CRM: All grown up

Comparing the customer relationship management (CRM) of today with the CRM of the 1990s is like comparing apples and oranges. CRM has evolved to a point where it`s practically unrecognisable.

It`s a hotly contested business now, as evidenced by the recent agreement by Oracle to buy Siebel Systems in a deal worth around $5.85 billion. At the time, Oracle president Charles Phillips said the plan was to make the features of Siebel`s CRM products the centrepiece of Oracle`s Project Fusion CRM, as another "major beachhead against SAP".

SAP sneered at the move, saying Oracle`s strategy was to "buy customers while SAP`s is to serve customers".

There is good reason for the competition. Oracle noted that of all major segments of the enterprise applications business, CRM is the largest and fastest growing - estimated to be more than $8 billion in 2004 and expected to grow to $14 billion by 2009, according to the International Data Corporation (IDC).

No longer just a nice-to-have marketing database, today`s CRM packages include business intelligence (BI), analytics and more, and are capable of practically "anything" - from predicting trends to determining why customers don`t like what businesses are doing. CRM is now so different from the CRM of the past that most CRM vendors now say they`d like the name changed to something more appropriate.

Everyone is talking CRM again.

Roger Strain, head of business solutions, Liquid Thought

CRM solution providers report that local companies are increasingly prepared to invest in an enterprise-wide CRM solution.

"Not too long ago Meta Group was reporting survey results that found that 70% to 75% of all CRM initiatives failed. That was yesterday," says Nicholas Maweni, marketing director at Atio.

Gartner notes that most organisations had started their CRM projects by 1997 and by 2000 they were in the process of deploying their first generation of CRM. More than 40% of organisations have implemented some form of CRM, says Gartner, and another 30% are moving forward with CRM projects.

Roger Strain, head of the business solutions division of Liquid Thought, says there has been a significant resurgence of interest in CRM in SA over the past six months.

"Everyone is talking CRM again. It was a hot topic in the 1990s, and then died down for a few years. Many companies spent the past few years focusing on processes and ERP systems, now they are focusing on growth once more. With that, comes a need for CRM," he says.

Graham Mansfield, GM of Siebel Systems, says while it is "practically impossible to say" what the size of the local CRM market is, Siebel has seen tremendous growth in the market.

The customer experience is going to be the next business battlefield.

Jeff Solomon, director of customer management, Ability Solutions

"But even still, CRM and BI vendors have probably tapped less than 10% of the overall market potential. One thing we are fairly certain about, though, is that the focus on customer service and differentiation is not going away."

Jeff Solomon, director of customer management at Ability Solutions, feels strongly about the business case for good CRM.

"SA has never had a culture of good customer service. Consumers have been apathetic in their acceptance of bad service, and competition has been limited," he says. "But the market is changing. Competition for the customer`s spend is becoming more aggressive, so we`re starting to see CEOs worrying about customer satisfaction."

Solomon warns: "The customer experience is going to be the next business battlefield."

SAP Africa director of strategic initiatives Simon Carpenter sees increased activity in the small and medium business (SMB) market as a driver for CRM market growth.

"SMBs are using CRM technology more and also becoming CRM service providers - particularly in relation to call centres," says Carpenter.

"SAP global statistics show that almost 70% of all CRM activity is call centre-related - because call centre technology is the most mature of all the CRM options. So, large corporates are installing call centres well ahead of other CRM solutions. In addition, voice over Internet Protocol (VOIP) technology has put call centres well within the affordability range of SMBs - many of which are hosting call centre facilities for their peers or providing new services to larger organisations.

"At the same time, CRM as a discipline is shifting from a focus on point solutions, such as best of breed call centres, to integration of all subsets of CRM. The days of a separate front and back office are over," Carpenter says.

Marcus Potts, MD of Maximizer Software, notes: "SA is behind Europe and the US with regard to integration of CRM and the Internet. However, mobile integration is a growing trend, in large due to the South African love affair with the cellphone. This type of application is far ahead of Internet integration in the country, but as mobile and Internet technologies converge, SA will be well placed as companies find the true value in CRM."

IDC last year rated Siebel as the CRM market leader globally, followed by Oracle and SAP. The top three, however, accounted for less than a fourth of the world market.

Nick Hewson, head of CRM information and analysis firm the Hewson Group, feels strongly that the CRM market has to be divided into at least two distinct groups: corporate and mid-market.

"In the corporate market (ie global companies that have made a company-wide commitment to one solution) the main players are quite clear. These are: Siebel/Oracle, SAP, Amdocs and PeopleSoft," says Hewson.

