When Southwestern/Great American Inc. set out to implement a customer relationship management (CRM) system from SAP AG, the Nashville, Tenn.-based company thought it had its ducks in a row. But when it came time to gather user input, a key business sponsor airily informed IT that having risen through the sales ranks years before, he would speak for the company's salespeople.
Project leader and senior business analyst Ryan Tabor was skeptical. "I told him, 'Even though you've done the job, we really should meet with the people who'll be using this [system] now,'" Tabor recalls. But the executive held his ground.
So when the SAP CRM went live at the $200 million-plus direct-marketing company, problems abounded. "We spent 75% longer in post-project support than we had budgeted, revising all these small processes," Tabor says. "The system had salespeople recording all kinds of activity stats that really didn't matter but reflected what a manager wanted to see."
Midmarket enterprises getting serious about CRM can learn plenty of lessons from larger enterprises, whose expensive, often highly publicized train wrecks caused analysts to estimate a few years back that only a fifth to a third of CRM projects would succeed. Moreover, midsized businesses earned battle scars of their own during their early CRM efforts, and they're now putting those lessons to use in an emerging body of best practices.
Done right, CRM is more than software; it's the practice of managing customers and data to increase customer satisfaction, retention and sales. Thus it requires senior management buy-in and efforts to develop work processes to best use the software to attain those goals. But it also requires an IT proponent who can manage aggressive business leaders to ensure that the end product reflects true user needs.
By the late 1990s, large companies were learning this the hard way. They failed to recognize that the toughest part of CRM was the cultural change it wrought. This led to confusion, unused applications and a sinking feeling among business managers that big IT is a waste of money. "Many large enterprises bought more seats and more modules than they needed," says Liz Herbert, an analyst at Cambridge, Mass.-based Forrester Research. "Some aren't even sure today what they have."
Today, large enterprises know CRM is more vital than ever; but many sense that they've spent years and millions of dollars spinning their wheels. "Even the largest companies want smaller deployments with less expensive pain," says Brian Prentice, an analyst at Gartner Inc. in Stamford, Conn.
That's music to midmarket ears. "The midmarket is more cost-conscious anyway, so there's a lot more focus on really rolling out what you need," Herbert says. "Midmarket companies are starting out small, maybe with [sales force automation], and getting it right before they move forward."
Such modest goals mark a significant shift in the way companies think about CRM. After all, the early promise of the technology was to link disparate groups -- so that, for example, marketing could put a full-court press on customers that the salesforce deemed close to a purchase decision. It's not that CRM pioneers were fools; it's more that real-world experience has shown that smaller, targeted projects are a more likely path to success.
This insight is key in a world where CRM software has taken off. In an August 2005 survey by Bain & Co., 75% of the 960 business and IT executives from both large and midmarket enterprises say their companies use CRM, up from 35% of respondents in the 2000 study. And from a list of 25 management tools, respondents ranked CRM second in usefulness, edged out only by the category of "strategic planning."
CRM's rising popularity is also reflected in the growth rates for its vendors -- particularly those that offer a hosted software model, which supports the move toward simpler and faster deployments.
Siebel Systems, whose hosted product was one of the few divisions performing well for the company in 2005, reported an increase of 34% in license revenue for the quarter ending Dec. 31 compared with the same period a year earlier. (This was the last quarter of independently reported revenue for Siebel, which has since been acquired by Oracle Corp.) Hosted application provider Salesforce.com grew 97% in 2004 and was poised for even higher growth in 2005. RightNow Technologies boomed 83% in 2004. And SAP released an on-demand product in February.
This was first published in March 2006