In Mike Judge's wicked 1999 satire of corporate culture,
, there's a delightful character named Milton. Poor Milton. He's
all but invisible. No one likes him, no one talks to him, and
coworkers are forever stealing his stapler. Management doesn't
notice him enough to fire him. Instead, Milton is shunted from desk
to desk, each time losing more of that precious commodity denoted
by the film's title, until he finally winds up alone in the
basement, where he plots the delicious revenge he'll take on the
In times past, customer relationsstaff were where the Miltons of
the world most likely landed. If you couldn't do anything else, you
could probably listen to phone complaints all day. No one wanted
to, but somebody had to do it. And so they did, until they went mad
from boredom or frustration.
That was then. Today, there's a new shine on customer relations
departments, and the field has earned itself a fresh, glossy title
and a widely recognized abbreviation: customer relations
management, or CRM. And it's become an integral part of the SaaS
(software as a service) industry.
The Rear-View Mirror
But first turn back the clock to the 1970s, before the real
blossoming of the computer revolution. In that era, most companies
- especially those in the Fortune 500 - paid little attention to
customers, who were largely forgotten after they'd ordered
something. Big company execs, knowing they had enormous resources
at their disposal, along with a major market presence, had the
attitude that they could always replace customers, if
Then came the dawn of the Information Age, with evermore
powerful business computers and personal machines that began to
proliferate inbuyer s' homes. Now people could make more informed
decisions about whom they wanted to buy from. Globalization eased
the task of switching suppliers if they were unsatisfied with
someone's customer service. At the same time, businesses had
rapidly increasing computing power at their fingertips.
The confluence of these two factors led directly to the
beginnings of CRM in the 1980s.
At first, with the rise of sophisticated database creation and
maintenance technology, it was referred to as "database marketing."
Databases were employed to create focus groups to communicate with
customers, particularly the most valued. Problem was, data was
gathered primarily through repetitive and inefficient surveys, and
in the end surveys don't yield a great deal of useful
There were processing and analysis hurdles, as well. No
task-specific software yet existed that could take all the data
being amassed and spit something actionable out the other end.
Eventually, companies came to realize that what they needed was to
compile simple information they could make plans around: what the
customer was purchasing, in what quantity, how often, how much was
being spent, and what was done with the products purchased.
Sounds pretty basic today, but it wasn't until the '90s that the
phrase "customer relationship management" was coined, and more
comprehensive versions of the software were written. Everything
that could be automated, was.
CRM, however, is not just about technology. As it has evolved,
it has also become more complex, more of a two-way street. While
gathering information for the purpose of decision-making remained
primary in order to drive increasing profits, companies also put
some effort into building strong, enduring relationships with their
clients in order to build loyalty. Many began giving back to
favored customers, in the form of gifts, discounts, perks, and
sometimes even cash.
Customer support, integrated into a CRM system, became more
solid, even as machines were taking over much of the heavy lifting.
Management began to treat the old saw, "the customer is always
right," with greater respect. That was more difficult before the
computer revolution. Now it's a cinch. When customers complain,
their grievances can be handled quickly and efficientlyon an
individual basis. And the mistakes that caused the problem can
immediately be rooted out so that they don't happen again.
Sales, once made, can be logged into the database and tracked.
They can be cross-referenced to any number of other areas, and
analysis can proceed from different angles. Customers' interests
and buying patterns can be identified. Sales managers can have
direct access to information that allows personalization of the
buyer's experience. Electronic sifting of sales data can help drive
product development in the best possible direction. And customer
follow-ups can be generated automatically, according to any
Designing a CRM System
In order to achieve these goals, it's important for the
architecture of a CRM system to be broken down into three broad
, which deals with communications between companies and their
, which deals with the automation of as many processes as
- and the
, which analyzes customer information and uses it for business
Collaborative CRM involves all the interactions a company makes
with its customers - either face to face or through electronic
means such as telephone and Internet. Here, the personal touch is
very important. Customers must be provided not only with goods and
services, but with whatever assistance and information they may
require. Satisfied customers become repeat customers, and CRM can
use multiple technologies to bring that about.
