You'll put parts of your CRM in outside hands

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WILL YOU SOMEDAY outsource big chunks of your mission-critical CRM system to a next-generation marketing agency? Consider the following economic and technical assumptions.

Let's start with the economy. As everyone knows, the U.S. recession has reduced corporate budgets and caused widescale layoffs. Companies have decimated their in-house marketing departments and have, as a consequence, pushed numerous operational functions to outside advertising and PR firms. (Agency executives who complain about this are missing the big picture, I think. More on that in a bit.) My corollary assumption is that the outsourcing trend, forced by the rough economy, will not fade away when the economy rebounds.

Next, let's consider the technical side of the equation, specifically the revolution known as Web services. In a nutshell, Web services refers to an applications architecture that uses Internet standards for connecting programs wherever they reside, whether inside or outside a company's walls. The flurry of recent announcements by leading computer vendors about Web services points to the simple fact that the Internet standards for this kind of computing have finally matured. Companies offering Web services-based CRM include UpShot, and, most notably, Microsoft, which threw its hat into the ring last month (see story, page 31).

Microsoft's interest in this segment isn't surprising. CRM is popular. A Jupiter Media Metrix report released late last month (see story, page 2) found companies will spend more on CRM over the next two years than on any other large infrastructure tool. Jupiter believes the CRM market will jump to $16.5 billion in 2006, up from $9.7 billion in 2001.

Yet the record of CRM failures is truly appalling. By some estimates, more than half of companies that spent boatloads of money installing CRM systems are unsatisfied. The reason? Companies chase CRM technology without first dedicating real strategic thought to changing their culture and processes from a "sales" to a "customer service" model. Moreover, few companies measure the impact of customer service. A survey just released by Edison, N.J.-based DMR Consulting Group Inc., a unit of Fujitsu's software and services business, found that more than half of the companies in its survey aren't measuring the revenues coming from changes in their customer service strategies.

Marketing agencies-reconfigured to the brave new world of Web services-are ideally positioned to help. First and foremost, they are culturally and operationally attuned to worry about one-to-one marketing and measurement, two key ingredients for any successful CRM deployment.

Rather than complain, agencies should recognize they're on the cusp of a huge opportunity, a chance to involve themselves deeply in the CRM strategies and projects of their clients. They'll do this by stepping forward to handle some CRM functions. Those that don't-and, frankly, very few will be able to recast themselves this way-will lose this business to Microsoft and others.

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