News Stay informed about the latest enterprise technology news and product updates.

Is enterprise CRM dead?

PeopleSoft buys Vantive and J.D. Edwards, Oracle buys PeopleSoft and Siebel, SSA Global buys Epiphany -- does all this consolidation mean the end of enterprise CRM development?

Add to My Yahoo!

Add to Google

Three years ago, at an industry trade conference, Tom Siebel, then CEO of Siebel Systems Inc., first uttered the words, "CRM is dead."

It was a statement that raised eyebrows across the industry, coming from a man widely credited for helping to create CRM. While Siebel later explained he was simply talking about the rise of a new set of applications, it foreshadowed the end of standalone CRM.

In September, Siebel was again reciting a eulogy of sorts for enterprise CRM. At the time the company he founded was being acquired by one-time rival Oracle Corp. for $5.85 billion.

"What brought these companies together was a shift in market dynamics the past five years," Siebel told analysts and reporters in a conference call announcing the acquisition. "Customers and the partner community have indicated that what they're interested in is an integrated family of applications. It was that change in market dynamics that changed all of this."

Consolidation has been rampant in recent years. PeopleSoft Inc. bought Vantive, then swallowed up J.D. Edwards & Co., and last year PeopleSoft itself became one of Oracle's acquisitions. Epiphany, another enterprise vendor, was purchased this year by SSA Global. Undoubtedly the shrinking number of vendors in the enterprise CRM will affect development, but are the reports of CRM's demise premature? Certainly not as a standalone application, according to some.

"We've been saying that for some time," said John Ragsdale, research director with Cambridge, Mass.-based Forrester Research Inc. "Customer processes have moved from the front office to the back office. As a subset of enterprise software, it will continue to have buyers but standalone CRM is inextricably linked to the back office. At the enterprise level people aren't even including pure play vendors on the short list."

For more information

See how Forrester ranks midmarket CRM development

See whether hosted vendors are ready to step into the enterprise market

Certainly, the integration problems with large enterprise applications were what Siebel was referring to with his "family of applications" statement. Many of the CRM failures Ragsdale has seen center around incomplete and siloed data and incomplete and siloed processes between the front and back office, he said. The demand for customer data integration (CDI) applications has also clearly outlined the need for integration not just between back-office and front-office applications but between the front-office applications themselves.

And the need for both integration and standards-based architectures was one Siebel realized with its Universal Customer Master CDI product, and its component assembly initiative, an approach based on a service-oriented architecture. It's just that Siebel was slow in realizing it, said Rob Bois, analyst with Boston-based AMR Research Inc.

"The Oracle-Siebel thing is just the result of this shift in the market," he said. "Siebel hadn't grown license revenue in some time. That was a result of the fact they were selling suite software. They were sort of stubborn early on in realizing the shift in buying patterns. They were late in reacting to this shift."

CRM is dead, long live CRM

While standalone enterprise CRM may be waning, don't be mistaken in thinking that there isn't a need to properly interact with your customers.

"It's hard to say CRM is dead -- that implies the processes are no longer relevant," Bois said. "It's just that processes can no longer be contained in one application category. We've been talking to more and more clients to ask how they get more value out of technology with customer-facing business problems. Rather than [sales force automation], they're looking at processes that run into order fulfillment. It's not just about the front office."

AMR predicts that spending will rise 8% next year, but measures the spending on customer management rather than traditional CRM. Customer management focuses beyond the traditional pillars of CRM in sales, marketing and customer service and on processes and technology like inquiry-to-order applications. According to a recent survey from AMR, 91% of companies intend to increase spending on customer management.

Additionally, in the small and midsized business market there's still plenty of activity. Companies are still buying standalone CRM applications. Vendors like, NetSuite and RightNow Technologies have made buying CRM less risky by selling the software as a service and hosting all the infrastructure in their own data centers, thereby reducing the risk to the buyer.

"In the midmarket and departmentally, we still see business leaders driving spending based on budget," Ragsdale said. "Business leaders don't see the end-to-end data and process issues."

Additionally, there is not the same level of back- to front-office integration in midmarket, Ragsdale said. The product is lagging, which means purchasing is lagging. He expects interest in standalone CRM to eventually fall in the midmarket as well.

The changes in the marketplace do not mean an end for enterprise CRM vendors either. Standalone enterprise CRM software vendors will continue but will be forced to focus more specifically on vertical CRM, according to both Ragsdale and Bois.

For example, Genesys, a subsidiary of French telecom giant Alcatel and a provider of software and hardware for contact centers, still sees development and growth in the market despite the consolidation.

"I think consolidation will lead to competitors that compete on a different basis," said Wes Hayden, Genesys's CEO. "Customers still want features and technology but more than that [they] want help in implementing faster and better."

Dig Deeper on Customer relationship management (CRM)

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.