Is the CRM Acronym On Its Way Out?

Fifteen years ago, the acronym CRM didn’t exist. What did exist was Sales Force Automation (SFA) – an application area that was virtually identical to CRM. Could the CRM acronym follow SFA into acronym limbo?

This question is neither academic nor trivial. Software vendors invest millions of marketing dollars every year defining their software category and positioning their products within it. Changing the acronym of a software category involves additional costs that can only be justified if the existing acronym proves to be a significant financial liability.

That’s what happened with SFA. SFA was originally conceived as a transaction processing application inside large enterprises. The main purpose of SFA was to track the various stages of a sales process so that sales managers could prepare reports and forecasts more easily. While the idea seemed logical, SFA failed, primarily because it forced sales reps to act as data entry clerks. As a result, the majority of SFA projects were expensive failures, and that eventually turned the acronym SFA into a marketing liability.

When acronyms turn to mud, the companies who participate in that segment generally thrash around looking for a new acronym that lacks the negative associations. For example, the idea of providing applications across the Web was encapsulated during the dot-com era with the acronym ASP (Application Service Providers). After the dot-com crash left a sour taste in the mouths of investors, that acronym disappeared, replaced by SaaS (Software as a Service). Same idea, different acronym.

In the case of SFA, the software industry settled on Customer Relationship Management (CRM) as the replacement acronym. However, while that shed the negative associations resulting from SFA failures, the problems that users encountered in SFA have largely survived into the current spate of “CRM” products.

According to a recent study by the high tech analyst firm AMR Research, CRM failure rates remain high. Almost a third of the companies surveyed reported an implementation failure that kept them from going live with the software. And user adoption remains as much a challenge as it did in the old SFA days. Almost half of customer management applications face serious adoption issues, and a quarter of the CRM licenses that are purchased remain unused.

Even some of the news that AMR Research characterized as “positive” has a questionable character to it. For example, as the appeal of SaaS CRM continues to grow, an increasing number of companies are “upgrading” their CRM capability. According to AMR, almost two-thirds of companies now upgrade their CRM systems at least once a year – and a quarter upgrade even more frequently. While AMR characterizes that as a sign of a robust software market, it could also suggest that companies aren’t satisfied with their current systems and are looking for ways to make them useful.

Ironically, sales of CRM capabilities are brisk and growing. AMR believes that CRM spending will increase 16 percent in 2008 to nearly $2,200 per employee, and that mid-market companies of less than $1B in yearly revenue will see the greatest spending increase, up 22 percent from the previous years. What’s more, the year 2008 will see the largest average planned increase in CRM budgets to date.

Rob Bois, research director at AMR Research, characterizes the current situation as something of a paradox. “Spending has reached an all-time high, with expectations nearly as lofty,” he explains. “But implementation failure rates have not improved, nor have ROI metrics.” He believes that both buyers and vendors will need to work together to close this gap or the CRM industry might experience the same sort of debacle that damaged the market for SFA in the late 1990s.

Significantly, several erstwhile “CRM vendors” have started dropping the “CRM” from their product descriptions in favor of other acronyms and buzzwords, such as “Sales 2.0.” And we’ve conducted interviews with half a dozen executives who insist that their product isn’t CRM, even though the parameters of that product fall well within the industry’s standard definition. This suggests that the CRM acronym may be acquiring the same negative associations that made SFA into nomenclature non grata.