Operational CRM deals with the automation of business processes
such as enterprise marketing, customer service, and sales-force
matters. All data relating to customer interactions is stored in a
database, allowing for staff to pull information specific to that
customer as needed.
Within Operational CRM:
- Enterprise Marketing Automation gives the company quick and
easy access to aspects of the business climate, data on
competitors, industry trends, and other critical input. That
access yields strategies a company can employ to guide its
overall marketing plan.
- Customer Service and Support Automation takes care of such
things as returns and customer complaints.
- Sales ForceAutomation ((SFA)) covers demographics, special
customer needs, and accounting management, with access to
information made available not only to salespersons but, in
appropriate instances, to clients as well.
Finally, there is Analytical CRM, which deals with analysis of
all data input that bears upon customer service capabilities. Some
examples would be: cross-selling products to customers; finding
ways to retain customers who might be switching to competitors; and
providing important information to customers without delays.
Analytical CRM is also a tool for fraud detection and/or
prevention, and for pattern recognition with regard to sales,
inventory, and profits. It can be applied to product development
and risk management, areas in which it needs to be particularly
dynamic, so that the business plan can respond in a timely manner
to any winds of change out in the real world.
When these are all integrated into a cohesive whole, then the
company can realize substantial benefits in a competitive
environment. But managing such an extensive suite of procedures is
a daunting task for many companies to try to accomplish in-house.
It means adding considerable (and expensive) expertise. A
bespectacled software engineer lurking around every water
On the other hand, what if you could simply purchase what you
needed, in the form of software as a service?
It was a good question, and people on both the user and provider
ends of things began asking it. The result: creation of an instant
niche for companies with CRM software products that were more cost
effective than hired IT guns, and that were applicable across a
wide spectrum of the business world.
CRM as aService (SaaS)
First to jump into this space in a big way was Siebel Systems,
founded by Thomas Siebel and Patricia House in 1993.
Siebel began by offering only sales force automation software,
but with the explosive growth in demand for CRM through the '90s,
it quickly expanded to include marketing and customer service
applications. By 1999, it was by far the dominant player and was
named the fastest-growing company in the United States in that year
Along the way, Siebel pursued a strategy of forming strategic
alliances and making acquisitions to provide e-business solutions
for CRM and related areas; as of late 2000 the company had more
than 700 alliance partners.
The company went public in 1996, and in 2000 its annual revenues
broke through the $1 billion mark. A year later that had doubled,
and in 2002 Siebel peaked, grabbing a 45% market share. Today,
Siebel is a brand name ownedby
), which bought out the company in September of 2005 for $5.8
billion. Although its market share has slipped considerably, it is
still a major player.
Next to throw its hat into the ring, in 1998, was the giant
German multinational softwarecompany
). It was followed by
) in 1999and
) Dynamics CRM in 2002. Together with Oracle, these companies make
up the Big Four of CRM vendors, collectively holding about 60% of
(click to enlarge)
Obviously, three of the four are large, diversified companies,
for which CRM represents only a fraction of their revenue stream.
Salesforce is the upstart. It's a company whose NYSE ticker symbol
is, fittingly, CRM. That's what it's always specialized in (even
though of late it has been moving aggressively into the
The Rise of Salesforce
Salesforce established its position by targeting smaller to
mid-sized companies, an area largely neglected by its bigger rivals
- primarily because the high cost of the CRM solutions of the day
was affordable only by big-budget outfits. It also pioneered the
delivery of subscription-based CRM software online. Put the two
together, and you have one of the biggest corporate success stories
of the new century.
And no wonder. According to itswebsite:
"With Salesforce, every step of a sale - from phone calls and
emails to collaboration with colleagues - is tracked in one
place, so reps stay on top of deals and build stronger
relationships with their customers. The average Salesforce.com
customer experiences: +29% increase in sales; +34% increase in
sales productivity; +42% increase in forecast accuracy."
Salesforce currently has more than 82,000 customers and over 2
million subscribers. It's international - with regional
headquarters in Switzerland, Singapore, and Tokyo - and its
software supports 16 different languages. It is annually recognized
as one of
's 100 best companies to work for, with a ranking that vaulted from
52nd in 2011 to 27th in 2012.
