From more vertically-tailored software to greater integration tools, 2002 was an eventful and productive year for CRM. It was a year in which many found CRM to be less scary and more practical. Measuring and achieving ROI became more methodical. And just when you thought the vendor landscape was getting monotonous, a new behemoth joined the game: Microsoft. So where does that leave us as we begin anew in 2003? Here's what the SearchCRM experts see in their crystal ball.
Siebel and Microsoft will rule
By Chris Selland
- Market consolidation will accelerate in 2003. In the SMB market, Microsoft will rapidly become dominant and will take substantial market share from companies like Frontrange, Onyx, Pivotal, Sage/Saleslogix and even JD Edwards (YOUCentric). At least two of these companies will be acquired or shut down in 2003.
- The hosted model will continue to gain market share -- led by Salesforce.com, which is already dominant and will become more so.
- For same reason as number two, the enterprise CRM pricing model will change dramatically, which will lead to (again) continued consolidation as only the strongest are able to survive. Siebel will continue to lead, with Peoplesoft and SAP strengthening themselves in the second and third slots. Those on the periphery (Oracle, E.piphany, Kana) will have major problems finding committed buyers as their ongoing viability is deeply questioned.
- CRM services market will find recovery to be slow, at best. The software vendors, to keep revenues up, are taking back much of the service work from their integrator partners. In addition, the 'service multiplier,' the volume of services work that goes along with CRM applications, is dropping. Offerings such as Salesforce.com, for instance, require next to no integration at all. Where there is opportunity is in CRM strategy, but the technology consultants will have another very tough year.
- Buyers will move attention from CRM software to CRM strategy as they increasingly realize that the technology is becoming a commodity. The Dick Lee/Bob Thompson study is right on target. It really doesn't matter all that much whose application you buy, what matters is the underlying customer-facing business strategy. The natural evolution of this thinking is that it only makes sense to buy from the strongest, most viable vendors, supporting that this will become a market led by Siebel at the high end, Microsoft on the low end and only a handful of viable alternatives.
Predicted mergers and acquisitions activity:
- Siebel buys Sage to get Saleslogix's low-end offerings (and even more importantly to get their channel). This puts them in head-to-head competition with Microsoft/Great Plains.
- IBM buys E.piphany, and terminates its Siebel alliance.
- Pivotal and Onyx merge to survive
- Cisco buys Kana to deepen its Customer Contact Solutions offerings, then later spins off the group in a separate IPO
- Oracle acquires eGain for a very minimal price, but continues to struggle in the CRM market
Selland is president of Cambridge, Mass.-based consultancy Reservoir Partners.
Sweeping change for CRM?
By Paul Greenberg
By the end of 2003, CRM will not be the CRM you knew and loved (or hated, depending).
- All the major vendors are jumping on the business process-driven CRM bandwagon with releases that are either focused on the business practices and processes that govern the standard stuff - like sales process or releases related to vertically driven specialized processes - like CRM for Energy or Telecommunications. Throughout 2003, the processes will dominate and data-driven CRM will data drive off a cliff at some point, though there will always be those who like it like that.
- Even more significantly, there will be an increasingly realization (already underway) that CRM is not just a technology, nor is it just a system, but a philosophy and business strategy that is supported by a system and technology. In English, that means that there will be increasing recognition that one of the main reasons that CRM has been a very difficult ride for all us equestrians is that the immense cultural changes that CRM entails have been ignored. This naughty behavior means that CRM has ignored human relationships and how they interact when change is major. Tsk. Tsk. Well, by the end of 2003, the "whole-brained" approach to CRM - which implies that CRM is more than metrics, benchmarks, ROI and TCO but entails user acceptance and cultural change and ongoing iterative involvement of the internal and external users - should be either common knowledge or at least something that is seriously integrated into CRM projects - thus increasing the success rates dramatically.
- Blue-collar CRM also known as field service is beginning to gain credence and will become an important component of the CRM universe as senior management of the various corporations realize that good field service means both cost savings and revenue enhancement. Think Dell here. It is becoming increasingly obvious that in this now evolving customer ecosystem (evolving from a customer centric corporate ecosystem) that logistics, distribution, inventory management and other parts of the supply chain are now customer issues, rather than just supply chain issues. Do you hate anything more than a delivery on Tuesday that you expected Monday? The worst. So field service in all its forms is perhaps the most visible and direct relationship between company and customer. Bad field service, former customer. Good field service, happy camper. Buy lots of tents. So this domain is increasingly recognized and important. Watch companies like Astea for the technology side of field service and, of course, all the big kids – Siebel, PeopleSoft, SAP and Oracle. They will provide.
- Government CRM – Federal, state, and local government agencies are beginning to consider CRM a serious matter. Mark Foreman, the U.S. e-government czar has become a confirmed advocate of CRM at the federal level, and, according to marketing research firm, Input Inc. CRM spending in the federal government is expected to grow from $260 million in fiscal year 2002 to $590 million in fiscal year 2007. Keep in mind, though, that the value of CRM at the federal level is not so much in government to citizen interaction, but more so in agency to agency interactions. CRM is a very important and now recognized place for the government to be and the initiatives at every level such as the $15 million IRS PeopleSoft CRM software purchase or various state initiatives for CRM on the street or in vendor selection as of January 1, 2003 prove it.