Imagine the repercussions of contacting a client for payment if the order is outstanding.

Christo Nel, pre-sales product manager, Cognos

Hewson elaborates on the mid-market: "It has more players, many of whom will have a claim to a leading spot which would normally be defined by the number of deployed seats or revenues from CRM. In SA, there would seem to be a changing position, whereas the contact management market used to be fought out between Maximizer and Goldmine. This may now be different going forward with Maximizer`s enterprise product facing new competition from Microsoft`s CRM and open source in the mid-market."

SAP says SA`s key CRM players at enterprise level are SAP, Siebel and Oracle, with FrontRange as the leader in the mid-market.

Most companies face a common obstacle in their efforts to be driven by their customers: the lack of unique, complete and accurate information about those customers. Even companies that have implemented CRM applications often have fragmented customer data. The reason? Customer data continues to be created, updated and maintained in non-CRM systems.

Also, CRM applications are often implemented within a department or division, rather than across the enterprise. As a result, customer information remains fragmented and duplicated across the organisation, resulting in an incomplete view of the customer. Customer data integration solutions provide a single view of customers, pulling data from different locations and sources. The primary benefits being:

* Enhanced customer experience by providing more targeted, differentiated customer service.
* Improved cross-sell and up-sell efforts by providing a complete picture of the existing customer relationship.
* Streamlined business processes by eliminating manual rework caused by bad data.
* Reduced costs by centralising the management of customer data.
* Compliance with stringent privacy and regulatory requirements.
* Improved risk management by aggregating customer risk exposure across product lines and business units.
(Source: http://www.siebel.com/business-integration/software-solutions.shtm)

As markets reach saturation and the cost of acquiring new customers keeps increasing, companies are renewing their focus on retaining existing customers and increasing their value.

To do so, companies need to build more intimate relationships with their customers and maintain a continuous dialogue. However, the rising demands and costs of customer care present significant challenges to doing so.

In response, companies are increasingly looking to online channels to streamline customer interactions, increase responsiveness and reduce costs.

"Self-service" is the fastest-growing customer care channel and widely recognised as a viable means to reduce operational costs. With self-service and e-billing solutions, business and consumer customers can manage all their billing and account-related activities online at the company`s Web site.

As a result, they are able to improve the quality of customer care, reduce support costs and deepen customer relationships. These solutions are highly scalable and consistently gain three to five times higher adoption and return on investment than competing custom-built and packaged solutions. As a result, they are used by many of the world`s leading companies.

(Source: Siebel Whitepaper: Realising the true value of online self-service and e-billing, August 2005)

"CRM presents companies of all sizes and in every industry with several compelling business drivers, among them being operational excellence, cost savings and revenue growth," says Derek Kudsee, business group manager of Microsoft Business Solutions.

"On the flip-side, the hard reality is that the results of many CRM implementations have fallen below expectations. Companies today know that selecting the right CRM vendor is one of the most critical pieces of achieving CRM success."

The days of a separate front and back office are over.

Simon Carpenter, director of strategic initiatives, SAP Africa

"CRM solutions provide two types of information: a collection of information about customers that can be grouped according to criteria - such as per area; and information about who is responsible for these customers," says Christo Nel, pre-sales product manager at Cognos.

"Performing 'customer analytics`, however, delivers much more valuable information, such as who the highest revenue generating clients are."

Deon Cilliers, customer intelligence product strategy manager at SAS Institute SA, notes that taking customer data in isolation will not yield much business benefit. "Certainly not the kind that executives would expect after expending on the kind of price tags full-blown CRM implementations demand."

However, he explains: "Taking customer data and turning that into actionable customer intelligence is the end-game that organisations should strive for and what will deliver on the expected returns from CRM investments."

For example, Cilliers says, CRM solution analytical models can be developed around available customer data to show customer dimensions like:

* Propensity to leave / close account / become dormant / spend less / spend more.
* Next best product offers with response propensities attached.
* Customer lifetime value, at product / segment level and organisational level.
* Segmentation based on demographic and behaviour.
* Customer profiling across service and sales dimensions.
* Fraud profiling.
* Campaign, channel and offer optimisation models.

Softline Pastel MD Steven Cohen says the focus on the "customer" aspect of CRM is misleading.

"CRM systems aren`t just about tracking customers," he says. "They are total activity management systems. They can track all non-numerical information within a business - relationships with suppliers, pipelines of sales, and so on."

