Very Big Deals

There was a time when the “Big Eight” were accounting firms. Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick International, Price Waterhouse and Touche Ross were all excellent accounting firms. World class. Companies enlisted these firms for their expert assistance on such financial matters as auditing, financial planning and taxes. These firms established their reputations on these solid grounds. And they grew. And grew.

Then they expanded into management consulting. Consulting fit well into the advisory capacity they had already established in the financial arena. They developed “best practices” for managing companies of all types and shared their pearls of wisdom with executives of businesses far and wide. And they grew. And grew.

By the late ’80s, the Big Eight accounting/consulting firms had moved into all aspects of a company’s performance and management, including sales. Peat Marwick International and KMG merged to form KPMG. Arthur Andersen formed a separate enterprise, Andersen Consulting, devoted to business and technology consulting. Ernst & Whinney merged with Arthur Young to form Ernst & Young. Touche Ross merged with Deloitte Haskins & Sells to form Deloitte & Touche (globally, Deloitte Touche Tohmatsu, with the consulting division Deloitte Consulting). The Big Eight grew and merged and became the “Big Six.” And still they grew.

And then came ubiquitous technology. In the early ’90s, the Big Six moved heavily into the sales arena as consultants to the large companies and corporations that could afford their services. They further extended their reach into IT consulting, helping to design and implement the computer systems that support large corporations all over the world. With last year’s merger of Price Waterhouse and Coopers & Lybrand, the Big Six became the “Big Five” that we know today – Andersen Consulting, Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers.

During the last couple of decades, there has also been a remarkable evolution in the sales field. Sales force automation (SFA) systems emerged from the primordial ooze of centuries of selling any product to any customer willing to pay. Although the first crawling and stumbling SFA systems were little more than contact management packages, as time went on they began automating more and more of the administrative tasks: they scheduled sales calls, tracked the results and provided reporting mechanisms, so managers could better understand where their resources were going. The Big Five helped to bring these changes about, expounding the benefits of automation and helping companies select vendors from the handful of emerging major players. With their help, SFA became the buzzword of the ’90s, and everybody bought SFA systems.

From there, SFA quickly developed into marketing mechanisms used for broad direct-marketing efforts. Soon salespeople could target specific customers for follow-up, based on a preset schedule or information selected by the sales force.

SFA grew into its childhood when customer service became linked into the sales systems so that salespeople in the field would be aware of their customers’ history, pending orders and problems. The people at the help desk would know when sales and service calls were scheduled. Every touchpoint with the customer appeared as a link in a single system (or a group of linked systems), so that customers calling the company would be able to speak with a person familiar with their needs. Again, the Big Five were there, explaining how much better everything would be if the systems could only communicate and how customers and companies would benefit. They shared in the benefit as they expanded their consulting territory within each company, department by department.

Early SFA systems represented an important step in the development of more mature sales systems. As in any childhood, they were prone to errors and problems. Even when the hardware and software worked well, the sales force did not always underst how to use it. Management support was often lacking, and as a result, the failure rate of SFA systems soared to more than 50 percent. And yet, these systems continued to grow and evolve. After all, the idea was sound, only the execution presented problems.

Yesterday’s childlike SFA systems developed into today’s Customer Relationship Management (CRM) solutions, with important linkage to marketing, that involve nearly all aspects of a business. Although CRM is still in its adolescence, its goals are mature and far-reaching.

“It’s about optimizing the relationship with your customers,” explains Dale Renner, managing partner of Andersen Consulting’s Customer Relationship Management practice. “A fundamental principle in CRM is that all customers are not created equal. So figure out how to either make them best customers or remove them from the roster. You optimize customer relationships by understanding the customer or customer segment and then crafting specific resource-deployment programs to meet their specific needs. But don’t treat all customers the same way, or you will lose customers, potential profits or both.”

As Paul Cole, global leader of CRM solutions for Ernst & Young puts it, “CRM is not about just providing more customer service to everybody. CRM is about making disciplined decisions – investing in your customer portfolio based on knowledge of who they are and what return on investment you’re going to make through putting these systems in.”