The company is working hard to utilize social-networking
websites and to lock up a dominant role in mobile CRM. It's a
leader of the migration to the Cloud, as can be seen in the way its
CRM suite is broken down:
enables companies to create and track cases coming in from every
channel, and automatically route and escalate what's important.
For their part, customers have the ability to track their own
cases 24 hours a day.
provides sales representatives with a complete customer profile
and account history, allows the user to manage marketing campaign
spending and performance across a variety of channels from a
single application, and tracks all opportunity-related data
including milestones, decision makers, customer communications,
and any other information unique to the company's sales
leverages crowdsourcing via its member community to create a
highly accurate worldwide business contact list. Sales leads,
changes of contact information, and organizational profiles can
be viewed within the Salesforce application, all generated from
up-to-the-minute data created by real business interactions.
utilizes the type of features embraced by Facebook and Twitter
users, and with it employees can tap into social, mobile, and
real-time technology to collaborate on documents, business
processes, projects, and application data. Components include
profiles, status updates, and real-time feeds.
is a platform that allows external developers to create add-on
applications that integrate into the main Salesforce application
and that are hosted on Salesforce's infrastructure.
For its efforts, Salesforce has been amply rewarded. It's jumped
from nothing to over $2 billion in revenues in 13 years. Its CAGR
for the past five years has been 22.2%. It led the field in market
share addition in 2010-'11, with a 2.8% increase. Since its IPO at
$11 in June of 2004its share price has rocketed to around $145
today, a rise of better than 1,200%. And along the way, it steadily
buttressed itself (and dampened competition) through strategic
acquisitions, gobbling up 24 other companies between 2006 and
Though nothing in this fast-evolving space is certain, of
course, the consensus is that Salesforce will continue to eat
market share, as this projection graph against two of its primary
(click to enlarge)
And Salesforce is expanding in all the right ways. According to
leading technology analysis firm Gartner, the SaaS-based CRM sales
the company specializes in are expected to leap to $6.4 billion in
2015, from $4.5 billion this year. That's the biggest slice of the
SaaS pie, as can be seen in this table from Gartner:
(click to enlarge)
At the same time, clients will be integrating social media into
their customer service centers; while only 1% of companies adopting
CRM are now involvedwith Facebook (
), Twitter, and the like, by 2017 that number will reach 25%,
The Tentacles' Reach
CRM is continually pushing into new industries, as well.
Telecommunications leads the customer list at the moment, with the
energy/utilities and financial-services sectors close behind.
Buthealth care and public services are coming on strong, and are
expected to take over the top spots relatively soon.
There is also plenty of room to broaden the reach of CRM
services. Whereas CRM systems originated as uncoordinated, separate
department servers, the key word today is "integration." And there
seems to be no end to the number of corporate elements that can be
drawn together, as you can see from this near-octopus that depicts
the CRM of the future:
(click to enlarge)
The goal - always - is to put customers first, and to offer them
a buying experience that is seamless from beginning to end. The
vending company's website becomes the portal through which
customers can browse inventory to find what they're looking for,
place orders, track order status, and provide feedback about the
results. On its end, the company can gather data about customers,
personalize its response to them, and set itself up to generate
repeat interactions. All of this allows the vendor to transform
itself from a purely static entity to one that is much more
The Magic Quadrants
With Oracle and SAP losing market share, Salesforce and
Microsoft seem poised to benefit the most. But what about other
potential competitors, those that make up the 40% not controlled by
the Big Four? Might some serious challengers arise?
They might - at
Casey Extraordinary Technology
, we're always on the lookout for them.
Each quarter, Gartner publishes its famed Magic Quadrants, in
which it divides technology firms in a given field into four
categories - Visionaries, Niche Players, Challengers, and Leaders -
and places them inside a square partitioned into boxes. A company's
position in the Magic Quadrant depends upon how Gartner sees it in
relation to its peers.