Also crucially important, Cohen notes, is the fact that CRM systems take the vital customer information out of the sales representative`s head and make it available to the company as a whole. "If a sales person leaves, you still have all the relevant information within the company."

The single view of the customer concept, as unveiled by the South African Receiver of Revenue this year, makes CRM look staggeringly simple and effective; however, few local companies can boast a single view of their customers yet.

Inter-departmental sharing of data in real-time makes for better customer relationships, but it can also allow for greater efficiencies within the company and faster turnaround time on processes, translating into an immediate and measurable impact on the operational bottom line.

Cognos`s Nel points out: "A cross-functional process that shares client and sales data with the financial office is also necessary to establish which orders are outstanding. Imagine the repercussions of contacting a client for payment if the order is outstanding."

Liquid Thought`s Strain notes that factors like varied legacy systems, company culture and inter-departmental rivalry can stand in the way of achieving a single view.

Implement IT director Nick Zentelis adds that the `single view` ideal can be hampered by simple security concerns and legislation.

Strain points out that the CRM of today is different to what it was 10 years ago. It`s not just software that helps manage customer data anymore. And there is no longer a need to embark on a massive and cumbersome roll-out of new technology across an entire enterprise.

"Now, technology makes it possible to focus on the `quick wins` and areas that are easiest to implement, then to expand on the back-end later," Strain says.

So, it is possible to roll-out certain applications in certain departments or branches, and link them to each other later, he believes.

Strain says many companies burnt their fingers in the past when they invested heavily in one-size-fits-all solutions that had capabilities they didn`t need and which then did not maximise their return on investment.

"You need to ask `what do we want to do with our customer-centric focus?` then find the specific technology that addresses this," he says.

Ability`s Solomon agrees that a plan is crucial: "Successful CRM is not just about the CRM software - there has to be a CRM strategy coming from management. If you are going to invest in CRM solutions, you might as well invest in getting it right first time."

Most vendors and implementation firms are quick to point out that CRM is a strategy, not a technology that can simply be plugged in and run.

Gartner notes there are five major hurdles in implementing real-time CRM: establishing return on investment; ensuring management buy-in; technology issues (such as integration with existing systems and data quality); identifying the right metrics; and ensuring adequate change management and gaining user adoption.

Tracey Newman, FrontRange Solutions SA MD, sums it up: "As with most other technology - and life in general - CRM implementations fail when you skip the basics.

A CRM implementation is no walk in the park.

Tracey Newman, MD, FrontRange Solutions SA

"Most companies never do adequate needs assessments. Adequate in this context means including broad-based representation from every department. Without that you have no clear understanding of what the people, who are going to use the system, want or expect from it.

"If a company doesn`t know what to buy, it risks ending up with products that either don`t have the features and flexibility it needs or are too complicated and expensive to implement. Either way, users get frustrated and, very quickly, reject the CRM programme. Why not just pour your money straight down the drain?"

Zentelis believes the major challenges in rolling out a CRM solution include the legacy systems already in place and multiple databases, particularly in financial institutions in SA.

Noting that companies may not have the experience to cost, choose and implement CRM solutions in-house, he says it can be "hugely useful" for companies to get insight from specialists in the field. "The investment on this due diligence from experts is relatively small and a low-risk approach to what can be a major investment," Zentelis says.

A CRM solution can be a major investment. Rolling out a solution can cost anywhere from R40 000 to R100 million. In many cases, management may also not immediately see the possible returns on such an investment.

Caron Mooney, director of IS Partners, says the attitudes within the company can also be one of the biggest hurdles. "Projects like this must have measurable deliverables for staff to buy in to them."

The quality of data is key to a successful BI or CRM implementation.

Tshitego Moses Segaetsho, data quality executive at Sasuka Channel, which focuses on data quality management as one of its services, highlights recent surveys backing this assertion: "The Data Warehouse Institute (TDWI) estimates that $600 billion is lost annually due to poor quality customer name and address details (TDWI, 2002).

"Employees experience low morale and productivity as a result of blaming each other when data and information from their systems do not match. Management makes wrong decisions affecting customers. An example is marketing campaigns targeted at customers who are already clients or whose profiles do not match the target audience."

Paula Hocking, business development manager of Radical at DVT, who was involved in the development of the home-grown Radical CRM offering, concludes that while CRM is a business imperative, the CRM market in SA is still immature.

"People jump onto bandwagons too fast. They pick up on buzzwords and try to play catch up. They should take the time to assess what they need in terms of CRM and align it with company strategy."