Executive roundtable: where is CRM headed?

Where is the CRM software market headed? Will hosted solutions one day surpass on-premise solutions in terms of market share? Will we see even more small and medium sized businesses making use of CRM solutions? Will there be further consolidation in the CRM arena? Is the term CRM still relevant?

To find out the answers to these questions and more, Customer Interaction Solutions recently interviewed executives from six of the top CRM software vendors: Al Falcione, Director of Product Marketing, Salesforce.com; Tom Aiello, Vice President of Worldwide Sales & Marketing, Envision Telephony; Larry Ritter, Vice President of Product Management, Sage CRM Solutions; Bob Stutz, Senior Vice President and General Manager, SAP CRM Strategy; Pete Strom, General Manager, CRM, Consona; and William (Duffy) Mich, Chairman and CEO, Aperio Technologies. Selected responses to our questions appear in this Q & A, which has been fashioned to represent a roundtable discussion:

1. How do today's CRM implementations differ from those of seven years ago?

Bob Stutz:

For starters, CRM is no longer viewed as existing solely within the realm of the IT department, but has now expanded into all business areas. While CRM implementations in 2000 may have been spearheaded by the CIO for the purpose of cutting IT costs, today's implementations are embraced throughout the C-suite as a catalyst for business growth. As a result, CRM implementations are tightly aligned with the overall business strategy and focused on realizing business value, rather than meeting singular metrics.

William (Duffy) Mich:

Today's CRM implementations are more powerful and faster than seven years ago. They collect a lot more data at a faster rate. But that doesn't necessarily mean they are more effective. Many companies erroneously believe that new technology automatically results in better CRM. In fact, the way businesses identify and manage their customer relationship processes--including the ability to analyze and predict customer behavior--plays a much more prominent role in addressing customer needs than technology.

2. How do these differences open the possibility of using CRM to new and different companies in terms of size and vertical market?

Tom Aiello:

Smaller companies can take advantage of analytics offered in CRM systems to understand why their customers are calling and then to take action to improve their customers experiences faster than their competition. Small to midsized companies can take advantage of Web-based applications to share valuable information across their enterprise anytime, anywhere, creating a more intelligent organization. With hosted solutions, they can leverage the power of CRM solutions that in the past only larger companies had access to.

William (Duffy) Mich:

As technology becomes commoditized, smaller-sized businesses will be able to affordably leverage CRM solutions, particularly those which are comfortable in implementing self-help Web-based services. This will allow companies in previously untapped vertical markets to improve their CRM capabilities. In addition, smaller companies, particularly those that do not possess the internal skill set required to manage CRM systems, will rely more and more on outsourced providers to manage their CRM needs.

3. What sort of changes or shifting paradigms are you seeing in today's CRM solutions?

Larry Ritter:

Recent research from analyst firm IDC shows that companies are beginning to move into a new phase of CRM evolution--what is being called the "decision" phase. Users are looking at CRM as more than just a tool, but as a source of information that will help them make good business decisions. These forward-thinking businesses are utilizing their CRM systems in a strategic manner to change processes in order to attract, service and retain customers. Providers of CRM solutions are being tasked with the challenge of meeting these needs with advanced analytics, flexibility and accessibility of information to allow users to retrieve and utilize the proper customer information instantly, providing customers with a seamless service experience.

Bob Stutz:

Business leaders have realized that internal efficiency alone is not enough to guarantee market differentiation and competitive edge. Success is no longer determined by price and product alone, but also by well-designed sales channels and service processes. Realizing this, organizations now measure CRM implementations beyond the ability to effectively run marketing campaigns or operate efficient call centers. In the last five years, we've seen that effective vendor solutions offer a holistic approach to CRM and recognize that customer experience is not limited to the front office. To energize new growth, organizations need to excel across and beyond customer touch points, which cannot be achieved with the point solutions on the market. This requires comprehensive, highly integrated applications that support end-to-end business processes.

4. Do you think the issue of "licensed versus hosted" will ever be settled? Or will it become a moot point?

Larry Ritter:

Licensed and hosted solutions do not necessarily need to be viewed in opposition to one another. We see the two deployment options as part of the increasing trend towards customizing the best CRM deployment for each specific business. For some companies, the lower cost and quick deployment benefits of a hosted solution may be best for their current environment. On the other hand, companies that need their CRM to do more--perhaps the business requires comprehensive customizations or extensive integration with ERP (Enterprise Resource Planning) and other systems--would be better served by purchasing an on-premises, licensed system. Still other companies may be more comfortable with the cost of an on-demand system initially, but may need to migrate to an on-premises solution as their business further develops.

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Bob Stutz:

Different deployment models have their advantages and disadvantages. It really comes down to customer needs and business goals. On-demand became popular from a simple sales-enablement perspective. For a VP of sales, on-demand is a perfect solution to bypass IT and get an easy-to-use SFA (Sales Force Automation) tool up and running quickly. But pure on-demand solutions are limited in scope and hit a ceiling in delivering value. There's definitely a tipping point for customers where on-demand doesn't make sense and they need an on-premise solution.

5. Are there still untapped markets for CRM solutions?

Al Falcione:

We think that there is significant opportunity for small companies, large companies, and vertical solutions. Small companies have really just started adopting CRM solutions. Our on-demand CRM offering makes it easy for them to get up and running quickly without the traditional hassles of software. Large companies have tried--and many failed--with implementing CRM software, however they are now beginning to realize the benefits of on-demand and we see a lot of potential. In terms of vertical solutions, we've already seen incredible success in the financial services industry--and there are many other verticals that are great opportunities for on-demand CRM.

