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Vendors discuss next phase of CRM market evolution

The CRM market has long borne the stigma of failure. Here, some of the leading vendors share their thoughts on why it has failed -- and their solutions.

The CRM market has seen its share of hype, disappointment and recovery.

There was a trend where people lost sight of the fact that CRM is about your customers 
 Angela Bandlow,
 Vice president of CRM strategy and communicationSAP

And its failure rates have long been a topic of discussion. Four years ago, a presenter at a Gartner conference suggested that CRM's high failure rates were attributable to end users who resisted change management. Since then, CRM practitioners have identified a lengthy list of factors that can jeopardize CRM initiatives – for example, poor methodology, lack of established success metrics, and too much IT involvement. Dirty data has also been blamed for CRM projects gone awry.

The "F" word has surfaced again in recent weeks as vendors trying to capitalize on a maturing market have offered their visions for the next phase of CRM's evolution.

"There was a trend where people lost sight of the fact that CRM is about your customers," Angela Bandlow, vice president of CRM strategy and communication at SAP, said at the company's recent Sapphire user conference in Orlando. "We're seeing companies that had point solutions … having difficulty integrating those to [be able to] look at the entire solution."

Accordingly, SAP's new CRM strategy involves bringing together its on-demand and on-premise applications and revamping its user interface. The company touts the importance of back office integration as a considerable advantage over point solutions.

Similarly, Oracle's planned release of Siebel 8.0 will focus on better meeting the needs of the end user, with improved usability and task completion and guided interactions, according to Ed Abbo, senior vice president for CRM products at Oracle. Oracle is not only blending CRM with the back office operations but is also blurring the lines between deployment models.

"[Those features are] being made available essentially this year," Abbo said. "We're reaching from on-demand into on-premise and into the back office and expanding front office analytics into back office analytics applications. Really, we're making these metrics available to everyone."

For RightNow Technologies, a company with roots in the customer service arena, managing the customer experience is the next evolution in CRM.

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"I think the line between sales, service and marketing will disappear," said Greg Gianforte, CEO of RightNow. "CRM failed because it focused too much on internal process improvement. There's a shift in power from companies to consumers. You can't manage a relationship."

That sentiment jives with the assessments of Dick Lee, who believes CRM as a concept has failed because it focused on the technology and internal processes rather than the needs of the customer. And he has some research to back it up.

"We have a split that has developed between customer centricity and CRM," said Lee, founder and principal of High Yield Methods, a St. Paul, Minn.-based consultancy. "The promise was [CRM] would lead to customer centricity. What we have now is, the basic components of CRM as it's practiced today -- people, process, technology -- are not delivering on customer centricity."

In a survey conducted in conjunction with David Mangen, of Mangen Research Associates, entitled "Customers Say What Companies Don't Want to Hear," Lee found that a company's level of customer focus was most important. When 547 customers were asked what company behavior most influenced buying decisions, 60.3% said customer focus. Consumers said empowered employees (71%) ranked nearly as high as quality products (76%) when it came to how they evaluated companies.

"The study outcomes clearly indicate that CRM is not fulfilling the original promise of CRM," Lee said. "From the get-go, this was going to be about how we improve relationships with customers, how we could improve customer loyalty through delivering value to customers. All the lofty ambitions seem to have been lost."

Historically, companies have focused their CRM efforts and investments on cutting internal costs with tools such as online self-service or interactive voice response (IVR). These technologies help decrease workloads and theoretically reduce costs, but they haven't necessarily been used to understand customers and foster loyalty.

"When we look at what motivates customer buying decisions, CRM is not supporting the principal motivators," Lee said. "In that sense, from a customer standpoint, CRM is somewhat irrelevant, which is not what was supposed to happen."

What does matter to customers is companies that have empowered their employees., for example, the company rated highest in the study for customer centricity, empowers its agents to correct company mistakes without a lengthy escalation process, Lee said.

For too long, companies have tried to persuade customers to do what's right for the company, but now customers want the company to do what's right for them. And companies that can adopt this philosophy stand to gain real competitive advantage -- particularly those companies in commoditized, price-competitive industries where cutting operating costs is difficult, according to the report.

Yet the market for CRM technology continues to thrive. According to a recent report from Stamford, Conn.-based Gartner Inc., the worldwide market for CRM software grew 14% in 2005 to $5.7 billion.

Bellevue, Wa.-based Onyx Corp., which was acquired by a private equity firm this month, continues to see demand for CRM, both in the midmarket where it has historically competed, and in upper midmarket and enterprise businesses, according to its CEO, Janice Anderson. SAP and Oracle/Siebel accounted for nearly 50% of the market for CRM, but according to Gartner, there is plenty of room.

"I think this notion of saturation is a fallacy," Anderson said. "There are still a lot of homegrown solutions out there. I don't think that market is anywhere near done."

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