Positive outlook despite downturn: CRM (part 1)

11 Mar 2003

A couple of years ago customer relationship management (CRM) spelt profit and business opportunity for software and software services firms and a must-have technology for the business community.

In these dark days, the market for CRM systems is in severe recession and many businesses have put CRM investments on the back burner.

Hit hardest by this dramatic shift in sentiment have been CRM vendors, such as Irish firm Norkom, which sells data-mining systems to industry. “The CRM environment has changed radically. What was ‘must have’ 12 months ago is now just a ‘nice to have’,” comments Norkom’s CEO Paul Kerley. “A year ago people wanted sophisticated real-time data mining. Now they just want to know which customers should I target today so they don’t bomb on their next quarterly figures.”

Kevin Jones, managing director of IT services firm Version 1 Software, which was recently appointed as distributor in the State by Belfast-based CRM vendor Lagan Technologies, believes that the CRM market has suffered from its inability to make a business case for the technology. “The jury is still out in terms of what it can really deliver,” he asserts. He adds, however, that suppliers are now waking up to this fact and starting to focus more on delivering real benefits. “In a situation where there isn’t enough money to go around, delivery of promises and benefits becomes a lot more critical,” he says.

Paradoxically, recession may be the catalyst that will allow the CRM industry finally to fulfil its potential. This is the contention of a new report from European technology research firm Current Analysis, which sees recession as an opportunity for CRM.

“Based on the dismal sales in 2002, it may not seem that the recession is an opportunity for CRM, but it is,” says CRM analyst Kelly Spang Ferguson. “CRM is more crucial in times of weak spending as companies are challenged to attract and retain customers. This is a struggle across industries; companies that will survive this recession will be those that understand and act upon the fact that relationship management is a competitive differentiation,” he says.

Sprang Ferguson argues that an attitudinal change is needed, both on the part of industry and suppliers, to kick start the industry. “Buyers are postponing CRM investments, when companies desperately need to find new and innovative ways to differentiate themselves through their messages and customer interactions. Similarly, for many CRM vendors the end goal is gaining market share, when CRM vendors need to shift their emphasis to doing a better job to convince prospects that CRM is a strategic business investment that shouldn’t be put off,” he adds.

Those who are optimistic about the prospects for CRM note that the software is no longer the niche application it once was. The success of Siebel, the world’s largest CRM vendor, has seen to that. But if confirmation was needed that CRM is at last entering the mainstream, it came with the news that Microsoft is targeting CRM with a new enterprise application called MS CRM. Already launched in the US, MS CRM will be available in Ireland later this year, although an exact launch date has yet to be confirmed.

Pitched mainly as an entry-level product, the product includes account activity and history tracking features, reports, order management functionality and communications tools.

Another sign of the growing maturity of the CRM market is the rapid proliferation of applications. Where once CRM was identified primarily with customer databases, contact lists and data mining functionality within the corporate environment, a growing list of services is available that allows organisations to communicate with their customers. The travel industry is currently undergoing a revolution in this regard and there are new products in development that will allow users to track the exact locations of buses, trains and planes in real time from their phones. Dublin Bus is currently trialling just such a system. Another sector that’s beginning to embrace the possibilities of CRM is healthcare.

However, perhaps the biggest area of growth for CRM services is going to be in e-government services. Both in Ireland and internationally central and local government have a number of projects under way aimed at the electronic delivery of public services, most of which will have a CRM component. In December, for example, Dublin City Council issued a request for information (RFI) for a new citizens portal that will serve as a one-stop shop for information about local government services in the capital.

A number of UK cities such as Newcastle, Stockport and Birmingham have already established such portals and the Dublin City Council initiative is a sign that Irish cities are ready to follow suit, believes Kevin Jones of Version 1 Software. “CRM works for both sides – for citizens and for government employees. It enables the citizen to make contact with the local authority through a number of different channels – PC, email and even SMS, while local authority staff can work more efficiently by getting a single view of each citizen,” he concludes.