CRM: Cutting through the hype

By Matt Danielsson, Assistant Site Editor 18 Oct 2001 |

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Every week there is another contradictory report about customer relationship management (CRM.)

Is it the savior of e-business, or yet another fizzling fad? After all the analysis and weighing of the pros and cons, CRM would best be viewed as only a tool, not a magic wand.

This summer, a Jupiter Media Metrix survey suggested CRM technology would be one of few escapees from the tech downturn.

Seventy-four percent of responding companies planned to increase spending on CRM infrastructure in 2001, compared to the previous year. The majority talked about a whopping 25% to 50% increase. Companies believe CRM infrastructure will continue booming. The study predicted that the 33 million online-help seekers in 2001 would grow to an impressive 67 million by 2005.

Conclusion: CRM is doing great! Pass the champagne and celebrate!

The flip side

However, other analysts are not so optimistic. Gartner Group expects more than half the companies jumping on the CRM bandwagon to end up describing their experiences as failures. Other analysts predict a failure rate as high as 70%. CRM implementations notoriously underestimate actual costs. These underestimates can be as high as 40% to75%, says Gartner.

Conclusion: CRM is doomed.

CRMGuru.com, a Web site devoted to CRM, conducted an independent study to see what people thought about the matter. When they published it in October, it turned out that 2,200 largely pessimistic users confirmed the gloom and doom. Favorite hype-phrases such as "ease of implementation" and "customer focus" got a serious reality check with low customer satisfaction scores. Overall, CRM users are not happy with what they're getting. This has led to low satisfaction scores across the board. Ouch.

CRM tips If you're considering a CRM solution, the first questions you should ask from a high-level, strategic point of view are what CRM means to you and what is the goal and how does it translate into revenue? Also, keep in mind that in order to be successful, you have to have very tight integration within the whole business lifecycle process. This must be a continuous effort with no slack. "The response must be quick," said SearchSAP Business Intelligence expert Naeem Hashmi, chief technology officer of Information Frameworks, Londonderry, N.H. "You have to constantly analyze the information and produce a swift response to accommodate the customer." Here are three key steps to ensure that a CRM solution will work out: Define exactly how CRM fits into your organization. Investigate how you will tie CRM to the rest of the applications. Establish how you will manage the content and organization of issues within the company. "Also, do not underestimate the time for customization/development and unit/system/integration testing," said Matthew Billingham, searchSAP's Application Development expert. "With any SAP product, the complexity is such that the old adage 'a day spent planning saves 10 days fixing' certainly applies," he said.

SearchSAP Business Intelligence expert Naeem Hashmi, chief technology officer of Information Frameworks, Londonderry, N.H., takes the controversy in stride.

"The analyst numbers are inflated," Hashmi said. "I don't see a boom, but I can't imagine the industry just dropping dead either. Instead, we'll most likely see a slow but steady growth over the next couple of years."

A view that make sense

This makes sense. While CRM technology is maturing, it is still evolving. The boom some analysts predict assumes that a company like SAP or Oracle will deliver a fully integrated solution. They have the architectures in place to make the most of CRM, but that is not to say they have figured everything out, said Hashmi.

"SAP has a good, solid infrastructure across the board, which gives it a distinctive advantage over the next few years," he continued, "Point-solution companies like Siebel, Broadvision and Clarify will keep wrestling with integration issues. Meanwhile, companies such as SAP and Oracle will emerge with more powerful and easily managed solutions, and will continue to gain market share."

So what about the reportedly high failure rates? Perhaps it's more informative to look at how often the technology fails when the customer is requesting miracles. CRM is only a tool, not a magic wand. Many problems can be attributed to the integration of the existing business processes. In addition, different products work for different users. A small company might find a Siebel solution good for their needs, while a large global enterprise requires a powerful SAP solution. If they switched, they could both end up with "CRM failures." Would that be CRM technology falling short?

SAP CRM gets lukewarm response

When SAP released its SAP CRM 3.0, it got a lukewarm response from many industry experts. CRM 3.0 is R/3-independent and Web-based, making it a flexible and potentially effective tool for going head to head with the competition. The problem is it's only really good for existing SAP users, said some experts. The product is structured to tie into the cost center, contact management, content management, sales automation and so forth. To reap the full benefits of a CRM solution, the same data must be shared in the same environment. When this is not the case, non-SAP users may face integration issues and decreased functionality. At this point, few would recommend a non-SAP user get SAP CRM 3.0.

Companies today use CRM to build customer relationships, but not necessarily as a tool to directly increase the revenue stream. That may change. If so, this will benefit SAP and Oracle. PeopleSoft, JD Edwards and Baan may be left in the dust because SAP and Oracle have a more powerful architecture in place. This allows for tighter integration, making their CRM solutions more effective and more attractive to users.

Oracle has its own problems. Oracle's past as a database company creates cultural collisions as they move into the business applications field. Granted, they are making progress, but it will be years before they are through with their cultural issues. SAP, however, is already application- and business-centric, which gives it an edge.

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