Loading ...The maelstrom of customer relationship management and how to navigate it
Ariba has just gone on demand, and says that it has some customers who have gone from perpetual licensing to on demand. That got me thinking about customer relationship management (CRM), in which we saw Worldspan take the same approach with Siebel. That, in turn, led me to think about the perennial CRM "problem" and how hosting is one approach to it.
After nearly a year fraught with getting budget approvals and executive sign-offs, evaluating a boatload of vendors, and tying enterprise systems together, a bleary-eyed Paula Casey flipped the switch on her company’s new CRM (customer relationship management) system. "I’ve heard about CRM as a buzzword for a long time," says Casey, director of sales operations at high-tech manufacturer Polycom. "But only recently have I learned a lot about CRM and what it can really do." 
Of course, now that Polycom’s CRM is live, the real test begins-and Casey is on the hot seat to make sure the system’s myriad promises are realized. But Casey is not alone. The pressure is on virtually every sales executive to spark growth, retain customers, and lower costs-all at the same time. At the center of these market forces sits CRM, a widely known yet oft-misunderstood range of applications that has found itself in something of a maelstrom of its own making, in addition to that created by the challenges of today’s difficult sales climate.
CRM typically is a pricey, enterprise-class suite that may take years to fully implement, but it carries the promise of better management of sales, marketing, and customer service, which in turn can fuel sharply improved sales productivity. But throw in sky-high failure rates mixed with the stories of stellar successes, and CRM becomes what must seem to some decision-makers like a temperamental thoroughbred that runs away from the field in one race but fails to leave the starting gate the next.
CRM’s dark side has become starkly evident in the past year. Gartner Group, for example, delivered a controversial study on the state of CRM: Its key finding was that 60 percent of all CRM projects failed to meet expectations. Even Steve Mankoff, senior vice president of technical services at Siebel Systems, the category’s traditional standard-bearer, admits that CRM projects can have loaded guns pointed at them, ranging from cost overruns to integration challenges to poor user acceptance. Among other problems, many companies underestimate the time and cost of cleaning up (also called scrubbing) various data repositories so they can be accessed by a CRM solution. Another common mistake is that companies use CRM software simply to automate flawed processes, resulting in a system that hurts rather than helps companies.
In a paper entitled, "Ten Critical Success Factors for CRM," Mankoff writes that successful companies are those that shop for CRM solutions with a list of detailed requirements. In other words, instead of having some generic wish such as improving customer service, companies should plan to reduce service response time by, say, 25 percent. Furthermore, the deployments that work best target concrete pain points, says Mankoff.
Sounds simple enough. Maybe too simple. Indeed, a CRM project often starts out filling a specific need. But CRM means many things to many people, thanks to its wide-ranging functionality and cross-enterprise nature. It is not unusual for a highly placed executive to catch wind of the project and become star-struck at the vast potential it represents, creating conditions in which a stream of add-ons results in an initiative that is overly ambitious. Potentially even more problematic is that CRM touches customers, so even minor hiccups can damage key relationships, while major problems can have lasting negative implications.
The Art of CRM
But what, exactly, is CRM? And what does it do? Answers to those questions vary greatly, and within the answers lie some of the keys for unleashing the power that resides in the various tools it represents. For the most part, CRM represents software and online tools that face outward in three areas: marketing, customer service, and sales. In the real world, CRM ranges from niche tools (for example, tools that perform simple things like personalizing corporate Web sites for certain customers) to a large-scale application that captures myriad interactions with all customers, analyzes them with sophisticated reporting tools, and connects to other major functions such as supply chain management and ERP (enterprise resource planning).
An illustration of how powerful and wide-ranging these applications have become-and why it is so easy for enterprises to go astray in the multitude of possibilities-can be found in the latest version of mySAP CRM. The application, which began shipping in September, includes tools for more than 100 business processes, such as field sales, telemarketing, account management, channel management, field service, and Internet-based selling and self-service.
A major CRM project at a large corporation will run into the tens of millions of dollars and may take years to fully implement. Furthermore, as in many other major implementations, the cost extends well beyond acquiring software licenses. A recent AMR Research survey of top professional services firms indicated that maintenance fees and integration services often amounted to more than four times the cost of the software license.
Undaunted, companies maintain that CRM is still a worthwhile investment. AMR claims more than 50 percent of its clients plan to continue spending-or, in some cases, increase spending-on customer-facing IT initiatives. "In a down economy, you really want to concentrate on retaining customers, cutting costs, and, later, growing the business," says AMR analyst Kevin Scott, adding that these goals fall under CRM’s purview.
Most companies understand that the road to CRM will be long and arduous. "We never had false hopes of this being simple and inexpensive," says Dieter Huckestein, executive vice president of Hilton Hotels Corp., which embarked on a major CRM initiative using software from E.piphany. The ambitious plan calls for capturing all "touch points" with customers at more than 2,500 hotels around the world and then sharing the data with other enterprise systems.
Creating a Roadmap
So how does a company begin thinking about CRM? Start with a lot of research. Industry watchers consistently point out that the biggest reason for past failures was that companies were not aware of the potential scope of the project. AMR Research found that only 42 percent of CRM projects were put through formal business-case analysis. "It was a combination of vendors overselling their products and users having too high expectations," says AMR’s Scott. "Neither one really understood the complexity of the integration."
