So where do we go from here?

Well another week brings more economic bad news. Recession seems inevitable, so I figure it might be a good time to try and work out what it means for the CRM industry. Anyway these are my thoughts:

Firstly, you’d figure that people are going to spend a lot less on buying new CRM systems. For those that do decide to invest, then the decision making process is I suspect going to be longer, more complex, more competitive, with considerably more focus on the business case. CRM vendors take note; how you sell software will have to change. I think there will be a shift in thinking from ‘which CRM software do we choose?’ to ‘is this really going to give us a major payback in the short term?’

The market will consolidate. Pre-dot com bust, there were a large number of on-premise CRM vendors, post dot com bust the market consolidated dramatically. Then Salesforce.com came along and did a stellar of marketing themselves, and was soon followed by a wave of me-too software as a service (SAAS) CRM vendors. Some; probably many, possibly most, won’t survive.

I’m not sure on the on-premise CRM side there’s that much left to consolidate in terms of technologies, however the value added reseller (VAR) network that support technologies like Goldmine, Microsoft CRM, Sage CRM, SalesLogix, will struggle. These applications developed by the likes of Sage, Microsoft, and FrontRange are sold and supported more or less exclusively through a network of resellers. These resellers are generally small, typically turning over around £1 Million, and are rather more susceptible to the vagaries of the economy.

Even if your VAR survives the down-turn – and many won’t - it doesn’t mean you (as the owner of a VAR supplied CRM system) are going to escape the impact. As these businesses look to trim costs, the quality of the service may be impacted, and I suspect many VAR’s will cut back the portfolio of products they support. There’s been something of a trend in recent years towards VAR’s supporting multiple CRM products, and I suspect that in tougher economic times there will be a trend back to focusing on the core business, which may leave many clients effectively orphaned.

That said, even if your VAR or on-premise technology provider goes out of business, disruptive as this may be, at least you will still have a working system and you can look to make alternative arrangements at your leisure. If your SAAS provider goes bust there’s a big question as to whether you will have access to your own data, and even if you do manage to extract it before the lights go off, what are you going to be able to do with it?

The irony is that the better use you make of CRM technology, and the more it underpins the performance of your business, the more vulnerable you are to disruptions in the performance of your CRM vendor. Ultimately CRM vendor failures may in turn result in some of their customers failing too.

With less money being spent on new technology, I suspect firms will look harder at what they already have. There’s a considerable amount of underused CRM software out there, and considerable scope for companies to rationalise. All vendors will be hit by this, but in this respect I think SAAS vendors are particularly vulnerable. If you’ve purchased on-premise software it’s largely a sunk cost, with SAAS it’s ongoing expenditure, which, subject to contractual terms, can be terminated as required.

If vendors do decide to ditch software, I suspect the open source vendors will be key beneficiaries. The software may not be as feature rich, but then if you are one of those companies which for one reason (and it may be for very good reasons) or another are never going to use CRM technology well, it’s not going to make a huge difference anyway, so you might as well go for the low/no cost option.

On the other hand, for those who do decide to keep what they have, I believe there will be considerably more focus on wringing value from their investment. Perhaps this will finally mean the point that I’ve been banging on about for several years now, that CRM success is based on process, people, and technology, not technology alone, may finally hit home. In the absence of funds to lavish on new technology I expect the emphasis to shift to re-implementing existing technology in way that does add value.

There’s no doubt we’re heading for ‘interesting times’, but perhaps it will teach us an invaluable lesson along the way – the art of extracting value from technology.

Unsinkable CRM...

In retrospect, suggesting that the Titanic was unsinkable, was hardly the most accurate of representations. The origins are interesting though. ‘The Shipbuilder’ magazine published an article in 1911 where the term ‘practically unsinkable’ was used. The article in turn seems to have borrowed extensively from a White Star Line publicity brochure quoting many sections verbatim. While the word ‘practically’ does qualify the claim, it’s apparent that in people’s minds the ‘unsinkability’ bit was absorbed and the ‘practically’ bit was discarded. The myth was now established; and since White Star would be the primary commercial beneficiaries, one would imagine they were hardly motivated to set the record straight.

Anyway, I mention this because I recently set myself the task of reading as many CRM related articles as I could find. While some were very good, I was surprised at just how many bore little relationship to the ‘real’ world, at least as I understand it. Some clearly emanate from the marketing department, and are high on spin, and low on insight. And there were also a lot of articles written by journalists, who, in the absence of any domain expertise, were clearly patching together vendor press releases (i.e. spin) in order to create supposedly well balanced factual stories. It’s also clear that one article created in this way, may indeed fuel multiple other less than accurate pieces, and I was interested to note how many incontrovertible ‘facts’ about CRM presented in the mainstream press, clearly had their origins – albeit perhaps several generations of articles earlier – in a vendor marketing department. Over time, and multiple iterations, ‘practically unsinkable’ became ‘unsinkable’.

