An Opinionated Roundup of the Biggest CRM News Stories of the Quarter

Compiled by Jon Reed, SAP Expert, SAPtips
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Salesforce.com Upgrades On-Demand CRM

http://www.informationweek.com/showArticle.jhtml?articleID=164901705 

key excerpt: “Salesforce.com releases major upgrades of its online CRM software, and launched a new single-platform for customers to manage all of the company's hosted applications.” 

Jon Reed’s take: The CRM market has had a good year, and so-called "on-demand" applications are a major reason why. The next couple years in CRM will be dominated by stories about on-demand pioneer Salesforce.com, and what they're doing to protect their lead from a host of well-funded competitors like Siebel, Microsoft, and maybe, someday, SAP. Behind the scenes, Salesforce.com is justifiably concerned about the bigger fish that are moving into this market, but as long as Salesforce.com keeps innovating and doesn't get acquired, it should remain a key player in this important CRM category. This article details the latest Salesforce.com product upgrades, including the 18^th release of its core product and the debut of its new "operating system," called Multiforce 1.0. Perhaps the most important Salesforce.com release to keep an eye on is Sforce 6.0, which includes the latest version of their "integration platform," a platform that is built on web services standards in order to better integrate large amounts of data. This is especially significant if Salesforce.com hopes to move "upward" from its traditional small and mid-market customer base. Larger companies are reluctant to take on the integration challenge of tying Salesforce.com into a core ERP system, but if Salesforce.com can continue to enhance its integration technology, it might be able to have success with larger companies that normally don't consider on-demand solutions.

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Microsoft previews next-generation CRM

http://news.com.com/Microsoft+previews+next-generation+CRM/2100-1012_3-5772430.html

key excerpt: “Microsoft released details of the long-awaited update to its customer relationship management software on Tuesday, adding a slew of new tools and making the system available via the on-demand applications delivery model.” 

Jon Reed’s take: Not to be outdone, Microsoft is announcing its major new CRM release, CRM 3.0. This is technically only the second major release of Microsoft's CRM product, and it comes none too soon from the criticisms we've heard of Microsoft's first CRM release. The one thing you know about Microsoft is not to judge based on early releases. This article details what Microsoft is trying to do with its 3.0 product. More significantly, we learn about Microsoft's aggressive push into the on-demand CRM space. Officially, CRM 3.0 will not be available to customers until early 2006, but Microsoft partners are already testing live instances of the product. One of the huge perks of CRM 3.0 is tighter integration with Microsoft Office - we expect this feature to have major appeal for smaller business that are considering their first CRM solution. One of the big gaps that Microsoft fills in 3.0 is a new set of marketing automations tools - something that was missing from its first CRM release. We were also impressed by the straightforward quote in this piece by a Microsoft executive who admitted that this product did not have the bells and whistles that big companies might be looking for. Knowing your niche and admitting it gives you a lot of credibility in a market saturated with phony-sounding brochures. The executive went on to say that Microsoft wants to be "the easiest-to-use CRM system on the marketplace," with a product that is perfect for the needs of small and mid-sized businesses. Any other vendors targeting that space should get a shiver.

Perhaps the most compelling material in this article was Microsoft's high-class "bashing" of Salesforce.com. By offering both an on-demand and a client-based solution, Microsoft is in an ideal position to highlight Salesforce.com's limitations. Here's a couple of choice quotes from a Microsoft exec aimed at Salesforce.com: "The traditional hosted model says, 'You will rent from me forever,' and I think people want more flexibility than that. The notion that [the Salesforce.com] model is going to be the only model on the market doesn't seem to make sense to us, based on what we hear from our customers. What companies want is flexibility to choose as they go, based on specific needs, and that's what we offer them." One thing we don't want to do is give the impression that because Microsoft is focusing their CRM offering on small companies now that they will always focus on smaller companies. SAP in particular knows that Microsoft is a partner to be wary of. They might be working together in Mendocino, but SAP is keeping a wary eye on Microsoft inside and outside of the CRM space. SAP does not assume Microsoft will want to "stay small" in CRM, and neither should anybody else.

