Managing your relationships

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The customer relationship management industry has been taking it on the chin.

The press gave extensive coverage to a recent Gartner study that said as many as 50% of CRM implementations fail. In addition, there have been articles about CRM companies that have folded and left customers in the lurch.

But IT managers and vendors have learned their lessons from the CRM problems of the past and are looking optimistically toward the future. They are convinced that well-planned CRM programs will reap significant benefits. In fact, CRM is the No. 2 technology priority for IT managers, according to a study by the Meta Group. Only system integration ranked higher. This marks a significant departure from 2001, when CRM spending languished at No. 15.

As CRM rises on priority lists, companies have changed their buying patterns, and vendors have changed their selling strategies.

The most visible change is the size and scope of a typical CRM project, said Volker Hildebrand, VP-eCRM with SAP America. Gone are the days of multimillion-dollar technology buys. Unless companies can identify a short-term return, they’re avoiding new purchases and turning to modular solutions.

"Customers are more focused on smaller projects or trying to solve a pain point," Hildebrand said.

As a result, CRM vendors are moving away from the suite approach and toward pay-as-you-go options. For example, J.D. Edwards is selling its products in bite-size chunks, said Karl Johnson, VP-CRM strategies, as are most of the major CRM vendors.

Vendors also are lowering prices, removing a barrier for anyone who’s on the fence about CRM, said Ben Holtz, president-CEO of Green Beacon Solutions, a CRM consulting firm. "Prices are definitely dropping," he said.

Some companies are adding features to their software packages at no additional cost. Oracle recently announced it was bundling business intelligence technology into all of its base CRM products as well as reducing its prices. "We’re making sure customers have accurate pricing and that they get all the discounts they are eligible for," said Andrew Kass, Oracle’s VP-CRM development.

However, while per-seat costs have gone down, many suppliers now require per-name commitments—anyone who uses the software must be registered by name. In the past, companies simply bought a specific number of seats, and those seats were shared across the enterprise. Microsoft’s new CRM offering will use per-name licensing, but it’s an extension of its program’s security, Holtz said.

Another change in the marketplace is an increase in interoperability. Because customers are more cautious and are not making across-the-board investments, vendors are courting anyone who will buy their software, even if that customer happens to own a competitor’s enterprise resource planning (ERP) or sales-force automation product. To do that, they’re building in hooks that will connect software into a successful heterogeneous environment.

Many CRM users are not convinced. One CRM customer said he doesn’t think true interoperability is here yet, which is why he bought a CRM program from the company that supplies his ERP software even though the vendor’s program didn’t have all the features he wanted.

"What it really came down to for us was a trade-off of feature set versus best of breed versus the cost of integrating software with our legacy system," said Aaron Nichols, general manager of business transformation for Canada Post, the Canadian equivalent of the U.S. Postal Service. "From an integration standpoint, it was most important for everything to work together well."

Vendors also are working to integrate CRM and partner relationship management functions (see story, page 17). Quite simply, said Bruce D. Temkin, principal analyst with Forrester Research, companies are looking for a way to serve all of their business partners and customers in the most efficient manner possible.

"Companies are getting clear the whole area of managing partners," Temkin said. "How do we handle leads? How do we pass content and marketing catalogs to our partners? Companies are realizing that CRM isn’t just a technology; it’s a way of doing business across the entire company and infra-structure," he said.

The changes are making their way into call centers in the form of self-service and "push-to-chat" features, he said. "It’s all about enabling every link in the supply chain."

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