A Focus on Speed, Efficiency, and Growth: An Interview with Oracle''s Lisa Arthur
Q: What is Oracle's definition of CRM?
A:
Oracle's definition of Customer Relationship Management is a complete and simple
view of the customer across a company, an enterprise, an organization. Traditional
CRM software alone is not enough; ERP software alone is not enough. Companies
need and require front and back office applications that link together. We believe
that CRM is giving marketing, sales, and service - individuals who interface
with the customer - the ability to get information and consolidate that customer
view across the Web, through call centers, through field service, and through
partners so that they can better market, sell, and service their customers.
To do that, you must not only synchronize marketing, sales, and service over
all of those interaction channels, but you must link it into financials, HR,
and inventory. For example, a Web store can't be a standalone Web store. That's
why many e-tailers have failed; they thought the Web store could survive alone
when in fact a Web store needs to provide availability of goods and merchandise
to a B2B customer or a B2C customer.
Oracle believes that CRM is a matter of linking customers, employees, and suppliers over the Web, over the phone, face-to-face, and through partners so that you can holistically improve relationships with customers, add value to customers, and also reduce costs. That's something that is not often discussed - the cost reductions and efficiencies that CRM brings.
Q: What kinds of cost reductions and efficiencies can be enjoyed by a company with a fully-implemented CRM solution?
A: It's important to take a step back and look at a strategy before discussing cost reductions and efficiencies. There are really two strategies that customers take in the market today in implementing Customer Relationship Management solutions. One of those is what we call a "kit" strategy. A kit strategy pulls disparate components together, like Web marketing, campaign management, marketing analytics, and a Web store, connect it to field sales, tie that to telesales, tie that into a partner management solution, tie that into field service, tie that into Web self-service, tie that into teleservice, and then tie in some pieces like email management that cross marketing and service to communications. In fact, based on that very brief discussion I've identified a CRM kit. A customer could actually put together anywhere from 10 to 20 CRM point solutions.
The other option is a "suite" strategy - one solution that connects customers over the Web, over the phone, in the field, with partners, marketing, sales, and service to employees, to suppliers to balance supply and demand.
So Oracle's strategy is the suite strategy, which goes back to complete and simple - out of the box and integrated. But what does integration mean? I'm only interested in integration as a marketing VP if it can help me do my job better. I can look at a campaign-to-cash and it sounds very simple: I go out; I want to generate some revenue; I go to new customers; I go to prospects; and I generate a campaign. With that campaign, I generate prospects and leads. Then my sales team starts to qualify and mature those leads. We do some of this over telesales and some we do in the field. If I am a B2B, I sell directly in the field, mature those, book the orders against that campaign, and then collect the cash from what we deliver. That's campaign-to-cash. I author a campaign; it generates leads, which turn into sales; we deliver to the customer, and it generates revenue.
Unless you have integration between marketing, sales, order management and accounting, it is impossible for a marketer to understand what revenue his or her campaigns generated. You can never answer, "What's my real ROI?". And in this competitive environment, especially with the U.S. economy being a bit shaky right now, having visibility into ROI and which channels are working is critical. That's what integration delivers to me as a marketer, a genuine flow of information with meaningful information as a result. You can certainly get integration through the kit - but it's not complete. It's costly, and it's never easy.
Gartner Group, META Group, and other analyst firms use different figures on integration of applications, but the bottom line is this: In a "kit" environment, six to eight times the license price of the software is spent stitching it together. We would call that "interfacing" and not "integrating." We believe that customers and their partners, like Accenture, should spend that money on things like change management, on best practices, on how to improve the marketing and sales processes, the sales to the customer, and internal efficiencies.
But that is one of many cost reductions and efficiencies that Oracle's fully implemented and integrated CRM solutions suite delivers. It's a reduction of stitching the kit component together and being able to allocate that money to the more strategic piece of the business, of changing processes, changing structures, changing practices to make that company more competitive.
In June of 1999, Larry Ellison, our CEO, set a very bold goal for Oracle to transform ourselves into an e-business using our E-Business Suite - we were already using many of the components. The goal was to drive a billion dollar difference to our business. You may have seen some of those ads. In that billion dollar difference, we were continuing to increase revenue and spend at the same rate. We wanted to continue increasing revenue, but really affect the operating margins so that we were increasing our profitability, and that end delta is $1 billion.
Larry gave us a year and it actually took nine months to achieve - and we're well on our way to our second billion. And so what are some of the cost savings there? Some of the cost savings were due to the integrated CRM solution and some were due to consolidation. We saved $11 million by consolidating databases, servers, and other infrastructure. On CRM, it was huge - of the $1 billion dollars, CRM changes in process, structure, and technology was $550 million of the $1 billion, which is 55%. And that came from carefully examining and consolidating our sales applications. We had a store that was disintegrated from telesales, that was disintegrated from field sales systems. Larry has publicly said he could not go out and get a global sales forecast prior to our transformation; he would have to make several international calls to find out that data. So we saved $18 million in just the process changes of moving away from all these separate applications to one global sales suite.
Additionally, we moved more and more sales, marketing and support functions to the Web and the results are significant. On the sales side, moving cost of sales from field sales to Web cut the cost from $350 per transaction to $20 per transaction. $350 is the total cost of a sales person going to the field, negotiating with the customer, booking the order, returning and entering the information into a database. The customer and/or the sales person doing it over the Web is $20 per transaction - a reduction in cost of sale of $330 per transaction. Online customer training moved from $250 per person from a customer knowledge sharing standpoint to $2 a person over the Web. Service was very similar; going to Web self-service reduced the cost of problem resolution from about $300 to $2 to $3 per resolution.
