsoft .NET framework enables vendors to adopt and create applications based on the principles of SOA in an incremental fashion without having to throw away existing investments.
Real-Time Embedded Analytics To Act On The 360-Degree View Data In Real Time
Providing rich native functionality for the analysis of past and future trends and integrating data from different sources is an inescapable phenomenon for CRM applications. Real-time enterprise computing is about establishing business processes to gain competitive advantage by removing the latency from underlying business practices.
As CRM applications move up the value chain of businesses, providing real-time capabilities to aid in fast decision making is key. This can be achieved only by integrating these capabilities into the core functionality of the application itself rather than having analytics as a stand-alone module. Providing snapshots of data from non-CRM parts of the enterprise suite is integral in enabling real-time decision making.
Summary
The CRM industry can look back on the past few years with a measure of satisfaction on progress achieved: customers now perceive CRM as a key enabler to succeed in todays high velocity business environment. However, the growth ahead gives rise to a question: When will CRM grow up and deliver what it promised at inception, beyond boosting productivity through functional automation to business process automation that scales all applicable users and devices to create an inherently connected enterprise? When will it yield a compelling return on investment? Will CRM grow up and deliver against that promise? Experience with Microsofts CRM ecosystem model and work with leading vendors to utilize the latest application integration, mobile and analytics technologies suggests ways CRM may address this question.
