The future of CRM is social, says Gartner analyst

5 May 2009

The highly customer-centric world of social customer relationship management (CRM), which allows businesses to interact and collaborate with customers and respond to their needs in a way that encompasses the growth of social media, is on the rise, Gartner’s expert on CRM, Ed Thompson, has told

In recent years, CRM has undergone significant change, moving from database-led applications in the hands of a few, to an all-encompassing corporate asset that feeds neatly into accounting and enterprise resource planning (ERP) applications.

“There are three kinds of CRM in the world today,” Thompson, a distinguished analyst at Gartner who was in Dublin recently, explained. “There’s operational CRM, analytical CRM, and now there’s collaborative CRM. But what is collaborative CRM?

“Collaborative CRM, or social CRM as it is becoming known, is effectively traditional CRM attuned to a world where customers and businesses live pretty much face to face.

“In the past 10 years, less than 10pc of CRM budgets were invested in the social aspect, but the rise of services such as Twitter and Facebook are hard to ignore, but also hard to define. Traditional CRM budgets are shifting towards social CRM applications, but I would advise CIOs not to take their eye off the traditional analytic aspect of CRM.

“More than ever before firms will have to analyse what their customers are doing, what their customers actually want. More than ever before behavioural patterns will matter, so analytical CRM and social CRM could prove decisive in future sales campaigns.”

Thompson said it is hard to ignore the rise of social-networking sites such as Facebook, which has some 200 million users, but also the Asian social networking site, which has even higher subscriber numbers at 300 million people.

The most obvious shift in the software world that is changing the face of CRM and helping CIOs adapt to the world of cloud computing is the move in the direction of software-as-a-service (SaaS), which is dominated by, as well as the software-plus-service (S+S) model espoused by Microsoft.

“But the one thing that SaaS and S+S proponents need to bear in mind is the slow move by CIOs in the direction of cloud computing.

“If it’s so easy, why aren’t so many businesses moving in this direction? I’ll tell you why: what puts CIOs off SaaS is data security laws; if a European firm has its database hosted in California, what are the privacy and data protection laws around that data?

“Companies, whether they are Unilever or Bank of Ireland, are nervous of being prosecuted for infringing privacy laws.

“Also, firms are nervous about signing contracts for hosting their data to the cloud because they will be locked into contracts and be stuck with a technology that may not work out. They therefore have adapted a ‘no SaaS is going to darken my door’ attitude. At the same time, they are under pressure to keep up with what executives are using.

“Trendy business collaboration services such as LiveMeeting and WebEx, they are all cloud computing. My feeling is that it’s not going to be an either-or scenario; businesses are going to end up with both internally hosted applications and cloud computing applications. SaaS is here to stay, but not everyone will go 100pc.

“The real money to be made is in the area of integrating SaaS and non-SaaS applications.”

Thompson feels that cloud computing services such as Microsoft’s Business Productivity Online Suite (BPOS) and Google Docs have a future in large corporations that will make a full IT investment internally and use cloud computing tools to affordably connect geographically distributed workforces.

“Is everybody dropping Microsoft Excel? No, they are not, and nor should they. But, if I’m a Shell or BP with thousands of workers out on oil rigs or working on desert installations, less than a third of these workers would have no access to PCs on a regular basis, so it doesn’t make sense to buy licences. But there are corporate PCs in remote offices, and where firms can’t afford to buy individual licences for occasional users, services like BPOS and Google Docs make sense.”

Returning to social CRM, Thompson said the technologies for using CRM tactically alongside social-media sites and services are still on the fringes, and firms would be best advised to walk before they run.

“While we’re all focused on this Twitter and Facebook stuff, firms are wondering how they’re going to be making money out of this. If you’re a business rather than a consumer, you’ll wonder what your sales and marketing staff will do with this stuff, apart from making idiots of themselves.

“But look at how Twitter is emerging as a search tool. What about tools that identify the key influencers? These technologies sit on the fringe, and because they are evolving so fast, businesses are afraid they’re not keeping up.

“On the one hand, tools are emerging online that allow you to build in Twitter interfaces to deal directly with customers. Another way is to look at tools that allow companies to synchronise with all social networks, such as, which is a micro-blogging interface that can sit on an iGoogle interface and that works with sites such as LinkedIn, Facebook and Twitter.

“Other organisations, like Contact Networks, which was acquired by Thompson Financial, and Tacit, which is owned by Oracle, involve extranet tools that allow businesses to keep track of various email traffic streams and see who was last talking with whom.

“Push technologies are also being studied by airlines such as American Airlines and Virgin to find ways of making better use of their air miles.

“Add-ons, such as a product called Initiate, are being used by Mars and Lego to find new revenue streams using social media. Did you know that Mars makes more money out of products like dog food than it does from chocolate? Did you know that Lego recently sold 50,000 units through a word of mouth campaign on social networks?

“At the end of the day, businesses need to realise that marketing will be impossible without social networks in 10 years time. Clever use of CRM and rising technologies like session initiation protocol (SIP) will enable businesses to facilitate social networking among people on the same flight or attending a networking event, for example,” Thompson concluded.

By John Kennedy