- Hosted CRM Services – Surprisingly (to me, anyway) I see a comeback in this as the economy continues to be tight. This will be in three flavors:
- ASPs - such as Salesforce.com or SalesNet which will gain ground in the small and midmarket and on occasion with a larger enterprise. While you get what you pay for with ASPs, they are cost-effective and security is less of a concern than is usually thought.
- Outsourcing - to larger integrators such as Bearing Point or Unisys will be a hallmark as the non-IT companies continue to realize that they are good at their core business and return to it. They are not good at IT at a reasonable price, so many of the Fortune 3500 will be handing their CRM programs as part of their IT to integrators who have the capacity to handle it. Witness the recent JP Morgan deal with IBM - $5 billion for 7 years. This will occur only with the big boys though. For example, as part of this deal, 4,000 JP Morgan employees will become IBM employees. Takes a lot to make a lot.
- Specialized hosting – This is where companies who aren't ASPs will host vertically specific applications that they've developed or evolved. One example of that is RWD Technologies hosting of an application they call OTIS that combines Siebel e-Pharma with Documentum through an e-connector. It is specialized, focused on the pharmaceutical industry and is hosted where needed.
This can be a year of sweeping CRM change. The transformation from the ugly duckling of customer-centric corporate CRM ecosystem morphs to the more mature and beautiful CRM customer ecosystem (it even reads easier!) continues. However, all these forecasts may be meaningless if humans don't take at least their CRM-related destiny in their own hands and, "make it so."
Greenberg is president of The 56 Group, a consultancy, and author of the best-selling book CRM at the Speed of Light.
Midmarket, clean data take center stage
By Michael Lowenstein
The middle market, 50 to 500 employees and up to 200 'seats', will be the biggest area of prospective growth, and the biggest challenge, for CRM vendors and applications in 2003. A relatively small proportion of these companies have implemented CRM in any form or fashion, and leading the charge to capture this market will be Microsoft using .NET technology. Other vendors will be looking to flank Microsoft with lower prices or other elements of incremental value.
Still, even with developing customer relationship architecture and systems, the central issue within this marketplace will be timely, in-depth, relevant customer data which leads to opportunities for higher levels of customer loyalty behavior. These companies will have the ability to store, mine, and apply customer information; however, so few of them have developed truly applicable data in the first place, allowing them to be intimate with customers and tailor experiences and communication with them on an individual basis, that this will begin to be seen, at last, as the important 'new' priority for business that, in reality, it always has been. Without clean, high quality, leveraged anecdotal and dimensional customer data, the best architecture and systems will be weak foundations for revenue growth, offering relatively little strategic advantage.
Michael Lowenstein is managing director of Customer Retention Associates, a Collingswood, N.J.-based customer loyalty consultancy.
Quest for value to drive CRM
By Arie Goldshlager
My 2003 predictions are as follows:
- Companies will initiate mostly CRM projects that can directly improve the performance of customer acquisition, customer management, customer care or customer loyalty. CRM project directors will have to demonstrate the performance improvement potential of their candidate projects via a fact-based business case or proof-of-concept prototypes.
- Companies will also focus on extracting more business value from past CRM technology investments by redeveloping elements of these systems to more closely connect with customer acquisition, customer management, customer care, and customer loyalty strategy and objectives.
- Successful CRM systems will be developed considering both the company and the customer perspective. This balanced approach will consider the systems potential to improve not only the efficiency and effectiveness of key CRM process (e.g., customer retention) but also the customer experience.
- Successful CRM project directors will more aggressively include their prospective end users in the development process to ensure the their business requirements will be met by the systems.
Goldshlager is a CRM consultant whose past clients include Capital One, USAA, Safeway and British Telecom.
The rise of data mining
By William McKnight
- The advent of low cost, high performance NT servers (2x2000 Mhz, 2 GB memory, 300 GB mirrored storage for under $5,000) will continue to lower the hardware side costs of data warehousing.
- Costs will be forced out of sophisticated data mining algorithms, making data mining, as a data access mechanism, a component of a much higher percentage of data warehouse programs and usage.
- Portal access replaces desktop OLAP as the primary means of data warehouse access.
- Is it back to the future? A forced refocus on economic payback returns many shops to enterprise data warehouse architectures with a high degree of data sharing. Efficiencies are gained from these architected approaches and undisputed sources of corporate cleansed data become more accessible.
- The need to load data to the warehouse in real-time is met by operational EAI architectures and the technical capabilities of data warehouse DBMS.
McKnight is president of McKnight Associates, a Plano, Texas-based business intelligence consultancy.
Siebel to sell
By Paul Sweeney
Siebel will be acquired by another software firm during 2003! My guess is that Tom Siebel anticipates additional erosion in the CRM market and will therefore sell the firm and take his profits.
Sweeney is founder and president of Sweeney Group, a CRM consulting firm in Acton, Mass.
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