Aside from making the obvious point that you might want to be cautious about what you read about CRM, I just wanted to note it’s my intent to post a monthly summary of interesting articles, which I come across. If you find any good articles on the practical application of CRM for beneficial purposes – as opposed to ‘version 7.42 of our marketing leading application has just been released with new and improved…etc etc’ – then please drop me a line. I don’t mind if they are written by CRM vendors, as long as they add value. Ultimately the more that can be done to take the spin and misinformation out of the market, then the better the potential to realise the true benefits of CRM technology.

CRM SOS

As promised, shameless plug number two. Last week I mentioned CRM VM, but the other new service we’ve launched is CRM SOS (second opinion service). As the name suggests we’re giving people the opportunity to get an independent second opinion if something a vendor tells them doesn’t feel quite right. Having seen some ludicrous proposals for upgrade work and customisation services in recent months, it struck us that giving people the option to get a second opinion from an impartial source might allow them to cut costs at a time when the pressure’s increasing to do more will less. We’re also aware that if the economy continues to tighten, and there is less of a market for new CRM systems, then vendors will inevitably switch their attention to squeezing more from their customer base. Anyway, shameless plugging over – details here though if you want to know a bit more.

The best will suffer most...

As a long standing veteran of the CRM market, I can recall what happened in the last down-turn in the economy post 9/11. Up to that point CRM vendors seemed to be springing up all over the place, thereafter there was a rapid consolidation. In recent years we’ve seen a surge in new CRM vendors riding on the shirt-tails of the SAAS movement. Will there be a consolidation in the face of the current economic down-turn? Yes, I think a rather major one. But this time around the impact could be very different. Post 9/11 the companies ‘consolidating’ were on premise vendors. Sure it wasn’t pleasant that if you vendor went bust or was acquired, but at least you still had your data. If SAAS players start disappearing that may not be true.

Witness the incredible goings on at Entellium this week, brilliantly reported by Chris Bucholtz on InsideCRM. Senior executives have been charged with wire fraud. It’s alleged that they ran two sets of books, the real ones, and an extremely inflated version for the investors. All employees have been let go, and who knows what’s going to happen to the customers. Entellium won’t be the last to go, and some organisations are going to get badly burned in the process. Sadly it’s the ones that use CRM the best that will suffer most.

CRM Value Maximisation...

One of the things that never ceases to depress me is the hundreds of millions spent on CRM software that while live is generating marginal value for the organisation using it. In my experience the vast majority of CRM systems under perform against their potential. There are a number of reasons for this, but the two key ones are that a) CRM vendors are motivated to sell software not implement high pay-back systems, and that b) though some organisations have been successful in implementing CRM, the systems haven’t kept pace with the business over time and has fallen into obsolescence.

Anyway I mention all this as the preface for a shameless plug on one of two new services – the second new service I’ll shamelessly plug in a separate post. We’ve launched a new service this week called CRM Value Maximisation, or CRM VM for short. The rationale is as follows: most CRM systems under perform. Perhaps in a buoyant economy you can get away with it, but in tighter times the performance of the CRM system can be life or death. If you accept you need to get your CRM system on track who do you turn to? There’s the original vendor perhaps, but then they probably got you in this state in the first place, and their answer is likely to be to sell you some large commission generating batch of products or services which will nicely empty the wallet but probably won’t change anything. Or, and this is where we come in, you could turn to an independent who has a track record of getting value out of CRM technology, and with no software to sell, and is focused on getting you on track.

So that’s how CRM Value Maximisation was born. We’ve positioned it as a quick, and cost effective review service, performed over a couple of days, with a fixed price (£2,400 actually) and targeted at mid-size CRM implementations. The output will be an action plan of immediately actionable high pay-back changes, and a road-map for the longer term development of the system, and we even throw in three months of remote mentoring to help get the changes done. In many respects it’s the formalisation of something we’ve been doing for several years, but we wanted to try and package it in a way that was attractive to organisations trying to come to terms with a more hostile trading environment. I’m excited about it because I know we can make a great deal of difference, but then my thoughts are irrelevant, it’s what the market thinks that ultimately counts. If you want to know a little more, the CRM VM link is here.