It’s important to point out that CRM is not simply a technology solution. To fully optimize the CRM solution a company must undergo a complete reengineering of the business to refocus on customer groupings rather than on products or geographic regions. Consultants encourage managers to group their customers in terms of what they mean to the company’s bottom line and analyze how they can best serve customers to increase profits. In other words, businesses must allocate more sales force dollars to those customers who produce the greatest return on investment and find cheaper, more effective ways to deal with the rest en masse.

How Important Is CRM?
In The Customer Relationship Management Planning Guide (High-Yield Marketing, 1999), author Dick Lee points out that “CRM empowers us to change our businesses exponentially – while SFA only empowers us to change incrementally.” Supporting that theory, a recent study by Andersen Consulting found that CRM performance accounts for 50 percent of the variation in companies’ returns on sales. We’re talking big dollars. In fact, the CRM market is projected to reach $16.8 billion by the year 2003 (AMR Research). With so much at stake, can you guess who is gearing up to help you with your CRM deployment? You’re right. The Big Five!

Big Five Deployment
According to Ernst & Young’s Paul Cole, companies must decide to go in one of three directions in order to build their CRM solution. If they choose the first option – design and develop their own systems – the Big Five can provide programmers, analysts and business consultants for the project.

Another option: Buy an all-in-one solution, such as Oracle’s. In this case, the Big Five can help to implement such a product. For example, Ernst & Young and Oracle have formed a strategic alliance and opened Ernst & Young’s Oracle Solutions Center, where they demonstrate the capabilities of an all-in-one solution.

The last option: Buy components of a CRM solution and integrate them. Any of the Big Five can assist companies in implementing and integrating components of a CRM solution, but each has its own view on how best to accomplish this. Each firm’s solution does have one thing in common: they all involve growth of another kind – the strategic alliance.

CRM Component Integration
Ernst & Young’s answer to CRM component integration is the Centric Group. In October of 1998, Ernst & Young joined Lucent Technologies, Genesys Telecommunication Laboratories, Siebel Systems, SMART Technologies and Staffware Corporation to form the Centric Group, a collaboration of companies working to identify the CRM success factors for their clients. More recent additions to this group include Nuance Corporation, Active Software and NCR, with hardware provided by Sun and Hewlett-Packard, according to Cole. The companies within the Centric Group jointly promote and demonstrate solutions at their Customer Solution Center in Chicago. Although Centric demonstrates how these companies’ products work when integrated, Cole insists, “When you leave Centric, we don’t necessarily care if you decide to buy those specific brands. We obviously put them there because we believe they are a relevant and feasible choice, but we want you to buy into the point of view – to think about it from a complete-architecture standpoint. Centric generally is around educating the client in what a complete CRM solution looks like.”

KPMG has taken a slightly different tack. Doug Holden, national partner of customer management at KPMG, explains, “We’re identifying the best-of-breed software solutions by market space, and we’re putting them together in a preconfigured solution. We’ve formed strategic alliances with the key ones so that we can launch specific solutions that are broader and more on-point than any of the vendors are able to provide by themselves.” An example of such an alliance: In 1998 KPMG, Pivotal Software Inc., Microsoft Corporation and Hewlett-Packard formed Enterprise 360, a CRM consortium, to deliver rapid, results-based solutions to mid-enterprise organizations. Additional consortium participants are still being selected to provide best-of-class solution components. The first of these participants, Epiphany, expects to leverage its existing relationships with KPMG and Pivotal to provide robust customer analysis functions. Unlike Ernst & Young’s Centric Group, whose stated goal is to educate the client, KPMG is interested in selling preconfigured solutions.

Deloitte & Touche also has formed alliances with several software vendors in order to provide CRM solutions. For example, D&T has had a strategic partnership with Trilogy since 1996. In April ’99, D&T announced a strategic relationship with Computer Network Technology (CNT), focused on real-time access to packaged and legacy applications. In May, they announced a strategic alliance with Calico Commerce, focused on electronic commerce. In June, an alliance with SPL WorldGroup was announced, to implement CRM solutions in energy and utilities markets. Rather than forming a consortium of CRM companies, D&T has formed numerous separate alliances with vendors, each having specific goals.

