Enterprise software: A tour of the year ahead
Despite the recession 2009 is going to be a critical year for all of those key vendors that best describe their turf in acronyms--CRM, ERP, BPO and perhaps a relatively new one VRM.
Those acronyms, which stand for customer relationship management, enterprise resource planning, business process outsourcing and vendor relationship management, respectively, are going to be more than just a jargon in the year ahead. They are going to be critical to your business as you either ponder upgrades, stand pat or try to figure out how they can help you revamp your business.
As I go around the horn among our ZDNet bloggers, there are a few thoughts that stick out.
CRM: Get ready for feedback 3.0 and VRM.
It's a bit surprising how CRM has become such a hot area when it was all but written off for dead just a few years ago. In the end, CRM's resurrection isn't all that surprising. Your customers--mining them and keeping them--is more important than ever. Toss in social networking and the need for companies to actually listen to customers and their feedback and you can see how CRM may be your most valuable application.The revelation that CRM was more than just some space being commoditized by Salesforce.com hit me at Oracle OpenWorld. Since I'm quite familiar with CRM but far from an expert I figured it made more sense to get the guy that wrote the book on CRM--Paul Greenberg. In a series of posts, Paul has the rundown on CRM in 2009--including a tour of the key vendors, emerging themes and forecasts for the year ahead. Paul's work is a must read for anyone interested in CRM.
Paul's focus has been on CRM 2.0, which in a nutshell is the coupling of traditional CRM apps with social networking functionality. Paul expects the integration between these two sides of the customer equation to accelerate even if there's a downturn.
- Feedback 3.0: Today (Feedback 2.0) companies are listening more to customers to learn, but there's little conversation happening. Feedback 3.0 will mean that companies will engage with the customers doing the most yapping.
- Vendor relationship management: The other theme is VRM. Simply put, a VRM tool would be something customers use to relate and manage multiple vendors. Paul thinks 2009 will be the year where VRM becomes more than just a concept. What's ironic is that vendors that have the most tentacles into companies (Oracle for instance) may become players. Just imagine the following: Here's a VRM tool from a big vendor so you can better manage it.
ERP: Here comes the dogfight
One of the hardest sells in 2009 will be convincing customers to start new ERP projects. How do I know? SAP is already hitting the infomercial circuit and 2009 hasn't even started.What we do know is that big projects are going be tough to get moving in the current economy. There aren't any bigger projects than ERP implementations. You have consultants. Big systems. Customization. Process revamps. And probably a few more consultants once you've screwed up the customization and process parts of the equation. Dennis Howlett has documented SAP's challenges as well as the ERP sector.
As for Oracle, we'll know a lot more on Thursday how the company is doing. The good news: Oracle hasn't preannounced its earnings. The bad news: Oracle is likely to feel some pain as customers pull back. However, Oracle is very diversified, collects a ton of maintenance revenue. Simply put, Oracle has the assets to weather the downturn.
Look for an Oracle-SAP bloodbath in 2009 with interesting detours provided by Microsoft and NetSuite.
BPO and IT services: Where we heading?
At the beginning of the great recession of 2008 IT services companies--those that allow you to outsource your infrastructure and processes--were seen as being immune from collapsing IT budgets.No more.
Citi analyst Ashwin Shirvaikar says in a research note:
Our interactions with industry participants indicate a sharp deterioration in near-term visibility for the IT service providers. Many buyers – especially in the financial services vertical – seem to be considering IT budgets that are lower year/year by as much as 10%-20%. This kind of a decrease is sharply lower than our CIO survey from September, which indicated that IT spend would be down sequentially, but still up ~1% year/year. To put this in perspective, we have had overall IT spending at flattish only once before – in 2002 – while all other years the IT budget has grown. Clearly the credit crisis and global economic slowdown – especially with sharply negative news-flow that coincided with the budget season – is a contributing factor.
Brian Sommer sums up 2009 for IT services providers simply. These services giants--IBM, HP's EDS, Accenture and a bevy of Indian players--can either hunker down in the downturn or innovate their way to more business.
IT services giants will make that choice all through 2009. So where's the innovation going to come from? My money is on the Indian outsourcers--Wipro, Infosys, Tata et al. Sure these vendors have their troubles--the biggest worry is a heavy reliance on financial services customers.
However, there's a lot of complexity to smooth out in that industry. Just imagine integrating the systems for the Merrill Lynch-Bank of America merger. Multiply that IT rat's nest by about 50 and you have the financial services sector. Meanwhile, the financial services industry is risk averse. What if the Indian offshoring companies swoop in, assume the IT risks and say we'll reduce your complexity every year. From there, Indian outsourcers have a platform they can take to retail and health care.
That theory is proposed by Wharton's Ravi Aron. In a Knowledge@Wharton India article Aron says:
Although it may take a year or so until the financial market turbulence dies down, he expects that offshore outsourcing firms will move toward offering better business process outsourcing services. He notes that it doesn't make sense for offshore firms to "diversify just for diversification's sake," but predicts that India's technology giants can find new business from financial services customers, which are rapidly integrating mergers while shedding non-core businesses. With new offerings created for financial services firms, offshore outsourcing firms can target other struggling or inefficient industries, such as retail and health care.
"Financial services firms are very interested in reducing complexity and minimizing risk," Aron says. "They want to standardize processes, and when finished they will look at automation. Offshore outsourcing firms have a great opportunity to offer platform-based business process outsourcing where they provide the technology and automate what a company does. The future for offshore outsourcing companies is to take 1,200 systems to 800 to 700 then 500 on down. There will be wrenching change in the back office."
Aron adds that Indian firms will have to hire a lot of U.S.-based expertise and project managers to make that vision happen. It sounds quite plausible so watch that back half of 2009. More for your enterprise applications reading list: