25th Nov 2010
In the first of a two-part feature looking at the changing challenges of the CRM sector, experts in the field discuss how CRM overcame its reputation for high failure rates to become a $10bn industry.
Estimated to be valued at over $10bn and with projected growth for the future, the CRM industry appears to be in rude health. Furthermore, according to a survey of European business and IT professionals, CRM weathered the credit crunch better than most other enterprise software applications over the last two years. Not bad for a field that was racked with problems a decade ago and which had acquired a reputation for having a high failure rate.
"We said the majority were failing to meet expectations but got misquoted a bit as it was shortened to just outright failure," corrects Ed Thompson, VP of Gartner Research, the analyst house responsible for delivering the most infamous indictment of the sector, some eight years or so ago.
However, he adds: "We were surprised how well it survived in the recession compared to 2001-2003. [But] CRM is a bit different compared to then."
So where did it all go right for CRM? What technology, strategic, cultural and implementation issues have been overcome? And what does it still need to address to ensure that it continues its rise and rise?
"The first CRM systems were not fully-baked and had large feature holes that were not always communicated to the purchaser," suggests Kate Leggett, senior analyst, customer service and cell centre processes at Forrester Research. "The technology was not intuitive and easy to use. It was hard to implement with long time to value, and hard to become proficient in its use. It was even harder to change the business processes that had been implemented – changes that were necessary to stay in-line with evolving business needs.
"CRM systems were also difficult to integrate with a company’s IT ecosystem which meant that many actions needed to be repeated in multiple systems. For example, consider a CRM system that was not integrated into a company’s email system. This means that a sales person would have to cut and paste a customer communication from their email correspondence into the CRM system which was labour-intensive and often not done.”
Furthermore, Leggett continues, most CRM systems were very limited in terms of scalability. This inevitably meant that as more users were added, the system would slow to the point of being unusable. "Duplication of effort, slowness and user-unfriendly interfaces detracted many sales, marketing and customer service professionals from using the tools," she explains. "This meant that CRM records were incomplete, inconsistent and many times inaccurate. And, as information became stale, fewer employees used the CRM system which added fuel to the fire."
Richard Boardman of Mareeba CRM Consulting, adds: "The technology in those days was a lot less flexible than it is now, and a lot more time-consuming to develop in, which meant there were some pretty serious project overruns, or projects that failed to deliver what was anticipated."
And anticipations, unfortunately, were sky high. Because the area was fairly new, a great many CRM investments had taken place with unrealistic expectations. "Those early days coincided with the dotcom craze, and companies were on hyperdrive looking for that next technology magic bullet to transform their business as the internet was doing in the channel space," says Mark Swenson, director of Teradata's customer management practice for EMEA.
"There was lots and lots of sales and marketing hype, and few case studies for companies to learn from, so there were some major expectation bubbles out there destined for the pin pricks of operational reality!" agrees Boardman.
And unfortunately this is precisely what happened. Many of these adopters were soon to find that simply investing in CRM technology would not address ineffective business process, dirty data, misaligned key performance indicators or missing strategic plans.
"Ten years ago people typically wanted a ‘point solution’ to solve a specific problem within one department, such as sales force management, and did not think about the company-wide need for CRM," explains Duncan Wood, CRM product manager at Sage’s Enterprise Division.
"There was also an assumption that by simply installing CRM software into a business it would solve the firm’s problems. In reality, CRM needs to be closely aligned to the strategic aims of the company if it is going to realise the technology’s potential to maximise profitability, revenue and customer satisfaction. Implementations that failed tended to be the ones where the company did not obtain buy-in from top-to-bottom, and as a result were ill conceived and with little commitment from staff."
"The majority of Gartner’s Top 10 reasons for the failure of CRM projects can be grouped under a heading of ‘weak or missing governance at executive management level’. When there was no management buy-in, there was little traction within organisations, so people weren’t ready to break down silos and work across teams," adds Steve Fearon, VP in charge of Oracle CRM sales development and CRM On Demand for EMEA. "This often culminated in companies heavily customising their CRM systems to fit their old ways of working, rather than adopting the standardised processes already existing in the CRM product. High customisations could lead to spiralling costs, project delays and ultimately failure."