Andersen Consulting and Oracle have a long and successful history of working together. Many years ago they formed a Global Business Alliance, paving the way for what they call “a cooperative and committed relationship.” Andersen also formed a strategic partnership with Siebel Systems back in 1994. Now Andersen offers both of these systems as CRM solutions and partners.

For more than 10 years, PricewaterhouseCoopers (PWC) has been an Oracle Alliance partner, codeveloper of Oracle-based custom configurations and integrator of Oracle solutions. PWC and Oracle have now teamed to provide a comprehensive CRM solution and services to maximize the use of the technology. Last May, PWC announced that it had joined the Sun–Netscape Alliance Preferred Integrators initiative “to provide e-business solutions for global companies.” In September, PWC announced the formation of a global venture with their long-term alliance partner, i2, “to develop, sell and deliver end-to-end e-business solutions.” In June ‘99, PWC and Computer Network Technology (CNT) announced a strategic alliance to deliver real-time integration solutions for packaged and legacy applications in CRM environments. In August, September, October and November, additional PWC alliances were announced with Clarify Inc., Intel Online Services, Extricity Software and Vignette, respectively.

As you may have noticed, these alliances are not exclusive. In addition to the alliances noted above, Clarify has strategic alliances with Ernst & Young, KPMG and PricewaterhouseCoopers. Baan has “Baanforce Alliance Partners,” which include all of the Big Five as well as 32 other consulting firms. You’d have to look far and wide to find a consulting firm that does not have an alliance with Siebel today (with 238 consulting firm alliances at last count). With alliances playing such a large part in the development of CRM solutions, exactly what will they mean to the Big Five, to the CRM vendors and, most importantly, to you?

The Big Five and CRM Vendors
Although nearly all of the companies we talked to claimed to continually comb the market, evaluating and reevaluating the hundreds of CRM vendors, we found that the Big Five often drew on their past experience with particular CRM vendors in deciding which partner to take to the prom.

Doug Holden at KPMG explains, “We went through a lot of the software companies that we’re familiar with and implemented the ones that we knew were the best in terms of their ease of use, ease of implementation and price/value ratio. And then we did a lot of analysis and invested a lot of money and people in preconfiguring and working on solutions centers to get them to work together.”

Of course, sometimes the client selects the vendor even before selecting the consulting firm. Patrick Piccininno, vice president and chief information officer for Xircom, states that Xircom has narrowed down their CRM vendor list to Oracle and Siebel. When asked why, he explains, “Those two vendors were far and away above any other vendor that was out there, so we just very quickly picked the two industry leaders and decided to focus our attention on them.”

So, selecting a partner in the CRM arena can have as much to do with market share as it does with product value. As Paul Cole at Ernst & Young says, “We’re not blind to which companies are emerging as the market leaders, and sometimes that momentum carries through. To turn your back on Siebel or not want to play with Siebel would be a mistake, given their momentum on the marketplace.”

Alliances with the Big Five
When asked what he thinks the benefits of these alliances were to the Big Five, Gord Breese, director of strategic alliances for Pivotal, answers, “Everybody claims to have certification…By creating a more in-depth partnership with a specific software vendor, I think you create some differentiation. You create some unique value-added.”

Andersen Consulting lists the benefits of their alliance with Oracle as including advanced access to product updates, customized training for the firm’s global practice and access to Oracle’s development labs, which help shape future releases and set product direction.

The CRM Vendors
According to International Data Corporation (IDC), vendors that form effective partnerships will be in the best position to take advantage of CRM’s increasing revenues. Stephen Graham, vice president of IDC’s Software Channel and Alliance Strategies research program, explains, “The complexity of CRM solutions, driven by the need for unique customer implementations, means there is seldom a single company that is positioned to satisfy all the required components and capabilities of a customer implementation. Therefore, an effective network of partners is a cornerstone of a successful CRM market strategy. Vendors attempting to go it alone in the market will quickly find it is nearly impossible to compete effectively against the breadth of skills that can be offered by a strong network of partners.”

