Amid an improving economic environment and the resulting resurgence in CRM spending, a sound, future-looking CRM application and technology strategy (tied to a CRM business plan) is a prerequisite for success. A few key technology trends will impact user decisions during 2004/05.
META Trend: During 2004/05, lack of perceived value resulting from technology overinvestment will drive organizations to realign their CRM initiatives with their business strategies. Concurrently, legacy applications nearing end-of-life will motivate organizations to upgrade to next-generation CRM architectures. By 2006, CRM transformation will become strategic for mainstream organizations, supported by industry-specific products, service-oriented architectures, integration frameworks, and articulated value propositions. Concurrently, 15% of Global 2000 organizations will approach end-state CRM, having succeeded in imbuing customer life-cycle management into their business practices.
Seven years ago, monolithic two-tier client/server packaged applications were the norm. Currently, Web-oriented, n-tier architectures have become common, albeit with proprietary elements under the covers. The industry is currently in the midst of another major evolutionary phase, with many vendors evolving toward service-oriented architectures. For CRM practitioners, this architectural evolution directly impacts CRM upgrades.
There is also a great deal of hype surrounding CRM deployment methods. The debate on whether to implement on-premises or go with a hosted CRM solution has become quite heated. Fundamentally, enterprises of all shapes and sizes want to know whether a hosted CRM solution is tenable for their company. In addition, a veritable host of emerging technologies is beginning to impact CRM technology decisions, including portal technology, business process management (BPM), and customer data integration (CDI). As technology worlds converge and enterprises focus more of their efforts on cross-functional and cross-systems integration, new and innovative solutions must be explored within the context of a CRM strategy.
CRM Upgrades: Determining the Path of Least Resistance. 2004 will be the “year of the upgrade,” which will certainly be welcome news to CRM vendors and systems integrators, and hopefully users as well. Two major factors are driving the upgrade push. First, there is a great deal of pent-up demand for the latest release, which, for most vendor products, represents a quantum leap in architectural design. During 2002/03, many users put their upgrade plans on the back burner because of IT resource constraints, the realization that upgrading to a next-generation architecture would be arduous at best, and little demonstrable business ROI. Yet, with many vendors in the second or third release of their first-generation Web architectures (read: maturity), user purse strings loosening, and the distinct possibility that users may find themselves several releases behind (and, therefore, in a bad position), users two or more major releases behind must seriously consider upgrading this year - or at the very least, develop a plan to upgrade within the next 12 months.
The second factor driving CRM upgrades touches on what has indeed become a touchy issue - maintenance. Some vendors (e.g., Siebel) will significantly increase maintenance this year for customers on older releases, unless the customer makes a commitment to upgrade. Other vendors are reducing technical support staff, or turning off support completely, for older releases.
The old adage, “pay me now or pay me later,” is particularly appropriate. Users that make a decision to upgrade now will end up paying for that upgrade. Users that hold off on the decision risk operating a desupported product, getting behind by several releases (thereby making the upgrade that much more difficult when they do decide to do it), and paying more in maintenance. However, other options are available (e.g., switch application vendors). For a detailed analysis of upgrade options, see Practice 2117.
CRM Deployment: Integrating and Managing the Hybrid CRM Portfolio. The critical factors - application ”best fit,” growth and migration, IT maturity, IT constraints, and cost of ownership - that must be explored prior to making a CRM deployment decision are analyzed in Practice 2132. Both hosted and on-premises CRM applications can provide significant value, though enterprises must not fixate on the delivery model. Rather, aligning CRM application decisions to support current and future business and technology requirements, while respecting IT and business constraints, is essential to maximizing the potential for CRM program success.
Hosted CRM vendors, particularly salesforce.com, have done an excellent job generating hype and creating market awareness. META Group clients often ask about the applicability of hosted CRM vendors to meet their requirements, and in general, customers of hosted CRM solutions seem content with their investments. Even given the typically limited scope of these investments (e.g., contact management, pipeline reporting), many enterprises become overly enamored with the “quicker/cheaper/better, and oh, by the way, you don’t have to involve IT” value proposition of hosted solutions. In addition, in many cases, long-term strategy - particularly CRM business transformation - is being sacrificed for short-term, tactical gains. Quicker implementation and time-to-value is to be desired, but doing so at the expense of stovepiping along functional domains is not, as was learned in the early days (1997-2001) of CRM.
Enterprises must accept the fact that they will implement applications on-premises, opt to use hosted solutions, and even outsource entire functions and systems (e.g., call center) of their CRM portfolio. The issue is not which deployment approach is best, since there is no single answer for all situations. In this new world order of deployment choice, the key issue will be how to integrate and manage the hybrid CRM portfolio, and how the portfolio ultimately supports the enterprise CRM strategy.
Emerging Technologies and Their Impact on CRM. Integration continues to be one of the most challenging and resource-consuming activities within CRM. On average, companies spend $3 on consulting and implementation services for every $1 they spend on CRM licenses. Of the CRM services cost, roughly 60% is spent on integrating systems and data. While there are numerous tools, methods, and techniques to affect CRM integration, new technologies and markets are rapidly emerging to capitalize on the demand for innovative integration solutions. The following technologies bear increasingly close scrutiny:
Business Impact: A lack of coordinated CRM technology planning now may lead to long-term CRM program disarray.
- Portals: Although portals are not a new market, they are increasingly overlapping with CRM initiatives. A portal is a mechanism for aggregating applications, content, business logic/rules, and data into a unified user interface. Portal frameworks enable the delivery of personalized information to specific end users, tasks, or roles, while providing end users with a contextually relevant experience within the context of a particular business process. For instance, many of our clients are exploring portals to enable a single, integrated agent desktop in CRM initiatives focused on the contact center (as opposed to customizing one specific application to act as the single desktop).
- BPM: Many enterprises are attempting to move beyond departmental workflow toward managing business processes across the enterprise. While the BPM space is currently quite fragmented and solutions require numerous components that must be integrated (e.g., modeling, rules engine, orchestration, integration servers, monitoring, optimization), the intent of BPM is to enable articulation, automation, and ongoing optimization of cross-functional business processes. This is particularly important in the CRM world, where sales, service, and marketing processes touch numerous functions both within the enterprise (e.g., order management, billing, manufacturing) and external to it (e.g., channel, partners - see Delta 2340).
- CDI: CDI strategies are designed to operationalize a panoramic view of the customer (i.e., creating a de facto customer system of record) through underlying data aggregation, consolidation, and interoperability, while applying value metrics (e.g., customer profitability) to customers (both individuals and groups) so effective strategies for managing customer relationships can be developed, implemented, and continuously augmented over time. A well-structured customer CDI strategy is required to best realize the nascent value of existing and future CRM investments, and has its own unique set of planning, implementation, and ongoing operational requirements. In essence, CDI represents the holy grail of a CRM strategy since it promises to expose a single customer record of truth across relevant CRM processes.
Bottom Line: Planning CRM upgrades, carefully evaluating deployment alternatives, and understanding the role of emerging integration technologies are key CRM technology issues enterprises should explore in 2004.
META Group originally published this article on 21 April 2004.