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The future of CRM: Commoditisation or innovation?

2nd Dec 2010
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Earlier this month we asked a team of CRM experts for their thoughts on the development of the CRM sector and the obstacles that firms must overcome to have a successful CRM programme. In the final part of this series, our expert panel provide their forecasts for the future of CRM.

As of 2010, the evidence would suggest that the CRM industry is in rude health.
"We were surprised how well it survived in the recession compared to 2001-2003," says Ed Thompson, VP of Gartner Research. "CRM is a bit different compared to then. The vendors that survived 2001-2003 are more robust, they rely on maintenance revenues more, subscription is now 25% of the market with lower churn rates, the consultants have more experience, the buyers see it more as a necessity rather than a nice to have. So it’s a market that is basically just more mature.
"However, it’s not settling into ERP middle age. There is no consolidation down to a handful of vendors – there’s always newcomers and new areas of CRM. The reason I think is sales and marketing will always experiment to win business – and soon afterwards vendors learn to encapsulate the new approach in software. So at its core it’s more robust but it’s still dynamic – a surprising contradiction."
Kate Leggett, senior analyst, customer service and cell centre processes at Forrester Research, is similarly positive about CRM’s present and future. "CRM is becoming increasingly important, and I don’t see an end to the importance of this technology or this category," she explains. "Today, we live in a world of undifferentiated products and services. Many companies are now focused on the ‘customer experience’ as a differentiator, and as a way to satisfy customers and entice long-term loyalty. A healthy CRM system is the foundation for providing a personalised, targeted customer experience."
Three ages of CRM
So there’s plenty of optimism for the direction of the industry – but how will CRM actually develop, as a technology and a strategy? The move to software as a service (SaaS) has seen nearly a quarter of all CRM shift to the on-demand model. So what else of similar significance is in store?
"As a technology we’re obviously interested in the long-term shift from operational to analytical to social and in the many different needs that each industry has," explains Thompson. "You could call them three ages or eras or generations. However, they overlap and are additive. Analytical builds on operational as does social. [It’s] evolution not revolution. Interestingly they appear to be more customer-centric with each evolution of CRM."
Also interesting, says Thompson, is the battle between IT trying to limit the portfolio of apps and the business users looking for an advantage, no matter how short-term. "We’re expecting to continue to see 25-30 new vendors each year and lose about the same number but the newcomers rarely challenge the incumbents head on – they seek out new gaps in the market and keep things interesting," he adds.
Leggett and Forrester see three main trends driving the CRM space at present:
  • A focus on offering a targeted, personalised experience – "CRM systems are evolving to provide proactive service such as alerts and notifications," says Leggett. "Business intelligence solutions are being used to analyse customer information to provide targeted service."
  • A focus on the end-to-end experience – "Companies are moving away from front-office silos and back-office silos. They are now looking at implementing end-to-end business processes that cut across functional domains. This means that there is a greater focus on integrate-ability of CRM systems."
  • A focus on the needs of your customers – "This means embracing real-time communication methods like chat and virtual agents, as well as offering CRM solutions that run on mobile smartphones so that CRM professionals can be productive wherever they are."
The emergence of new channels has also forced change. "Web self-service is now critical rather than a ‘nice-to-have’," suggests Bryn Standrin, contact centre business consultant at Pegasystems. "Social CRM is the current challenge, which is all about listening and capturing customer sentiment across all social channels and then making decisions about how to act upon it (feed it into marketing for new products/services, proactively engaging by outbound contact, reactively engage but offering no service or better service)."
"In the short-term, there will be continued interest and innovation in making social networks part of the CRM experience," agrees Duncan Wood, CRM product manager at Sage. "This comes back to the point that CRM is all about adding value by connecting, and making actionable, data that follows the full customer lifecycle. Regardless of whether data is coming from CRM, accounts, or further afield in the form of social media conversations, businesses will have the tools required to make sense of this information and use it to enhance the customer experience."
CRM as a commodity
In the longer term, however, Wood sees major changes to the traditional view of CRM. "Over time, the concept of a ‘point solution’ will fade away completely, as more businesses understand that CRM success is about the complete 360 customer journey. Finding ways to better support flexible working practices through mobile CRM and offering additional ways to connect the enterprise environment will also continue to grow in importance. CRM will adapt and develop so that the appropriate functionality is presented to the users according to how they want to connect to it."
As for the industry itself, Mareeba Consulting’s Richard Boardman predicts that CRM software could become a commodity – and he points to some pricing strategies as a portent of this.
"I think we'll start seeing CRM software becoming something of a commodity and we are starting to see some very aggressively priced software out there at the moment," he suggests. "The price of basic development will get driven down as people look to offshore it. I think we will see more organisations taking CRM seriously, and seeing it as a way of achieving long-term competitive advantage. As a result we will see those companies, at least, putting a lot more investment into their systems.
"I think we will see a segment of CRM vendors and resellers start to differentiate themselves on their ability to provide genuine business solutions in a way that very few are capable of doing today. I believe independent CRM consultants like ourselves will also continue to gain a higher profile, as people begin to realise the battleground is not about choosing the right technology as much as how to use CRM technology to grow business.
"The analogy I use is the building industry. Once upon a time there was the client, and there was the builder. That model didn’t work so well when clients wanted bigger and more impressive buildings. The better model proved to be the client, the builder, and the independent architect, and I think that’s where we are in the CRM industry today, as organisations, under pressure to perform, look to get more out of their CRM software, and turn to third party specialists to help them do it. I don’t think it’s a coincidence that we’ve seen a big surge in demand for our services since the financial crisis hit, as organisations needed to make sure their CRM investments paid off.”
Flight to the future
So, potentially some major changes lie ahead for CRM as an industry, a technology and a strategy. Greg Anderson, global general manager, customer service management and GoldMine at FrontRange Solutions, is philosophical about what is in store. But he insists there is one rule that must not be forgotten in the flight to the future.
"The advancement in technology will only accelerate in the coming years. What we think of CRM today will probably be completely different because of the advancement of technology we cannot even imagine today. There will continue to be new and innovative ways for people to communicate with each other. Companies will need to continue to look at how they can best take advantage of these changes to enhance the customer experience. From a vendor perspective, we will need to look at how we can have an ‘extensible’ framework so that we can quickly take advantage of new trends."

He concludes: "One thing that should not change is that it’s all about the customer!"


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By JohnPaterson
02nd Dec 2010 16:46

I agree with Richard that some CRM will become commoditised, but that also marketing and Social CRM are areas that are still evolving.

The basic sales process however has remained pretty well unchanged for decades: call people, make notes, schedule the next call, track the pipeline. All that has changed is the technology that delivers it: cloud and mobile. So I think we will see basic sales force automation being made simpler and cheaper, to point of being offered for free like at Meanwhile all of the innovation will take place around marketing and social CRM.


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By Intelestream Inc
15th Jan 2011 20:55

Great information here, and much to think about when considering where you want to take your company in the years to come. It’s good to hear that it’s safe to say that CRM will be around for a long to come; as for future trends, well, even better to start thinking about them. My thoughts are with Greg Anderson’s projections. The rate at which technology is growing is astronomical. While there are indicators today that my help us try to foresee the future, it’s nearly impossible to know. 

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