There is no Magic Quadrant for CRM as a general designation;
rather, there are separate charts for different aspects of the
business. Thus we have this one for MultiChannel CRM Lead
(click to enlarge)
And quite a different one for Sales Force Automation:
(click to enlarge)
There are others as well, but these two identify some of the
up-and-comers in the business.
, lead management involves "processes [that] take in unqualified
leads from sources including Web registration, direct mail, digital
and email marketing, social networks and tradeshows. CRM lead
management solutions automate and optimize how those outputs are
then qualified, scored, nurtured, augmented and prioritized for
delivery to direct and indirect sales personnel and
In thiscategory, we find companieslike top-ranked
(ELOQ), which Gartner cites for its ability to support complex,
multichannel lead-management processes and easy-to-use user
interface, and which grew revenues by 39% last year. Another is
Marketo, which specializes in B2B (business-to-business)
transactions, and which experienced 130% growth.
On the SFA side, SugarCRM had a big year in 2011, landing a
major contract with IBM that brought aboard 75,000 users. The
company is interesting in that its CRM software and associated
community are open source, which enables collaborative,
customer-driven enhancements. The open-source community develops
and refines new capabilities, which SugarCRM then incorporates into
subsequent commercial releases of its software.
Whither from here for CRM? There are probably as many answers to
that question as there are those giving them. But a few themes
One of these is the integration of social media with corporate
CRM. It's even got its own buzz term, "SocCRM." And one logical
extension of SocCRM is what is generally referred to as "value
Through the use of social media, companies have the ability to
interact with the customer base as never before. There is a ton of
information floating around out there, and it can be tapped into.
Now, even major decision making can be based on real-time feedback
from users. Design, marketing of product, pre- and post-purchase
service - all can become true collaborative efforts, the goal being
to create a
scenario for both the vendor and the customer. Some startups are
even creating social networks
they bring their product to market, in order to find out what it is
that the market really wants.
Value co-creation - both in the beginning and as an ongoing part
of the toolkit - can be extremely advantageous for the company
because it is, in essence, outsourcing much of the heavy lifting of
product development, and getting it done for free.
With regard to its Dynamics CRM software, Microsoft put out a
white paper in which it suggested uses that its product might be
applied to. Among others noted by Microsoft:
- Manage online class registration automatically. In addition
to automating the registration process, one could track student
activity like attendance, grades, certifications, and course
evaluations, as well as track and report on marketing activities,
including social media, to measure the success of campaigns.
- Medical-product manufacturers and distributors can
automatically notify product owners of a warning or recall;
answer product questions with confidence using a CRM-based
knowledgebase; and suggest additional products that could enrich
a customer's life.
- Help municipalities respond to citizen requests more
- Ditch the paper order form. Work alongside customers to
configure an order and send the quote immediately from a tablet
- Track customer goods in transit with map integration, in
response to customers' expectations for knowing where their
product is in the supply chain once they have ordered it.
- Compile a comprehensive view of lapsed customers and generate
automated lists of customers who might be re-attracted based on
- In a phone conversation with a clients or prospects, employ
guided dialogues to prompt follow-up questions based on answers
and build decision tree interviews.
- Fine-tune customer contests to meet fan interests.
- Keep track of where backup paperwork specific to each
interaction is located.
But in the end, how do you get sales staff, who may be very set
in their ways, to actually
That's the question posed by Dr. Michael Wu, principal analytics
scientist and blogger for
. Wu writes that "one of the many challenges facing Social CRM will
be adoption. In fact, traditional enterprise software (e.g., sales
force automation) often experiences a very steep learning curve and
is not well adopted within the enterprise. Even if it is adopted,
people often hate to use it. Employees only use it because their
job requires it."
His simple solution: "gamify" CRM software.
That is, people are more apt to learn new skills, and to warm to
new technologies, if they're presented as a game. "Social gaming
dynamics," he says, "can foster team work, collaboration, and even
a healthy level of competition within your organization. The result
is ultimately a huge boost in productivity …
"So if you ever get involved in [CRM] software design, make sure
it's entertaining! Never underestimate the power of fun."
Sounds like an idea whose time has come.
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
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