Research Companies Look into CRM’s Crystal Ball

Feature Article | March 6, 2006 by SAP News

Forrester points out that enterprises probably spent more than $3 billion worldwide on new CRM software licenses in 2005 and total spending on CRM, including maintenance, integration and related hardware and software, probably topped more than $12 billion. Both research companies believe enterprises will continue to spend big on the technology to improve customer-facing processes and still struggle to realize satisfactory returns on their effort.
Gartner turned its attention to the marketing departments in major businesses worldwide and said they will more deeply the embrace business process automation to drive and deliver strategic value for CRM. Gartner, for example, maintains the improvement to marketing will assist sales organizations in pursuing better-targeted prospects. In business to business sales, handheld devices will consolidate and sales executives will look to sales technologies to drive tactical revenue goals and strategic growth objectives.

Software as services in a five-year time frame

Application Service Providers (ASPs) for sales will grow beyond sales force automation to include ecommerce,” said Gartner analyst Joe Galvin. “The concept of software as a service will be the most disruptive long-term trend to affect vendors, but this will occur during a five-year time frame.” Gartner also expects the most exciting direction in CRM to be not a vendor-driven trend at all, but a user-directed initiative, which is to focus CRM efforts on understanding customer intentions and designing applications accordingly. “Management focus will be on automated customer self-service, optimization of the contact center agent to enable fast problem resolution and identification of upsell opportunities,” Galvin said, adding that in asset-intensive industries, field service management will emerge as a source of strong revenue enhancement.
Gartner also emphasized customer data integration will rise in importance as it is part of the glue that connects the back office with front-office CRM investments. The technology research firm recommends companies understand what CRM is really all about, how to approach it, what CRM means to the business and customers and how competitors are using CRM to entice customers and gain market share. “You also need to make sure that time and money are well spent and that a project’s value is clear and quantifiable,” Galvin said.

Creating differentiated customer experiences

Separately, Forrester Research talked with 22 large companies in Europe, North America and Asia, including Alcatel Networking, British Telecommunications, Deloitte, Energis UK and DHL International, who continue to spend a great deal on CRM. The high investment level is driven by unrelenting pressure on companies to create differentiated customer experiences to distinguish themselves from competitors.
However, Forrester pointed out that despite high levels of spending, satisfaction with CRM implementations is not strong. Even though enterprises view customer-facing strategies and technologies as critical to gaining competitive advantage, they continue to spend a great deal on CRM, though many still struggle to find the right practices to leverage CRM to its greatest benefits.
Forrester surveyed 94 business and IT executives about their satisfaction with CRM software applications and just 10 percent strongly agreed that the business results they expected to achieve were met or exceeded. Another 10 percent strongly agreed that they were able to quickly realize value from their CRM applications. The survey also found the companies documented reductions in costs and resources and many measured the ROI they achieved from CRM and reported positive results.

Guidelines to capture the benefits of CRM

Ten Best Practices for Successful CRM Deployment

Ten Best Practices for Successful CRM Deployment

For example, one European energy utility reportedly achieved an IRR (internal rate of return) of 23 percent over three years based on quantifiable measures such as reduced transaction time for billing, marketing campaign results and reduced system support. One insurance claims processing company said it expected a 2 to 1 return ($20 million return on a $10 million cost) but actually are getting a 4 to 1 return.
William Band, Forrester analyst and author of the report Best Practices for CRM Deployment, said companies should follow three guidelines to improve their odds of capturing the benefits of CRM.
First, stay the course to capture CRM value. CRM is a long term strategy to deliver differentiated customer experiences to set a company apart from competition. Band recommends using an approach of continual improvement and aim to improve CRM capabilities every quarter of every year.
Second, Forrester recommends companies evaluate and remediate weaknesses in current CRM initiatives. “There are many pitfalls to be wary of,” Band said. “Compare your CRM initiative with the 10 best practices* (see below) to identify the risks in your program. Address weak areas immediately.”
Third, follow a balanced approach to CRM deployment as successful CRM deployment depends on paying attention to both technical and people issues. “Enterprises should compare their approaches with best practices to uncover weak points in need of remediation and in so doing improve the odds of CRM success,” he said.

Aligning CRM to the overall business strategy

According to Band, information technology professionals have an important role to play in helping business leaders understand how to take advantage of mature CRM technologies (such as packaged CRM application software) as well as emerging approaches (CRM software-as-a-service). Band emphasized in most companies it is the business parts of the company that are accountable for delivering profit and loss. CRM initiatives, he said, must be led by business executives who own and manage the customer-facing processes that impact company success metrics.
“The more closely aligned that CRM is to important business strategies, the more likely senior management will see it as important,” he said. “Successful CRM projects require a constant balancing of objectives, priorities, resources and schedules.” The executives interviewed emphasized that technical challenges constitute only 20 percent of the effort for successful CRM while addressing people issues will consume the remaining 80 percent of management attention. For example, inadequate training in new CRM processes and technology tools will impede user adoption, Forrester noted.
“It is essential to define CRM objectives and the business process changes necessary to meet the objectives before considering a technology purchase,” Band said. “For example, is the goal to increase revenue per sales rep or increase average order size.” Yet in spite of all the challenges, analysts agree consolidating CRM solutions require that enterprises rethink the type of relationship they have with their technology and professional service providers as that relationship must move beyond a focus only on cost, project schedule and system performance to include a shared vision for achieving business outcomes.

Barbara Gengler

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