I Think they’ve Got It!

In the classic musical My Fair Lady, there’s a moment when Professor Higgins realizes his student Eliza Doolittle has at last mastered proper speech. “By Jove!” he exclaims. “I think she’s got it!” The same could be said for CRM. After years of too many failed implementations, complaints of shoddy customer service, and frustrations over lengthy customizations, CRM customers and vendors, in the words of Professor Higgins, seem to have “got it.” Customers have come to realize that technology will not magically solve their problems; they must first establish viable business processes. Vendors have been paying a lot more attention to customer satisfaction and demands for shorter implementations, simpler-to-use products and a faster return on investment. In short, we are witnessing a turnaround in the CRM industry.

At the DCI CRM conference in Chicago earlier this year, Selling Power sat down with representatives from the top 15 CRM companies – as determined in ISM Inc.’s annual evaluation of product comprehensiveness – to discuss the state of the CRM industry and where it is headed. It was immediately apparent that the industry continues to be very dynamic and that vendors remain upbeat about the customer relationship management business.

The Microsoft Factor

Vendor optimism comes despite several trends which, at a glance, seem to present a challenge to the CRM market. One of the most notable of these is the release of Microsoft CRM. Clark Dircz, president of Axonom, called the release “a watershed event. I think it’s going to change everything in the industry in the next six months.” It already has had an impact on the business of several CRM vendors – but surprisingly, a positive one. Dircz, for instance, says Axonom has had “more success in the last two or three months than we’ve seen in 18 months, as far as closing deals.” He attributes that success to Microsoft “legitimizing the marketplace for us.”

Axonom, Dircz adds, has a midmarket focus but has recently scored some notable sales to larger customers. “Now Microsoft is going to accelerate that,” he predicts. “As I said, Microsoft is legitimizing this entire industry for us. People are seeing really good productivity.”

Van Symons, president of Clear Technologies, agrees. Clear Technologies focuses exclusively on the midmarket. Microsoft’s entry into that space, he says, “has legitimized it, and we’ve seen 70 percent growth in the last three months because of it.” Customers are looking for solutions that can be up and running quickly and can demonstrate a fast return on investment, he adds, and Clear Technologies’ ability to meet those demands, coupled with Microsoft’s “legitimization” of midmarket CRM, means Symons’ newest problem is “expanding quickly enough to meet the demand. Not the reverse,” he says.

Another result of Microsoft’s entry into the CRM space is that vendors are homing in on their key strengths and on vertical markets in order to differentiate themselves from the software giant whose CRM product is very much horizontal – a more generalized product applicable to any line of business. Take iET Acquisition, LLC, makers of Applix iEnterprise, for instance. Tom Stille, the company’s vice president of operations, says that while Microsoft does affect them, “I believe it is actually going to help us focus on our core market, rather than having a very horizontal approach to CRM.” He says Applix has been concentrating on analytics, because the company sees that market growing quickly.

Other vendors are digging further into vertical markets with specialized solutions for industries such as finance, telecommunications and others. “You have to get vertical. There is just no other choice,” says Axonom’s Dircz. “We look at the Microsoft CRM product, in a way, as being the next version of Microsoft Outlook. And once it gets to be that ubiquitous, they could price it at a dollar. They’ve been known to do those kinds of things. So I think it’s going to be a very vertical world we’re all living in going forward.”

PeopleSoft saw this trend coming and now offers six packaged vertical applications – for communications, energy, financial services, insurance, government and high technology. “The work required to go live takes much longer if you have to take a generic product and then alter it to fit the business processes of each company or industry,” says Brad Wilson, PeopleSoft’s vice president of marketing. “You can go live faster if you have prebuilt processes that are already close to the way you run your business.” Wilson says PeopleSoft has multiple customers who have gone live with PeopleSoft CRM in 12 weeks or less.

There’s a time savings during the selling process as well. “We used to sell a different product to every cross-industry customer we had,” says Peter Dios, vice president of Optima Technologies Inc. “If you were a salesperson, you had to be able to react and address business needs in every company. But when we now go to a vertical market edition that really drills down function, it is more often than not an out-of-the-box solution. So sales reps can learn the features, the benefits, the things that appeal to each industry.”

