Technology budgets have been slashed, including monies earmarked for customer relationship management (CRM). Yet two of the big five consulting firms have recently formed partnerships to capture more business in the CRM solutions market: Accenture with Siebel Systems and PricewaterhouseCoopers with Sun Microsystems. If CRM spending is to remain flat, or worse, decrease, in the coming year, what are these major players gearing up for? The answer is competition, from both vendors and rival consultancies.
To capture CRM business in the coming year, you need to remain competitive and know what your clients will be looking to purchase. To get the skinny, we interviewed some industry experts about the state of CRM spending, which services will be most lucrative in 2002, and what strategies they advise for consultants.
Spending will be flat
Corporate CRM spending will remain at U.S. $3.0 billion in 2002 and is also not expected to grow significantly until 2004, as many institutions examine their ROI from less-than-successful CRM investments, according to a study by Meridien Research. Yet if you read the headlines in trade publications, you know that CRM continues to be a hot topic.
While spending has definitely been reined in across every sector of technology, CRM is still a relevant and viable software space, said Joanie Rufo, research director with AMR Research, a business application and technology research firm. AMR’s research shows that regardless of industry, CRM falls within companies’ top three spending priorities, along with enterprise resource planning (ERP) and supply chain concerns.
“Companies are being much more pragmatic and much more frugal in terms of where they’re spending new investment or application dollars,” she said. “But people still have to manage customer relationships, even when the economy is down. I think it’s an area that is of utmost priority to companies.”
The CRM market will return to a strong growth rate as customers better understand the cost reduction and revenue enhancement capabilities of most CRM applications, said Anthony Conrad, a partner at venture capital firm Venture Strategy Partners.
He argues that many CRM customers, for example, still don’t understand what they’ve bought, how to fully deploy the capabilities, or which applications are delivering results.
“As customers pull together case studies, they will better understand which applications are appropriate for their business and have a higher degree of confidence to roll out applications with a proven ROI across multiple business units,” he said.
Stiff competition: Advice for consultants
When companies invest in capital expenditures like CRM, they expect greater customer retention and more efficient customer data that can be used for acquisition campaigns, said Jeff Maszal, a vice president with TMNG Marketing.
Maszal said he has noticed three trends as a result of stiff competition in the CRM market:
- Big-name players in the CRM space are now competing for the smaller accounts that one or two years ago they wouldn’t have gone after.
- Large consulting firms are also going after the smaller accounts to generate revenue.
- Both CRM technology firms and consultants are cutting the costs of their products and fees to stay competitive.
As the contest heats up, consultants will have to find the most saleable areas on which to focus their efforts. Conrad offered the following advice for staying competitive:
- Identify and target verticals in which CRM implementations have been generating substantial returns for clients.
- Develop expertise in these verticals by learning the nuts-and-bolts of operations.
- Create a strong business case for CRM implementations, including ROI arguments, and focus on the financial benefits of the implementation.
- Build “product-ized” versions of service offerings.
- Provide more critical assessments of CRM software vendors to clients.
Integration services may be opportunity knocking
Rufo said that despite declines in software spending, there’s still a need for consultants to offer CRM-related services. While organizations may not have the budget to implement and deploy new applications right now, they will finish implementing the ones they’ve already purchased.
With CIOs being asked to “do more with less,” consultants may be able to find new ways to make better use of companies’ previously purchased software.
“There are always opportunities for services even when there’s not a direct correlation to applications,” Rufo said.
One opportunity for service lies in the integration of CRM systems with existing applications. Rufo said CRM has always been a business process that touches more than just the front office, but in some regards that may be truer now than ever.
“Integration has become such a huge component of any CRM sale,” Rufo said. “There’s rarely an implementation we see any more where you’re not integrating to a handful of applications.”
Another way to stay competitive is to diversify your knowledge of CRM vendors’ products. Consultants often have difficulty conveying what differentiates their services from others, Rufo said.
“So many consultants, in the past few years, have really been focused on just a handful of players,” Rufo said. “For several years, that was a good way to go. In a lot of ways, Siebel dominated the market, and they still are a key market player.”
Industry leaders in CRM software
If you want to know who will emerge as the new leaders in the CRM market, think big. Rufo said ERP players like Oracle, PeopleSoft, and SAP are living up to their claims of CRM functionality.
“[Their products are] still not as proven as a company like Siebel Systems [is], but we’ve seen a real difference in the quality, the breadth, and the depth of those applications,” Rufo said.
Companies with an existing investment in one of those back-office systems are really finding themselves hard-pressed to come up with a business reason why they shouldn’t go with front-office applications from the same provider because the integration benefits are so strong, she said.
The race isn’t over for smaller players, though. Some software firms argue that customers are making smaller software purchases, making it an opportune time for their growth.
“To a certain extent, that’s true,” Rufo said. “But I think a lot of what we’ve seen is that even though companies might be buying smaller chunks of CRM, they’re buying them from the larger players simply from the viability and stability perspective.”
In other instances, companies that aren’t ready to take the plunge have begun using sales-force automation tools from companies like UpShot or Salesforce.com. While neither are enterprise-level CRM solutions, they could appeal to companies that can’t afford to invest in a significant infrastructure or significant applications deployment: “But they can afford to spend $49.95 a month for 100 sales reps,” Rufo said, “and they’re at least implementing some form of business process and some form of consistency in the way that they’re selling.”
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