You drive those efficiencies by leveraging the Web, not as a stand alone e-business initiative, but integrated into the heart of the business so that your call center is integrated to the Web. So when a Web self-service comes up, and the person can't solve the problem, the call center can make an outbound call and quickly fix that problem. And the customer may also solve it themselves by going online and going to a knowledge base; that drives down the number of problems and drives up the resolution time. That helps customer loyalty.
On the marketing side, by using our own new marketing systems, we've been able to drive down the cost of attending a seminar from about $350 per attendee to $1.98 - and in that we increase our reach five-fold. So we grew by using e-marketing and e-seminars over the Web; we increased the reach five-fold, but we decreased the cost from $350 to $1.98. That doesn't mean that we don't go out in the field with seminars anymore. What it means is that we're able to do them strategically by limiting the number of face-to-face seminars that we do.
Everybody will tell you how much CRM will cost you or about the top-line growth, but no one really discusses the efficiencies it brings - and that's really when CRM is a winning proposition. CRM efficiencies can help you keep your customers, make them happier, grow your revenue with new prospects, and also drive out all the craziness that we've built over the last 20 years because of disparate systems, because we were retro-fitting these business processes on the fly. Now we've solidified to connect Internet business processes and practices where the business should flow, which makes it much more efficient, cost-effective, and easier to do business.
Q: How does online hosting play into the CRM space?
A: We think that online applications are going to be huge in the future. And this is one of my favorite topics, because we have already released two online CRM applications over the Internet. Customers today are given a url that takes them directly to the site where they can actually get access to internal customer care or sales force automation applications. Over time, that will be built out to feed the entire CRM suite, the whole E-Business Suite, and we expect tremendous uptake in that. In fact, we launched the Sales.Oracle.com site in August 2000 and in February we launched the Support.Oracle.com, which is the internal facing customer care online application. Since then we've had over 12,000 unique companies and over 180,000 users sign up for the service, so we think online CRM is absolutely the future because it wages War on Complexity on a whole other level.
Q: Small and mid-market companies complain that they can't afford to work with the big integrators. How will the ASP model help those companies with their front-end integration?
A: Oracle feels that if we deploy our application online, small to mid-size companies will work with their system integrators in a new way. These system integrators will add value, like strategic change management components, to that company. So Oracle will deploy online applications that are configured for that customer - but still affordable - because the hardware and the methodology are in place. There is no longer a need to try to bolt many different systems together.
There are not huge maintenance issues involved because it's very seamless and the system integrator will work with that company on change management, on structure, on driving the efficiency and the competitive advantage to that company. So I think our online services offer them more opportunities to be more strategic and spend less time on the non value-added things like resources, hardware, and infrastructure. They can spend that money on the competitive nature of the business like getting to market faster, driving out inefficiencies in our supply chain, and on increasing demand by marketing and selling smarter and better. That's how small to mid-size companies will get to be part of the Fortune 4000.
Q: Does Oracle have a total solution for front-end integration or does it take a collaborative effort with some strategic vendor partners?
A: Since Oracle offers the suite approach, the applications we create integrate marketing, sales and service over the Web, over the phone, face to face, and with partner management. We partner on the key components that extend that teamwork to our customers. For example, in the call center space, we have partnerships with vendors so that our customers and our partners only have to work with the switch vendor and with Oracle to install a very complicated call center that does in-bound and out-bound call center activities with predictive dialing. We partner with the switch vendors; we partner with companies on the middleware and make that totally seamless to our customers. So basically it's Oracle and the switch vendor; a partnership that provides the total solution. We partner very strategically in areas that add a lot of very precise depth and very niche functionality. We bundle that with our product in a manner that is seamless to our customers and, in the end, it is really a complete suite - a strategic partnership.
Q: What kind of implementation time are we looking at for Fortune 4000 enterprises to get their CRM initiative fully integrated?
A: Oracle is helping customers wage a War on Complexity. If customers question the conventional implementation methodology of taking months or years to implement a single function, they will find with Oracle they actually do it much quicker with a complete, simple solution. I'm going to draw a parallel to the ERP market. Oracle started accelerating the adoption of ERP applications through programs like FastForward, programs that basically accelerated adoption deployment kinds of benefits. So now, for example, Oracle can actually implement global financials in a large company in as little as five days. Five years ago that simply wasn't possible. So we decided to do for CRM what we did in ERP; we are waging a War on Complexity by using the Internet as a way to roll out products very quickly and seamlessly.
So the whole War on Complexity is this: You can actually transform pieces of your business in as quickly as 90 days. By using the Internet, by using best practices from other companies that have already done it, you can actually begin to see ROI from CRM in 90 days. And we use ourselves as a proof point in that we rolled out a global instance of field sales in over 60 countries in just over a week. So we've used ourselves as a guinea pig to wage this War on Complexity, get Internet business practices defined, and use the Internet to deploy them quickly. We believe that we can actually get key functionality implemented within a company in as little as 90 days. Some companies will take longer because they have to go through the technology, the structure, and process changes to be able to do that, but we still think we can significantly reduce the timeframe in implementing and enjoining CRM by using the Internet, and by leveraging Internet business practices.