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Siebel Q2 Sales Won't Meet Expectations

http://www.bizintelligencepipeline.com/showArticle.jhtml?articleId=165701234 

key excerpt: "Siebel Systems Inc. is once again disappointing its investors. The customer relationship management software vendor reports that financial results for its second quarter ended June 30 will come in below analysts' applications." 

Jon Reed’s take: Not too long ago, we began every CRM Quarterly Review with a Siebel news item. It's a sign of how much ground Siebel has lost that the first stories went to Salesforce.com and Microsoft. This article documents the latest round of disappointing earnings reports, and summarizes Siebel's current market challenges. As it turns out, Siebel's 2005 second quarter revenue is not only on the low end of the company's own guidance, but its reported license revenue of $78 million is down 18 percent from a year ago and below the predicted license revenue of $90 to $100 million. It's been a shaky year for Siebel - in April, CEO Mike Lawrie was replaced by George Shaheen after an underwhelming first quarter. Siebel's executives downplayed the bad earnings news, blaming it on delays on deals closed, but admitted that the company "underperformed." The analysts were not as subtle. One firm blamed Siebel's woes on its over-concentration on the mid-market, saying that they had taken their eyes "off the big-ball deal." Some restructuring is expected in the wake of these reports. What doesn't get covered in this article is some good and bad news. The good news is that Siebel's own on-demand CRM applications are considered to be an effective market play which should give Siebel some action with smaller companies that have balked at Siebel's typical price tag. The not-so-good news: the persistent rumors that Siebel is on the chopping block, ripe for acquisition by Oracle, assuming Larry Ellison is still in a buying mood. Our feeling here is that Siebel eventually shrinks into a niche player in the CRM market it brought to life. We expect to see SAP, Oracle, and Microsoft as the main CRM players a few years from now, with Salesforce.com as the most powerful best-of-breed player. But we'll see - we've seen the CRM market turn before, and it could again.

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Will SAP sample hosted recipe?

http://news.com.com/Will+SAP+sample+hosted+recipe/2100-1011_3-5770315.html

key excerpt: "[SAP] has been particularly guarded about its plans for a new, on-demand version of its customer relationship management, or CRM, software." 

Jon Reed’s take: This article is mostly rampant speculation about the possibility of SAP making a move into the on-demand CRM space. Rumor or not, it is certainly something that the folks at Salesforce.com are keeping a wary eye on. The bottom line: the on-demand CRM space is hot enough to keep rumors like this one constantly warm. As it turns out, SAP has fueled these rumors by demonstrating a "slim" version of its online sales force automation application at a conference in Europe in April. Currently, Salesforce.com has 265,000 subscribers at more than 15,000 companies, and they added 40,000 subscribers in the second quarter of 2005 alone - an 80 percent increase over the previous year. These kinds of numbers are not to be ignored. And SAP has surely noticed that Salesforce.com can indeed succeed in selling to some larger companies, as evidenced by its recent sale to 5,000 employees at Merrill Lynch. Salesforce.com continues to hammer away at large ERP/CRM vendors like SAP for being too complex and expensive, and "wins" like Merrill Lynch suggest that this sales pitch can be effective. SAP, of course, counters by emphasizing the significance of integrating CRM functions with the "ERP back office." We found the quotes from an Analog Devices executive in this article to be revealing. Analog is using both SAP and Salesforce.com, dividing the CRM functions between the two vendors. Salesforce.com is used to manage the direct sales force, while SAP's CRM package is used for e-commerce functions that tie directly into the SAP-ERP back end.

