For most companies that have tried it, CRM has been a painful experience. While there is nothing wrong with CRM in theory, most organisations have failed to make it work in practice.
According to a study released by Gartner Group two years ago, the proportion of unsuccessful CRM projects is due to peak at 80 per cent by the middle of this year. Given the billions of dollars already ploughed into CRM solutions, this represents a staggering waste of money. In short, the CRM industry's reputation is in tatters and a huge effort will be needed to regain customers faith in the concept.
Many blame the giants of the CRM software industry, which grew fat in the dotcom era. These 'first generation' CRM vendors persuaded their customers to spend countless millions ripping out legacy data stores and constructing massive warehouses of customer data - all to reach the holy grail of a single customer view.
Companies were promised that CRM would help them win new customers, sell more, improve service and enable compliance. In reality, huge and highly disruptive implementations and a cumbersome architecture made companies less, not more responsive to customers needs. The big CRM vendors monster applications were about as manoeuvrable as a fully loaded super tanker - they took months to customise and just as long to make even the most minor changes.
Despite the failure of first generation CRM, most analysts agree the market will grow modestly over the next four years after suffering a 5.4 per cent drop in 2002 . However, the days of large-scale CRM implementations are well and truly over. More and more companies are rejecting prescriptive off-the-shelf CRM packages in favour of building their own applications in-house to fit their specific requirements. It is probably no exaggeration to say that the CRM vendors biggest single source of competition, in a shrunken market, is the in-house IT department.
However, companies should think very carefully before going down the DIY CRM path. While the building stage may appear cheaper because internal resources can be used, the ongoing cost implications of a bespoke solution all too often render this a false economy. These include maintaining and upgrading the application to cope with mergers, organic growth and the launch of new channels to market.
Likewise, companies persisting with the off-the-shelf approach to CRM should think very carefully before jumping into bed with a vendor - even if that company claims to have a solution tailored to meet the needs of their niche market. The buy approach certainly gives a head-start in terms of functionality and can reduce risks. However, many pre-packaged solutions will be incompatible with a firmÕs existing IT infrastructure and are likely to cause integration problems with other internal systems.
In short, the build or buy dilemma is risky whichever path companies decide to go down. One escape route IT directors are increasingly exploring is CRM applications that lend themselves to a hybrid approach. These combine the best of both worlds, while side-stepping potential pit-falls.
These solutions, which are tailored to fit existing business processes, were recently recognised by Gartner Group as the new hot spot for CRM. The analyst house stated in a recent report: "Previously, CRM applications competed on the basis of functionality. Beginning in 2003, CRM applications will battle over process automationÉBy 2005, all leading CRM vendors will contain at least rudimentary process automation support."
A key characteristic of a hybrid CRM application is an engine that makes it easy for business users to develop customer engagement interaction processes.
The software is also designed to be changed frequently and easily by business users, with visual process generation tools and little or no coding. This enables firms to out-manoeuvre the competition by giving them the power to update the CRM system so it reflects changes in the competitive environment. This is something that is simply not possible for the mass of firms whose business processes are dictated by the CRM software, rather than the other way round.
Furthermore, the use of meta-data allows all customer data to stay where it naturally lives, with the real-time single view generated when needed. This makes integration easy and changes fast.
In summary, the CRM market may have taken a step back over the past two years, but both vendors and end-users are fast learning from past mistakes. A new pragmatic approach to CRM, which combines the best of the build and buy approaches, is likely to form the foundation of a slow recovery in the industry's fortunes. Successful CRM vendors will be those that take the time to build applications that map onto the customers business processes.
Andy Lewis has been managing scientific and IT projects for over a decade in fields as diverse as gold mine prospecting, forensic gunshot analysis, nuclear physics, and terrorism prevention. He now leads the AIT Pre-sales Consulting Team. For more information on AIT, visit the website at: http://www.aitgroup.com