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What's Next in the CRM Evolution?

The now universally understood term of CRM has been around since 1994, however, the business concept of knowing and accommodating your customers has been around since the start of commerce. Customer relationship management as a business strategy supported by CRM software is clearly advancing at an increased pace. New delivery options (software as a service), pricing models (subscription pricing), technology plays (open source) and industry shifts (social media) are advancing CRM solutions in a way that was unimaginable to most only ten years ago.

So what’s next in the CRM evolution? Of course the industry will consolidate, new software capabilities (such as mobile CRM and business process automation) will advance, new technologies will emerge and existing products will mature into requirements-driven customer segmentation models. However, these facets occur in all information technology segments and are hardly thought inspiring or interestingly predictive. I’ll use this post to forecast some of the more meaningful CRM industry advancements.

Software as a Service (SaaS) will surpass on-premise solutions. For the calendar year ended 2009, SaaS CRM solutions retain approximately 8% SMB market share and SaaS ERP solutions remain at just over 1% SMB market share. Gartner predicts that by 2011 SaaS will account for 25% of all applications and other analyst firms make comparable forecasts. The media attention and market momentum for SaaS CRM and ERP systems is clearly reaching an increased acceleration point. While SaaS ERP and CRM systems will remain the minority at enterprise organizations they will become the majority at SMB companies by the end of 2014.

Implementation success rates will continue to rise. Companies adopting CRM are increasingly realizing that CRM is a business strategy and not a software product. This recognition avoids putting the cart in front of the horse and facilitates management teams in aligning CRM software with their planned CRM business strategy. While strategy must be a precursor to software selection and implementation, CRM software applications are a critical tool for enabling the strategy and more so, for solving complex business problems while at the same time providing the flexibility to react to market changes and competitive threats. In addition to an improved strategy to software alignment, implementation teams are also doing a far better job of recognizing and incorporating project management critical success factors such as clear vision, measurable objectives, executive sponsorship, early and broad involvement, proven implementation methodologies and proactive change management.

CRM success metrics will continue to advance. Now that successful CRM implementations are the rule and project failures are the exception, implementation go-live is no longer the benchmark for success but rather the starting point or baseline for continued measurement. Organizational CRM objectives are moving beyond the ability to run marketing campaigns or operate call centers and instead look to more strategic metrics such as improved marketing budget ROI, reduced sales cycle durations, increased sales win rates and increased customer satisfaction scores.

CRM software will better leverage business intelligence (BI) in order to evolve from the simple storage of data to the delivery of actionable information. According to 2009 Gartner research, BI and corporate performance management (CPM) are the hot areas of next generation CRM. Getting marketing, sales and customer support data into a central information system was the precursor to supporting the sharing of information across customer touch points. However, storing data does not provide a competitive edge. Leveraging data by aggregating, extracting and delivering better information to decision makers which in turn supports better decisions does provide competitive advantage. Companies that leverage CRM analytics will acquire a deeper understanding of their customers’ behaviors and leverage this intelligence to improve marketing campaigns by serving promotions which are targeted, timely and compelling, or by increasing customer share by serving up-sell and cross-sell opportunities which are complimentary to past purchases. CRM analytics now illustrate not just views of what has occurred but also predictive analysis which empowers managers to affect change and not just react to it. Unfortunately, those CRM adopters who fail to harvest customer intelligence will likely feel as though they do not achieve the strategic benefits from their CRM investment.

CRM will fold into ERP. The customer experience is not limited to the front office. Marketers need to know which customers bought which products and when in order to launch relevant campaigns. Sales professionals need to know customer credit limits, credit availability and other back-office information at the time of creating a quote or taking an order. Contact center representatives need to know customer purchase history or which products purchased are covered under warranties in order to provide support services. Just as the preceding eras of host-based and client/server business systems evolved from point solutions to software suites to fully integrated and enterprise-wide applications, so will SaaS applications. Most of the current SaaS applications remain line of business solutions that satisfy only a single departmental operation such as the front office operation, the back office operation, the warehouse and distribution operation or the HR department. Business leaders do not want to incur the time, cost or distraction of having to integrate or manage the integration of disparate business applications so that they can reduce business process cycle times, efficiently manage end-to-end business processes and achieve real-time information reporting from a central depository for true enterprise visibility. As SaaS business systems mature, they will be forced to merge, consolidate or acquire other complimentary line of business systems in order to deliver a single, enterprise-wide solution. The blending of customer communication channels, shared customer information across customer touch points and a true 360 degree customer view which includes both front and back office information is required to remove the boundaries imposed by departmental silos, islands of information and disparate information systems.

CRM strategy and applications will expand globally. While for the first time the majority of US and EU SMB’s have adopted CRM solutions, there remains a tremendous growth opportunity for the rest of the world where the majority of small businesses do not yet benefit from CRM systems. These regions will profit from the lessons learned, increased software maturity and lower costs absorbed by the earlier adopters in the US and EU. An increase in CRM manufacturer international business partner channels will provide the much needed local resources to assist with installation, implementation and advisory services.

Social CRM will become the new CRM. Many business executives are witnessing the social media market momentum, however, lack the specific vision needed to apply social media to their existing business objectives. At this point, only the pioneers have truly implemented social media strategies, tools and programs which achieve demonsratable ROI. Early social media initiatives typically involve programs such as using online peer forums to reduce support costs, capturing user generated content for product R&D planning or leveraging social networks to increase sales of consumer goods and services. The integration of social media tools with the organization’s mission critical business systems will create a symbiotic relationship between the structured data managed in CRM systems and the largely unstructured data of the social media world. The merging of what is currently disparate information will provide a tremendous catalyst to embrace customer relationships and achieve new levels of measurable ROI. Customers increasingly want to control their own consumer experiences and will engage with suppliers that meet their preferences. Social customers prefer dialogue over monologue as well as transparency and open lines of communication with their suppliers. Suppliers incur countless hours in tailoring their messaging, marketing campaigns and sales positioning with various target markets and buyer types. The integration of transactional CRM and social CRM will provide the information and constructs for thought leaders to satisfy the social customer and achieve a mutually rewarding relationship. Gartner forecasts spending on social CRM projects to grow from less than 1% today to 10% of spending in 2020. That spend will be directed among three areas, internal collaboration tools such as web conferencing solutions, internal communities that are hosted by the business and the monitoring of outside social networks like Facebook and Twitter. The analyst firm states that 90% of current CRM spending is directed toward operational CRM initiatives such as sales force automation (SFA), but that will drop to 70% by 2020 as a result of increased social CRM spend.

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By Jason P.
Thanks for not posting another generic tells-me-nothing forecast of the CRM software industry. All good points.


By James Wood
I think you are out on a ledge with your SMB SAAS forecast but I like all the other predictions.

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