What could cause the company to go only with SAP for all CRM functions? "For us to consider [it], the question would become, what type of integration are we trying to do? If we were trying to look at order lead times on SAP and see where inventory is in Salesforce, the real-time and in-depth integration might require us to consider a change." That's a good summary of how we see this market playing out for the foreseeable future. Big companies that want state-of-the-art integration between CRM and ERP are going to go with the big ERP vendors and stay away from Salesforce.com and any other best-of-breeds. Even if Salesforce.com continues to enhance its web-based integration tools, it's going to be a hard sell. But companies of virtually all sizes that don't care as much about tight CRM-ERP integration are going to be companies where a hosted CRM solution will get serious consideration. This article speculates that SAP won't be able to ignore this, and we have to agree. SAP is taking its time making a move, but we'll be surprised if SAP doesn't have some type of hosted solution on the market within a couple years - even if that solution is primarily limited to sales force automation.

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Trendspotting: Getting The Most From CRM

http://ie.bizintelligencepipeline.com/164302647

key excerpt: “Remember the good old days of CRM? Multimillion dollar budgets were the norm, managing a project guaranteed you at least a couple of years of full employment, and you could send everyone off for a few weeks of training in the hopes that they would 'get it.'" 

Jon Reed’s take: This article takes a look at some of the CRM clichés that will lead you straight to project failure, and recommends a better path. As the opening quote points out, companies don’t have the luxury to spend freely on CRM and hope for the best. They need a plan, and an effective one. This article pulls together the lessons from the next generation of CRM implementations - leaner, smarter projects that aren't recklessly spending because of the "CRM makes you money" hype. One CRM cliché to avoid? That "it's all about the customer." As this article points out, you're better off structuring a CRM project around specific objectives, such as gaining better visibility in the sales pipeline, getting a better picture of how marketing efforts deliver new leads, or reducing manual data entry expenses. Other tips: select the right consulting partner, and don't start from scratch if you already have some good CRM functions in place. Another great point this article makes: training alone isn't enough. Expecting that training will always lead to enthusiastic user adoption is a mistake. As this article points out, a well-crafted approach to user adoption includes a range of factors, including keeping a management presence on the project and "culturing" a group of super-users. Though this is not a detailed piece, it provides an excellent overview of the lessons learned from the new breed of smart CRM projects.

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CRM: The Success and Failure

http://www.intelligententerprise.com/channels/customer/showArticle.jhtml?articleID=163100889

key excerpt: “Survey after survey indicates that call centers are still failing customers. Much of this problem is attributed to the failure of the associated CRM projects, since these were expected to solve everyone's problems.” 

Jon Reed’s take: This article is mostly focused on call centers, but we selected it because it sums up the key dilemmas posed by CRM initiatives. For example: are you trying to improve the customer experience, or reduce time spent on the phone with customers? Saving money and serving customers are sometimes contradictory objectives, and if you don't sort that out in the early going, the CRM project will inevitably disappoint. This insightful article lays out the challenges that have given CRM project managers fits. Driving the problems is a simple issue: it's hard to manage a relationship, period, and more so in an age where technology has created even more points of contact, including email and voice mail. Beyond that, customers are expecting more from these points of contact, including the ability to perform fairly complex business transactions. And how do you measure the calls handled by your contact center? If you reward call center workers by the amount of calls they process in a given day, are you really measuring quality, or quantity? Author Richard Snow sums it up this way: "The bigger challenge is how to make the interactions more intelligent and more appropriate to the customer at the time of the interaction." Of course, this is easier said than done. The technology is mostly there, but it has to be implemented smartly and managed intelligently.

This article does as good a job of summarizing "what's next" for CRM on a high level as any we've seen, but it does overlook one key, controversial point: one huge asset of a good CRM system is NOT to serve all customers better, but to identify who the most profitable customers are and serve THEM better. For example, you could envision a system where less profitable customers are given voice mail system to navigate, whereas premium customers are provided with a personalized "direct dial" number. No, it's not nice, but it's more honest and more effective than spending the same on all customers no matter what they spend or how often. It will be interesting to see how the major CRM vendors tackle these challenges. It seems that most of them are embracing the idea that combining core CRM functions with business intelligence and analytics will help companies identify and serve their most profitable customers better, and also provide a more intelligent interface for anyone that comes in contact. We'll see. Judging from some of the voice mail mazes we've navigated lately, with all the CRM technology at their disposal, companies and vendors have a long way to go to make the customer experience better.