KPMG’s Holden believes his team is closer to the customers than any of the individual vendors are in terms of the real business issues that need addressing. He explains that one of the advantages of bringing a small group of vendors together is that KPMG is able to push each of the vendors to make the overall solution better and better.

Gord Breeze at Pivotal explains that aligning with KPMG, “has certainly given us what we believe is a great advantage in the marketplace in terms of being able to tap into an existing client base and being able to customize solutions around vertical industries.”

Dollars and Sense
To a software vendor, an alliance with one of the Big Five can also mean investment dollars. When asked about Pivotal’s financial relationship with KPMG, Breese divulged, “We’re a publicly traded company and KPMG has invested in our firm.”

KPMG is not the only one of the Big Five to have a financial relationship with a CRM vendor. According to SEC filings, Andersen Consulting now owns 6.3 percent of Siebel Systems.

PricewaterhouseCoopers has also done a bit of wheeling and dealing with their CRM partners. When PWC and i2 announced the formation of a new e-business global venture last September, they also announced that PricewaterhouseCoopers would receive 5 million dollars of restricted shares of i2 common stock in exchange for intellectual property in the form of e-business software, workflows, business processes and industry-specific knowledge. To a CRM vendor, attracting Big Five dollars makes a lot of sense.

What’s in It for You
Shorter Timeline, Lower Cost
According to Breese, Pivotal has done a number of very successful projects with KPMG, and under their consortium they’ve created implementation templates. “That cuts the time and cost to implement a solution.”

“The real cost benefit stems from the fact that we don’t have to charge each client for the integration that we’re doing among the components because we’ve preconfigured them. Now we definitely have to refine the configuration for the unique situation that we find ourselves in, in terms of their environment, but it’s a reduced cost over putting it together on the fly every time,” according to Holden.

Lower Risk
Although McKinsey doesn’t form alliances, Darren Pleasance, engagement manager in McKinsey’s CRM Practice, is able to describe what he sees as the main benefit of the alliances being formed: “Say Andersen’s done a dozen or more Siebel installations. When it comes to the next one, and they decide that Siebel makes the most sense, you’re less likely to have hiccups along the road because they’ve got much more experience working with Siebel.”

Simply having an alliance is not enough to reduce risk, however. According to Breese, Pivotal’s solutions have been optimized for their Enterprise 360 partners. If a client chooses not to use one of their vendor partners, “there can be additional costs and risks if you start plugging out components of the solution.”

Piccininno at Xircom believes that KPMG’s vendor alliances are only going to benefit his company in the long term. “If we choose to implement with either of those vendors [Siebel or Oracle], we can continue to leverage those relationships [KPMG’s relationships with Siebel and Oracle], and leverage the fact that KPMG understands the requirements and understands what it is that we’re trying to achieve, and be a partner in that implementation.”

Of course, not all alliances are created equal. When a company allies with everyone, such an alliance is devalued and may mean little in terms of benefits to anyone.

Dangers
“If we try to force a square peg into a round hole because we become so enamored of a piece of technology, or so driven by generating sales around the products that we overlook what the business requirements of the client are and blindly present something as a solution, I suppose that’s a potential risk to the client,” explains Cole.

Pleasance describes why the Big Five are less likely to continually evaluate and change their alliances when a new “best-of-breed” emerges. “These people have been trained now how to install Siebel. If you all of the sudden discover that Vantive or Orum, or some other system would be better, it’s kind of tough to stomach switching all of the training to somebody else.”

Breese also notes that the financial nature of these alliances can present a danger to unbiased vendor selection. “It’s no secret that there are investments between companies. There are stronger financial partnerships that will govern independence.” If a consulting firm loses their objectivity because of a financial partnership with a vendor, it is the client who will suffer.

All in All
Clearly, strategic alliances are a benefit to CRM vendors. They also provide another growth opportunity for the Big Five. Insofar as they play a part in reducing cost, shortening timelines and decreasing risk to your CRM implementation, they can also benefit you.

The success of these alliances must, in the end, be measured by the ability of the Big Five to maintain objectivity, diligently seek out new solutions and put the client’s ROI goals ahead of their own. To the degree they can continue to do that, they will grow. And grow. And their customers will grow too.