Unsurprisingly, confronted with this myriad of problems, CRM’s reputation suffered. Leggett concludes: "Many companies launched into large CRM projects, instead of smaller projects with quick wins, without a realistic understanding of the time, resources, skillset and organisational commitment needed to be successful. Many companies abandoned projects mid-course, and this track record added to the negative reputation of the value of CRM systems."
Revolution in the head
A sector undermined by all of these issues couldn’t prosper into a $10bn industry – so what has changed to drive this growth? Unsurprisingly, things have matured from both a technology and strategic standpoint.
"Today’s firms are continuing to look beyond their own business, there is a growing appreciation for the software and services that can empower organisations to get closer to their customers. This shift in thinking has meant that businesses have begun to adopt a far more strategic and joined-up approach to managing their customer relationships through CRM," suggests Wood. "Where in the past, CRM was merely perceived as a tool to aid the sales force, it is now being utilised more strategically, helping firms get a much more holistic view of their activities across marketing, finance, customer services and sales, and ultimately enabling them to make better and more informed decisions."
Fearon adds: "The real change has been in people’s understanding about CRM projects. People have realised that they need to address issues such as change management and working across teams when they implement a CRM project. The CRM systems themselves have always shared information, but now people do it too.
"System integrators have learnt that ‘big bang’ implementations across a company all at once are very difficult from a people change management perspective, so now businesses tend to implement systems in bite size chunks – department by department – so that successful adoption can occur."
Greg Anderson, global general manager, customer service management and GoldMine at FrontRange Solutions, agrees that approaches to implementation are evolving significantly. “More and more firms today will take a phased approach to the implementation of CRM. The objective now is to get something implemented quickly and get a return on investment. Then re-evaluate assumptions and objectives and move to the next phase and so on. This approach has greatly reduced the risk involved in these implementations and increases the likelihood of success."
All grown up?
But the technology itself has also matured. Leggett emphasises that CRM systems are now feature-rich, with best practice and industry-specific workflows built into them. "This means that customers can choose to adopt these best practices without needing many man-months of customisation work," she says. "The CRM architecture has evolved to make them immensely scalable, more easily integrate-able with other IT systems as well as easily changeable to keep in-step with changing business needs (think about all the mergers and acquisitions that have happened in the last several years, and the IT changes that have had to quickly happen to preserve the customer experience). There are also SaaS solutions available to achieve a rapid time-to-value. Vendors and system integrators have a proven track record of deploying, tuning and optimising CRM projects to achieve quantifiable ROI, and this knowledge can be easily leveraged."
Swenson adds: "When companies introduce new marketing applications today, they realise it can't be business-as-usual in processes, strategies and measurement. CRM applications are just one piece of an overall cohesive customer initiative. They understand CRM isn't a marketing programme; it's a company programme. They bring together cross-functional teams to realign perspectives around the customer. It's not enough that marketing can produce analytically-driven next-best-offers if the operational teams on the front line aren't on board not only understanding their part in an larger company effort, but also sharing in the rewards and glow when they get it right. So, companies, vendors and consultants are more cognizant of the need to align CRM to corporate strategies with solid roadmaps, readying operational systems to bi-directionally work with analytical systems, and identifying focused incremental deployment use cases."
Ultimately, many of the challenges associated with CRM are being addressed because – in the words of Leggett – "we’ve all grown up". The technology has matured, we now have best-practice processes to scope, implement and deploy CRM systems, and we better understand the organisational commitment and achieve the ROI that CRM has been promising us for the last decade.
So, the good news is that CRM has put its growing pains behind it. Hasn’t it? "I’m not sure it has really…" says Boardman. Ah, it would appear there are some more issues that we have to contend with in the CRM space. And we’ll be looking at these challenges in the next part of this article.