Pete Strom:

There are still many smaller and medium sized companies that aren't currently using a CRM system so there are opportunities there. Additionally, there are still many international markets where CRM is relatively new and there is a lot of room for growth. From a functional standpoint, we really believe there is a void in the market for CRM solutions that have strong Business Process Management (BPM) capabilities, in essence, marrying the management of customer data and customer-facing processes. Additionally, we believe that most CRM solutions don't have strong Service Resolution Management (SRM) functionality and we see this as the critical next step in extending the traditional boundaries of CRM.

6. What organizational departments are not using CRM now but might actually benefit from it?

Pete Strom:

We see value for departments like operations, product management, accounting, R & D and other departments. When you think about it there is a lot of value in nontraditional departments leveraging CRM. For example, the account management and accounting departments may want to segment the customer base and vary their communication method around late payments, depending on the value of the customer (for example VIP customers getting a personalized reminder versus a generic letter). Or the R & D group may want to work closely with account management and product management groups on identifying, prioritizing and following-up on enhancement requests from customers that were tracked in a CRM system. There are many other ways CRM could be leveraged in a non-traditional way.

7. How can vendors help CRM become even easier to administer? Many companies shy away from CRM because they're afraid their IT people will need special degrees just to administer and troubleshoot it.

Larry Ritter:

By providing companies with options such as codeless development environments, CRM vendors can simplify the process for modifying an application and provide a level of consistency, which allows for easier IT management. This type of environment also cuts the ongoing expenses of maintenance and continued customization by allowing companies to easily configure a solution which meets their unique business requirements. However, many systems still require the help of a partner company in order to perform complex integrations or customizations. In this case, the best assistance that vendor companies can provide is an extensive partner network which will allow customers to select from local partners that have a vested interest in serving their business needs.

8. What has simplified CRM integration with other organizational systems?

William (Duffy) Mich:

Advanced ETL (Extract, Transform and Load) technologies have been a huge asset for efficiently processing customer information. It wasn't long ago that nearly 90 percent of all CRM activity was spent on collecting data. That left very little room for analytics, which are the real value in CRM deployments. Now, through ETL technologies, the time and resources spent on collecting and cleansing data have been reduced to 40 percent, leaving about 60 percent for analytics.

Al Falcione:

Recently we announced Salesforce SOA, which will deliver SOA as a service, heralding the end of complex and expensive software-based SOA solutions for intelligent Web services integration. Salesforce SOA will run on salesforce.com's on-demand platform, removing the cost and complexity associated with deploying and managing infrastructure.

Tom Aiello:

New XML-based languages have enabled CRM integration to become easier.

9. Do you think the term "Customer Relationship Management" is still relevant? If not, what term works better?

Tom Aiello:

Customer experience might be a better term. Customer experience more fully describes a customers' experience with the entire enterprise--how people, process and technology work together to support customer expectations. New technologies will support analysis and sharing of information critical to support customers' experience. As more and more data is collected, new solutions will become available, such as data security, to ensure that customer trust and confidence remain part of the experience. Better understanding of customer service delivery will also provide new opportunities for technology to support corporate demand to increase revenue, reduce costs and optimize performance.

William (Duffy) Mich:

There is nothing intrinsically wrong with the term. By definition, that's what businesses intend to do: manage their relationships with customers. But in practice, many businesses are relying too much on the data gathering engine and less on the intelligence aspect of CRM, specifically identifying, evaluating and acting on customer propensities. The technology can actually drive providers farther from their customers. But it's the analytics that ultimately brings the two groups together.

10. How do you see the CRM marketplace shifting in the years to come? Will we see consolidation like we're seeing in the workforce optimization market?

William (Duffy) Mich:

We're likely to see solutions that offer close to real-time decisioning and customer resolution. These may include intelligent call routing that far surpasses what's currently available through IVR technology. Service oriented architectures will enable businesses to link together previously disparate operating systems and networks--like billing, inventory and their enterprise phone network--to provide customized decisioning and resolution on the fly and in real-time.

Al Falcione:

The only consolidation that is happening among CRM software companies is with those that have missed to the mark when it comes to on-demand--look at Siebel. SaaS and the on-demand model is the future of software--this will be the biggest trend of 2007 and beyond. Issues of integration, security, reliability, scalability and performance that are inherent in traditional software are virtually solved with SaaS, and IT departments can focus on the challenges of innovation, not infrastructure.

So there you have it: In a basic sense, CRM is still about collecting and storing information about your customers--but today, more than ever, it about how you use that information to make good business decisions. As a result, today's solutions are putting a stronger emphasis on the ability to analyze the data in a wide variety of ways so that specific problems--or trends in customer behavior- can be quickly identified and addressed. Although CRM solutions are becoming more sophisticated in this regard, one thing remains the same: CRM software is not a "cure-all," it is simply a tool which can help you arrive at faster, more efficient business processes, which in turn leads to higher customer satisfaction. But as we've learned so many times in the past, there is no substitute for knowing your business and knowing your customers.

TMC will be publishing the complete interviews on a vendor-by-vendor basis on TMCnet (www.tmcnet.com).

By Patrick Barnard, Associate Editor