Verticalization is smart business in other ways. Michael Couture, vice president of marketing at Amdocs Ltd., says very large enterprise installations often become enormously complex and involve very complex business processes. “So you are either going to build all those business processes from scratch, and that costs a lot of money and is fraught with a lot of risk,” he says, “or you come to the table with those business processes built into your product and a lot of knowledge and expertise around that to make sure it’s going to work.”

Still, it’s not just about offering vertical solutions. Top CRM vendors know it’s how you help customers best use those solutions that counts. Laurie Hood, senior director product marketing with S1 Corporation, says her company brings to the bargaining table a wealth of industry best practices – and promises to help their clients incorporate them. With 4,000 customers in the financial services industry, S1 “sees what a lot of financial institutions are doing, so we look at how we can push the best business processes back into our product, and then push that back out to our customers,” says Hood. “We’ve also got quite a few analytics products that are targeted to banks. So, a lot of what we do is just work with our customers to better help them understand their customer base and have their sales and marketing be more effective.

S1 has a customer in St. Petersburg, FL, for instance, with which the vendor recently worked to run analytics on customer profitability. “We pointed out to them that 80 percent of their most profitable customers are age 70 and older,” says Hood. “This age group would not be uncommon in St. Petersburg, but businesses probably didn’t know the percentages. So we’ve been working with them on some strategies to grow their small-business customer base.”

Wireless and ASPs

Roundtable participants identified several other trends that are well worth watching. One is the shift towards wireless CRM. Mike Pessetti, vice president of SalesPage Technologies, says wireless and hand-held initiatives are becoming an issue with every prospect they touch. “Whether it is a true wireless implementation or an ‘on-device’ implementation for remote or field users, whether it is sales or field service, it doesn’t make a lot of difference,” says Pessetti. “Everybody is asking about it, and there is an expectation among customers that there is a viable [wireless] option for them should they select your product.”

Tony Martinez, director of global CRM for SAP, says roughly 20 to 25 percent of all its installations today are mobile in nature. “On the wireless side, probably 5 to 10 percent of that for new projects,” he says. He adds that the figures are just a guess, but overall, a “relatively small amount of SAP implementations are pure wireless implementations.”

Still, there’s no question that those figures will grow. Scott Creighton, vice president of Siebel PRM, says his company’s wireless installation figures are about the same as SAP’s, “but we see that they are growing dramatically, especially in the areas of service, life-cycle management and field service.” Siebel’s healthcare verticals are also a hot market for wireless customers. Pharmaceutical sales reps, he says, increasingly are demanding hand-held solutions, and that demand is only likely to increase. Fast. “It’s moving very, very rapidly,” Creighton says. “So I think wireless is going to be one of the fastest growing areas, certainly within CRM from a service standpoint, but even more importantly, we are seeing more and more on the sales side.”

Another fast-growing area of CRM is the application server provider (ASP) model. Barton Goldenberg, president of ISM Inc., which compiles the Top 30 vendor list each year, pointed out during the roundtable that several ASP vendors made the Top 30 this year and that they are “becoming a real alternative for certain types of situations.” They aren’t in the Top 15 yet, he says, because “at this time, the offerings of the ASP vendors don’t score enough points: they don’t have rich enough functionality. But I’m telling you there’s a move, things are on the way up.”

Top 15 vendors agree. Dios of Optima Technologies says three out of four of his customers today are opting for an ASP model, a trend which surprises him. “We thought it was going to be one out of four,” he says.

“We’re seeing the ASP model grow again, and I think it’s in its second evolution,” adds Michael Tarbet, vice president of Onyx Software. In the initial evolution, he says, customers decided ASP-based solutions were too limiting. “Customers found out they were limited in being able to migrate the solution back to an in-house application at some point. They were limited in the customizations they could do to the application. They were limited on certain aspects of it.” Now there’s a sort of ASP revival as companies rediscover its strengths. “We’re seeing quite a bit of demand for it now,” Tarbet observes, pointing out that Onyx recently signed a deal with IBM that will allow companies to “heavily, heavily customize the application, although it is hosted by IBM, and to migrate it in-house when they want to. We are starting to see [the ASP-model] become a really interesting space for us. I can’t tell you today how big it’s going to be for us, but it’s moving pretty rapidly for us right now.”

