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Gartner outlines five technology trends changing CRM architectures

Cloud computing, social networks, analytics, unified communications and Web-oriented architectures are among the things that will change CRM architectures.

SCOTTSDALE, ARIZ. -- The market for CRM software was one of the few technology areas to see an increase in spending this year, slight though it was, according to Gartner Inc.

Companies have transitioned from buying big, cross-departmental suites to niche products, and that has helped keep the market growing, said Ed Thompson, research vice president of the Stamford, Conn.-based research firm at the company's annual CRM Summit.

While the CRM market grew just an expected 3.3% in 2009, it did better than most other technology spending areas.

"Certainly we're shocked CRM is still growing," Thompson said.

Amidst that appetite for overall growth despite the recession, there are a number of technological advances CRM professionals must pay attention to as they plan their CRM architecture.

Cloud computing

While the conversation about  cloud computing tends to focus on Software as a Service (SaaS) when it comes to applications, it's still an important development for CRM buyers and vendors alike. In fact, HelpStream, a SaaS-based customer service vendor switched all of its systems over to Amazon Web services and saw a 60% decrease in operating costs and The Sage Group plc this week said it will make its SalesLogix CRM system available for customers and partners on Amazon as well, allowing customers upgrade control and the ability to migrate between SaaS and on-premise. How is this disruptive to CRM buyers and implementers? Privacy and integration, Thompson said.

"In the world of SaaS or cloud, historically concerns were about uptime and security," he said. "Now the issues that come up to us are data privacy, particularly for those in the EU. That's a showstopper for many today. Second is the lack of integration skills. The majority of SaaS vendors' integration has been with email and that's it. We're starting to see sophisticated integration out there. But with SaaS and non-SaaS applications that's pretty difficult."

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While some start-ups may launch their business on a completely SaaS model, most companies have significant on-premise applications to support and integrate. Plus, new software vendors are launching solely under the SaaS model. That means business and IT are going to have to bring together the old and the new.

"We're going to be living with traditional on-premise applications for the rest of our working lives, which means we're going to be in a SaaS/non-SaaS world the rest of our working lives," Thompson said.

Business intelligence and CRM

When it comes to business intelligence (BI), corporate performance management (CPM) is the hottest area, according to Gartner research. CPM, a discipline which typically includes data-driven planning, budgeting and forecasting activities often includes sales and marketing analytics. The next hottest discipline within BI is sales analytics followed by service analytics.

"We look at business intelligence and we can look at the application of that in the CRM domain," Gareth Herschel, research director with Gartner, said at a later session. "That's clearly a key factor for organizations. It all points to the same topic of how do we learn more about our customers to drive better, more profitable customer relationships."

The rise of BI, which according to Gartner surveys has been the top concern of CIOs for the past six years, should force organizations to think about recruiting the right skill sets. Thompson advised hiring people right out of college with statistical and analytical backgrounds and moving people from IT into "marketing because they have the right skills -- you need those people inside marketing team."

BI competency breaks down between "the have nots," businesses with only one or two people with analytical skills in areas like cross sell, upsell and churn analysis and "the haves," companies with a team of analytics employees treating analytics like a factory.

As CRM and BI evolve, analytics will become embedded in business applications and processes, Thompson said.

The shift from operational CRM to social CRM

According to Gartner research, currently 90% of CRM spending is directed toward operational CRM initiatives like sales force automation, but that will drop to 70% of spending by 2020.

Meanwhile, spending on social CRM initiatives like customer communities and social media monitoring will grow from less than 1% today to 10% of spending in 2020.

That's forcing traditional operational CRM vendors to venture into social CRM capabilities like Oracle has with its Social CRM modules. Social CRM consists of three areas, according to Thompson; internal collaboration tools, which are fairly mature; internal communities that are hosted by the business; and the monitoring of outside social networks like Facebook and Twitter, an area that will see a lot of consolidation

"A lot [of social media monitoring tools] are not adding much value, just tracking and crawling and not adding much back," Thompson said. "The middle group is where I would put most of my focus on. You have a forum or a social network you're hosting. We're in the very early days of what's going on. You should already be doing something inside your firewall, where you don't have to get into legal complications. Likewise if you have an externally facing site, you should get into the second part, encouraging people to get into a community"

In fact, it's the legal department that is throwing up most of the resistance to social CRM initiatives, citing concerns over who is saying what to customers and questioning what kind of corporate governance is in place.

Web-oriented architecture and its affect on CRM systems

Web-oriented architectures, a subset of service-oriented architectures (SOA), is applying similar principles as SOA, only more rigid.

"At the moment, this technology is not applicable in a majority of cases in complex enterprise applications," Thompson said. "Shortly it will be."

That means many CRM vendors, which have focused on wrapping SOA capabilities around their applications, will have to go back and make them WOA compliant.

Unified communications

Unified communications and CRM means more than just voice over Internet Protocol (VoIP) and more than just enabling the call center to extend to the wider organization, Thompson said.

"Up until now, most organizations have thought of UC as the blending of networking and telephony and it therefore applies to contact center. Do not think of this [as?] relating solely to contact center," he said. "What we're already starting to see is these applications embedded into other applications."

Right now the main areas where applications are using unified communication are: administrative tools; some collaboration like the work being done by Cisco; notifications in the contact and escalation process, bringing in subject matter experts on a sales call for example; intelligent notifications; and, context aware computing, telling the system where you are at what time and are you available.

Other technologies impacting CRM architectures

Custom built applications continue to be a major force in the CRM marketplace, Thompson noted. In fact, currently between 60% and 65% of CRM applications are built and not bought, though that percentage decreases every year. Additionally, the percentage of CRM initiatives focused on CRM suites like SAP, Oracle and Microsoft is dropping.

"We expect in next couple years to break the 50% barrier [in build versus buy]," Thompson said. "If you look at these categories in 2003-2006 we saw a big shift to Oracle and SAP. That spun around in 2005-2006, partly because of and Microsoft."

Additionally, the emergence of business process management (BPM) vendors extending capabilities to CRM, the importance of the user interface in CRM purchasing decisions and Green IT are shaping the way IT organizations operate.

"Big CRM does not get approved in a recession," Thompson concluded. "Point projects tend to win and anything with an 'e' in front of it -- e-commerce, e-marketing, e-service -- tend to get approval. Plan to shift budgets. Operational CRM will dominate, but expect and plan to shift toward analytics and social CRM."

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