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The CRM Market
CRM is hot and getting hotter. Many believe that CRM will surpass ERP and will become one of the largest application segments ever. This phenomenon is not only a new application area but will eventually change the business models of the enterprise. As products become commodities, and all other things being equal, the added value provided by Customer Relationship Management will determine the success or failure of one player over another.
One need just look around and count not only the players but look into their line of business. CRM is flooded with vendors from all areas. Traditional vendor categories no longer fit and the accepted boundaries between hardware, software, and service vendors are blurred. The wide variance of players in the hyped CRM market is unprecedented.
ERP vendors such as Oracle, PeopleSoft, and SAP are attempting to expand their business as saturation is reached in the back-office market. A shift is seen to include frontoffice applications among the ERP vendors who are leveraging on their size, installed base, and promise of integration. Although the CRM applications require a different skill set, analysts predict a very significant market share for these vendors over the next few years.
The hardware, infrastructure, and CTI companies such as Cisco, HP, IBM, Lucent, Nortell, Geneysis, and Quintus are realizing the opportunity of the CRM trend. These businesses are expanding to include the necessary software in order to provide CRM offerings. System Integrators (e.g. KPMG, E &Y) are offering their services and quickly enhancing their expertise to service the integration needs of a complex CRM adoption.Analysts claim that integration costs are anywhere from 2 to 10 times the software cost, which is keeping SIs very busy.
In addition, software companies that have a software package that even remotely can be considered a component of a CRM suite are renaming their product CRM and are positioning their business as such. Old call centers and customer service applications are being revived and repositioned to also jump on the CRM bandwagon. Last, but not least, even the giants such as Microsoft and Compaq are declaring their CRM strategy and tying it into their other lines of business.
Looking at the number of mergers and acquisitions and at who the players are, indicates the opportunity and desire of so many in this area to have part of the promising and lucrative CRM pie. It is interesting to note the crossing of traditional business boundaries in so many of the recent mergers and acquisitions.
Here are just some examples of the M&A activity in the CRM arket to illustrate this point:
Siebel & IBM; Peoplesoft & Vantive; Nortell &Clarify; HP & Oracle. The consolidation that is taking place is only the tip of the iceberg when it comes to assessing the potential value in this dynamic market place. The chart below, figure 5, shows the CRM growth forecast according to IDC.
Conclusion
The popularity of CRM is fed by the fact that better customer relationship management is advantageous for both the customer and the enterprise. The end-user clearly enjoys great advantage from increased CRM. Better service
is not only pleasant but has tremendous value in its own right. The total value of a product with customer service is significantly higher than of the product alone.
On the other hand, the enterprise implementing CRM is not doing it for altruistic reasons. Companies have come to realize that their customers are their real asset. The benefits when CRM is adopted are very significant. Industry statistics show that 68% of customers who walk away from a relationship with a vendor do so because of poor customer service. Statistics also show that 80% of a company’s income is from its repeat customers.
A company that has both customer knowledge and the applications to leverage this information, has the advantages to:
• Increase customer retention by enhancing satisfaction as a result of higher responsiveness.
• Identify the most profitable customers and treat them accordingly. (20-80 rule).
• Reduce marketing costs by developing effective targeted campaigns.
• Direct qualified leads to appropriate sales channel.
• Increase sales by offering the correct products (cross-sell/up-sell).
• Achieve higher ROI by increasing profits per sale.
• Streamline the sales cycle managed by interdepartmental workflow.
• Eliminate redundant functions by centralizing common activities.
• Save costs by reducing errors that occur from multiple uncoordinated interaction points.
• Improve understanding of customer needs by using their preferred channel of communication.
• Leverage on previous contacts with other customers for the current interaction.
• Estimate future sales, marketing, and service activities based on analysis of past performance.
For CRM to have a significant impact on the organization, enterprise-wide communication and commitment are required. There is no question that to stay competitive, businesses must invest in CRM technology as well as in a new business model. It is the pooling of all customer information that is the core of a successful CRM implementation. This powerful strategy will increase sales, customer loyalty, and competitive advantage.