Paul Rodwick, vice president of E.piphany Inc., says his company is seeing a lot more interest in ASPs, as well, but from a somewhat different perspective. There’s a big push from customers today to get CRM applications up, running and producing a return on investment as quickly as possible, he says, and many are turning to ASPs to accomplish that goal. “We’re seeing a lot of customers who want to start initially in an ASP model, to roll out an initial phase of whatever application they’ve chosen, then, as they expand that application and issues such as integration are more important, bring the application in-house. But they want to use the ASP model to jump-start the initial application,” says Rodwick.

A final nod to growing interest in ASPs came from S1 Corporation. Hood says that as they work on pushing their applications down market, “the ASP model becomes more appealing, because a lot of smaller companies can’t afford the infrastructure to run a CRM application themselves.” Running a CRM application in house, after all, is a 24/7 proposition, and many smaller companies simply don’t have the resources or the desire to do so.

Enter the CFO

Resources, in fact, are becoming an issue for companies of all sizes. A tough economy has buyers scrutinizing purchases more than ever and slicing costs at every opportunity. That scrutiny, in turn, has brought CFOs onto the front lines of decision making, says Tim Vertz, director of business development at Oncontact Software Corp. “In the last 18 months, as the economy has downturned a bit, a lot more companies are seeing their CFOs heavily involved in decision making,” he says. “They are a lot more involved in looking at the software and seeing what’s going on.”

CFOs aren’t replacing the typical key decision makers, they’re just adding another voice – the voice of financial caution in economically turbulent times. CRM vendors say they’re still dealing with a combination of IT and sales when it comes to making CRM decisions, and that the two departments tend to weigh in equally. “We haven’t seen a significant shift in one direction or another where one part of an organization is really driving the process individually and independently,” says Pessetti of SalesPage Technologies. “What we’ve seen is more of a structured coming together of those two groups to really more appropriately attack the issue and address both the technological issues and the business process issues that are entailed in implementing a system like this.” He adds, however, that the IT group tends to do more of the “heavy lifting” in reviewing the CRM applications and defining internal requirements.

Adding the CFO’s voice to those of IT and sales has contributed to a longer sales cycle and a demand for highly detailed ROI analysis. There are fewer dollars to spend these days, so CFOs want to be absolutely certain they’re investing those dollars in the right technology – and they’re in no hurry to make that decision. “Companies, certainly, are taking longer to make the appropriate decision,” says Oncontact’s Vertz. “I think it is a matter of the budgets just not being there to do these things. They’re not simply calling up a vendor and saying, ‘Oh, I heard you’re Siebel, so I guess I’ll buy you.’ I think they’re just doing a lot more due diligence to make sure they’re fine with that solution.”

“A CRM solution almost has to guarantee a return on investment for it to get the signoff at the CFO level,” says Kuljit Bawa, CEO of Staffware. “We’ve seen a number of projects start off , and we had the buyers on our side and the technical people sold, but when they went up for release of funds they were kicked back because the business cases weren’t strong enough.” In response, Staffware is starting to include ROI in its contracts, and it is finding it has to address both tangible and intangible aspects of it. Ironically, says Bawa, it’s the less tangible ROI metrics – such as improved customer loyalty – that are hardest to measure but that buyers want most. “We’ve bundled our process integration software with our CRM product and we tend to use that side nowadays to help us to get the hard ROI,” Bawa says. “So not only are we driving CRM software, but we’re also providing the software that will link into the back office, and there we can show some very hard, tangible benefits, such as maybe cutting fulfillment from three days down to two hours, which in turn can eliminate heads in the back office.” Those are the kinds of numbers, says Bawa, that CFOs are seeking in order to sign off on CRM purchases.

That’s not bad news for vendors, it’s good news for the CRM industry. It means customers are really becoming partners in making CRM a success. It means they want to get it right and not wind up as another implementation failure statistic. And that dedication to success means customers are at last paying close attention to the factors that contribute most to that success, including, primarily, a focus on getting customer-centric business processes in place before selecting and implementing technology.