This almost happened to one of Deloitte Consulting’s clients, a global manufacturer of high-end communications equipment posting billions in annual revenue. The manufacturer was having trouble with its customer service centers. Big customers such as AT&T would call up and receive service on equipment, whether or not they had a premium service contract. As a result, few customers renewed service contracts, figuring they would just get the service for free. Also, labs filled with well-paid technicians were housed at every call center to solve local problems-a very costly scenario. The initial estimate to fix all of this: $15 million.
But after the first month, Deloitte realized it would have to tack on another $3 million to get the job done. "Back-office integration, specifically data cleansing for multiple conflicting databases, was much more complex than anyone initially thought," recalls Steve Pratt, global leader of Deloitte Consulting’s sell-side service area. Instead of increasing the budget, the parties decided to narrow the scope.
Today, the system has a global "solutions" database, whereby the manufacturer’s engineers can share solutions. No longer are labs needed at every call center. Using primarily Clarify and Primus software, the CRM system enables call center representatives to quickly call up customer profiles to see if they are entitled to certain services. The return? Revenues, in the form of service contracts, increased. In order to mitigate at least some of the fallout from customers used to receiving free service, the manufacturer implemented a tool so that customers could troubleshoot problems by searching for solutions on the Web or even engage in an online chat with an engineer.
A narrower scope, however, meant some features were cut. For example, the manufacturer wanted a Web-based configuration tool that would guide customers through the process of choosing a service contract, as well as automating any cross-sell opportunities. This tool has been pushed back to next year. "CRM projects are about dynamic management of scope, costs, and scale," says Pratt.
Choosing the Vehicle
Once companies have thoroughly researched their needs and carefully defined the scope of a given project, the next key step that can make or break a project is picking a vendor, which is not as easy as one might think. A common phenomenon that can easily complicate the process of vendor selection is project creep. In the case of Polycom’s CRM initiative, for instance, what started out as a niche solution quickly spread throughout the enterprise. The company wanted CRM to achieve everything from centralizing order management and customer service and providing shipping information for customers on its Web site. This meant the number of vendors that had products targeted at each function, and that therefore merited evaluation, skyrocketed. "I never knew there were so many CRM vendors out there," she says.
Polycom also wanted a single enterprise vendor to ground the solution, in addition to point-solution providers for specific features. There are only a handful of choices for doing the heavy lifting, most notably Siebel, Oracle, SAP, and PeopleSoft. Casey decided it would be either Siebel, because of its reputation as a CRM stalwart, or PeopleSoft CRM (which was still in beta testing), because Polycom was already using PeopleSoft to handle functions like financials, supply chain management, and human resources. In the end, "We chose PeopleSoft," says Casey. Polycom’s CRM solution is hosted at PeopleSoft’s eCenter, freeing up Polycom’s already overworked IT staff. But the decisive factor was ease of integration with the back end already in place. "We wanted to go across the enterprise without a hitch," Casey says.
At any rate, both the finalists in this case are well-known firms. And who today can afford to go with a no-name? Not many. Just ask Tim Thorp, director of global CRM systems for $1.5 billion power protection manufacturer American Power Conversion. The company recently settled on a Siebel suite. "If you look at any one component, you’ll probably find some vendor who does it different or possibly better," says Thorp. "[On] the flip side, if you take Siebel to our three focused areas and put it all together, there’s nothing else around that can get all the pieces put together."
The fact that Siebel is a well-recognized brand means employees and customers may be more likely to adopt its CRM system-a critical point, since issues relating to corporate culture and user commitment can create significant obstacles to successful CRM implementation. On the other hand, user adoption when a CRM leader is chosen can present challenges of its own: "For the user, Siebel gives a much larger, more complex interaction because it does many things instead of one," says Thorp. "It’s a shock to the user that has to be overcome."
Making the Journey Count
If a system, once chosen and installed, sits idle, then no one benefits. So it is incumbent on enterprises, as well as the vendors and professional services firms with which they partner, to apply attention and resources beyond the initial project description and implementation phases. Deloitte, for example, has developed what it calls its "100-Day ROI" methodology. Simply put, a CRM project must show a concrete return, in the form of increased revenue, decreased cost, or improved customer service, every 100 days. Period.
In the first 100 days of a CRM rollout for a global manufacturing company, Deloitte put in an automated proposal-generation and product-configuration system. This meant salespeople did not have to waste time writing up proposals. Also, it reduced the number of "dirty orders," whereby a salesperson would configure an order that did not make sense, such as ordering a server with inappropriate boards or cables. The second 100 days called for a sales management and forecasting system, enabling sales managers to track sales representatives’ pipelines. The third 100 days resulted in integration between the contact center and corporate Web site.
Like most CRM projects, the efforts are ongoing. Deloitte’s customers will likely spend years building out their CRM solutions, as will Polycom, Hilton Hotels, American Power Conversion, and others. The holy grail, of course, is to have a single, fully integrated corporate voice talking to another corporate voice, the customer. Starting out with a clear roadmap, choosing the right vendors, and segmenting rollout with measurable ROI benchmarks along the way can help put projects on the right path-as can a healthy realization that projects do evolve, regardless of the care with which they are planned. "CRM isn’t just a project," says Pratt, "it’s a journey."
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