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Have you outgrown homegrown CRM?

It may be time to ditch that do-it-yourself CRM system. You may save money and valuable IT resources by switching over to packaged software.

It's been said before: The CRM market still holds tremendous potential for growth.

Last year, of the $25 billion spent worldwide on CRM, only 15% went toward packaged applications, according to research by Stamford, Conn.-based Gartner Inc.

With all those potential customers doing CRM in-house, vendors are pulling out all the stops to get them to switch. They just need to convince these organizations that vendor software not only works, but that it can work better and cheaper than the company's homegrown system.

That can present a challenge for vendor sales teams, especially considering some of the widely reported early failures of enterprise-wide implementations.

Enterprise application vendors have begun to attack the issue in a number of ways. First, they are offering their applications as modules that customers can build on top of or write code around, creating a hybrid CRM approach, said Scott Nelson, a vice president and research director with Gartner. That hybrid approach -- blending in-house CRM with licensed software -- has allowed companies to salvage some of the homegrown applications that they have invested heavily in.

Secondly, the market's recent focus on vertical-specific software has given vendors a leg up. "By tailoring more and more to verticals, they take away some of the argument from customers that we need a customized application to do business," Nelson said.

Courting customers

Siebel Systems Inc., San Mateo, Calif., has taken a fresh approach with some of the larger, most promising prospects. Its CRM Strategy Team works with customers, advising them on integration strategies and establishing the company's customer approach before any sales are complete. It then goes back once Siebel software is adopted and makes suggestions on how to improve upon customer deployments. Part sales, part service, the CRM Strategy Team provides on-site assistance at no charge.

While not focused directly on moving from a homegrown system to Siebel, those situations fit right into the approach. "We love to see that because, frankly, the economics are so simple for us to build," said Peter McCullagh, vice president of customer strategy for the group.

According to many vendor executives, cost is where they can most easily make their case. While companies may have a sense of loyalty to a CRM system they built themselves with company-specific functions in mind, the costs of maintaining, updating and training can prove daunting. Besides, finding technical help is often a problem as well.

That's what convinced Affina Corp., a Peoria, Ill.-based CRM consulting and contact center outsourcing company, to switch from its own system to software from Oracle Corp., said Vic Burgess, vice president and general manager of business development.

"When [software] is homegrown, it's not like you can go out and advertise for folks with experience [working] with it," Burgess said.

When Affina started out in business, it didn't have a call-tracking feature, so the company essentially developed its own. As time went on, Affina gradually added a number of best-of-breed solutions. With multiple front-office systems, integrating to the back office became a headache.

"The number of interfaces was increasing almost exponentially," Burgess said. "As an outsourcer ourselves, we saw the value of outsourcing."

In December 2002, Affina was up and running with Oracle. Rather than mourn the loss of the old system, many in the company were excited about the opportunity to gain experience with some new technology, Burgess said.

For other companies looking to move from their own systems to a vendor's, Burgess said to make sure to have a clear business strategy for CRM and then leverage the technology against it.

"Don't rush. Know exactly what you're looking for in a software," Burgess said. "For us, the process took about 10 to 12 months. Maybe it's unique to our situation, but we really felt that a software suite has clear advantages over multiple best-of-breed point solutions."

A piecemeal approach

At PeopleSoft Inc., Pleasanton, Calif., giving customers that time is an important part of making the switch, according to Brad Wilson, vice president of CRM marketing. Phased implementations can help ease the pain.

"It's kind of like not being thrown into a cold pool all at once," Wilson said. "PeopleSoft remains flexible if you want to change other parts over time. We provide protection because we can integrate with other systems today and tomorrow. It's a matter of coexistence, leading to whatever level of migration makes sense."

PeopleSoft's recently announced Process Integration Packs are just one way the company says it has made transitioning easier. The six new packs, three for Oracle and three for SAP systems, contain process-aware integration functions.

For example, one customer of the Pleasanton, Calif., company, a large U.S. retailer, had 200 customer records in its mainframe and wanted to add a complaint system but leave the customer records in that mainframe.

"It's very easy for us to go in and not use a 'rip-and-replace syndrome,' which has been the norm in this space," Wilson said.

Better use of resources?

When trying to persuade prospects to switch from their own systems to SAP, two of the biggest factors are the cost and, more important, the resources involved, said Chris Rooney, SAP's vice president of CRM solutions for the Americas.

Rooney asks customers: "What gives you the competitive advantage in your industry, and why aren't you putting the energy toward that?"

He said that, if businesses are going to customize and put thought and leadership behind something, it shouldn't be with a commodity like a CRM system but rather with something that's unique.

"In our client base, that's a really strong proposition," he said. "People who make SAP decisions have said, 'I'm abdicating fundamental tech decisions to SAP. I'm not going to worry about applications, service, business partner management and database management.'"

The industries in which Rooney sees a lot of homegrown CRM systems are chemicals, manufacturing and pharmaceuticals. In many cases, he said, customers have added so many customizations to older, packaged software that 60% to 70% of the system is now homegrown.

The discussion on whether to change takes on different significance depending on the area of CRM. For example, marketing applications, which generally have a lot of analytics and company-specific approaches involved, are more difficult to migrate to packaged software, Nelson said. More generic applications, such as those in contact centers, are more easily integrated.

When considering the switch, companies should look at several factors.

"How unique is your business process and your CRM model?" Nelson said. "If you have an unusual situation and tailored an application to the way you do business, a packaged application will be more difficult to move to. If you have a larger IT department that is able to invest in research and development to push the application forward, you may want to think more carefully about a move."

On the other hand, companies in markets that have seen a lot of CRM vendor development or those with more standard business processes might see packaged applications as more attractive, he said.

FOR MORE INFORMATION:

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