“One of the things we’ve heard most from our customers is ‘Help us simplify our business processes; help us leverage our software to automate our business processes,’” says Creighton of Siebel Systems. One of Siebel’s big initiatives has been around business process computing and being able to configure CRM applications on an enterprise basis around the business process. Another piece of the initiative, Creighton adds, is integration and how Siebel interacts and interoperates inside and outside the firewall, with an enterprise’s many different applications. “So we can now take those business processes and flow them to the many different applications that companies have,” he says. “I think that is going to go a long way towards driving down the total cost of ownership, a long way to adding huge value to these companies, especially for those who are in their first or second phase of a CRM-type deployment.”

Sales processes are also getting a boost. Take lead management, for instance. Creighton says that when a lead comes in from the Web, rather than “clunking around three or four different desks, it gets routed to the right person at the right time, and maybe it’s pinging off back office systems, looking at the value on certain product lines, and feeding that information back to the customer in real time,” he says. “I think that can add huge value going forward in terms of cost take-out and real value to the customer’s customer as well as to the company implementing these kinds of technologies.”

At Your Service

So customers are getting it right: keying in on business processes that long have been a critical component of CRM success. But they’re not the only ones making the effort to improve problem areas. CRM vendors are making significant improvements in customer service, an area in which they’ve been roundly criticized in the past, especially in light of the fact that they specialize in customer relationships. Vendors like Onyx Software are leading the charge. “We as a CRM company ought to embody what customer satisfaction truly is. It really ought to show in what we do for our customers,” says Tarbet.

Onyx has a four-pronged approach to customer satisfaction. The first prong, says Tarbet, is the company’s group of account management teams. These teams meet quarterly, in person, with “all levels of our existing customers, to understand how they are using our software, whether they are achieving their ROI, whether the software scaled across the enterprise like we said it would, et cetera,” says Tarbet. Second, Onyx performs ongoing training and education programs for its customers through webinars, seminars and other similar sessions. The reason: “We feel that people always buy a CRM solution and inevitably only deploy a certain percentage of the functionality they had originally hoped for,” says Tarbet. “So our goal is to document those processes on the front side and hold them accountable to getting to those end results.” Consistent training accomplishes that goal. Third, Tarbet says, Onyx’s product team is very field focused, constantly reaching out to customers for input on its products. Version 4.5 of Onyx Enterprise CRM, which Onyx announced at the DCI show, was heavily influenced by customer feedback.

Finally, setting expectations up front – and then meeting those expectations – goes a long way to ensuring customer satisfaction. “One of our tag lines is that we will deliver on time and on budget. And we do. Period,” says Tarbet. “We clearly gain consensus with our customers in the early part of the process, and then we hold ourselves accountable to it, for better or worse. The last thing we want to do is put our customers in a position of going back to the CFO and asking for more money. So, a lot of our customer satisfaction is derived from that on-time, on-budget strategy.”

For Pivotal Corporation, customer satisfaction involves providing more value to customers. “What we have tried to do is really evolve from a go-to-market program in our professional service capabilities,” says Paul Mahon, Pivotal’s director of sales. “One example of this is that we can actually sit with the customer today, define some specifications and requirements, and literally build that out overnight and provide it back to him the next day. So we’re trying to do things like that to add additional value for the customers.”

Siebel Systems takes a different approach, but it’s goal is the same: 100 percent customer satisfaction. It works toward that goal in two ways, says Creighton. First, Siebel relies on a rotating set of customer surveys. Each quarter it alternates surveying its entire customer base with surveying just its brand-new customers to find out if the software is meeting their needs, if the installation occurred on time and so on. Siebel then uses the survey results to make improvements in both the company and the software. The CRM giant’s second method of achieving customer satisfaction is through employee compensation. “We want to ensure that customer satisfaction is in the heart and soul of every Siebel employee, so 50 percent of employee compensation is based on customer satisfaction,” says Creighton. “Behavior is definitely dictated by compensation.”

In the end, there’s no question that all these efforts are paying off. Vendors are delivering products that are simpler to use, are quicker to install and bring in a faster return on investment than in the past, and they’re doing so while ratcheting up their attention to customer satisfaction. At the same time, customers are paying more attention to their side of the equation for CRM success. The combined result, not surprisingly, has been a rising rate of implementation success. “We’re not going to sell our products anymore,” concludes PeopleSoft’s Wilson. “We’re going to sell our customer success stories to our prospects.” For the CRM industry, there are an increasing number of those stories to tell.