Beat The Odds
Integrating CRM and ERP can help VARs profit despite dismal market predictions for those technologies.
Most VARs in the CRM (customer relationship management) space probably won't look back at 2001 as a banner year. Statistics outlining phenomenal failure rates for CRM implementations, combined with what experts later confirmed was a recession, affected end users' willingness and ability to buy into a new system. January of this year began with predictions from Meridien Research (www.meridien-research.com) that both retail and corporate CRM spending will remain level until 2004. A January 2002 report from ARC Advisory Group (www.arcweb.com), suggests that ERP (enterprise resource planning) providers are only slightly better off. Though the report suggests that recovery from the post Y2K downturn is coming, ARC Advisory Group predicts only a 1% CAGR (compound annual growth rate) for ERP software and services over the next five years.
Does that mean that CRM and ERP VARs looking to grow their businesses should move on to some other technology? Not necessarily. However, the challenges of economics and technology will require VARs to look at new ways to maintain a revenue stream. In a research delta entitled "Exposing the CRM/ERM/SCM Intersection," META Group (www.metagroup.com) is advising its clients that by 2003 or 2004, it will be imperative for organizations to link CRM activities with back-office/supply chain functions. This is a trend that VARs and integrators are ideally positioned to benefit from.
According to Anisha Mason, VP of Akibia Consulting, her integration team is already affected by this trend. Headquartered in Boston, Akibia Consulting has 450 employees and 6 worldwide offices. "More than 90% of our implementations have involved integrating some back end system with Siebel CRM software, says Mason. "If customers don't have ERP already, they are thinking about it."
"There is a natural need to have front office and back office actually act as one seamless database," notes Michael Evans, senior VP of global marketing for MEI (Montreal). Unveiling a channel partner program in the fourth quarter of 2001, MEI offers CRM software specifically targeted at back office integration. "Interestingly, all the big back office vendors such as JD Edwards, Oracle, and SAP are moving into CRM. It's logical to have one big seamless transparent system."
End users are driving the demand for integration between applications, says Greg Millar, CEO of Snippets (Pleasanton, CA). Snippets markets business intelligence software that links applications. "CRM and ERP are just two of the things that customers want to integrate," contends Millar. "It's a growing opportunity and will be really strong in next six months or so. People are finally overcoming a stovepipe mentality and starting to integrate applications. They are recognizing that the tools are there to help them get more from existing resources. VARs can help them leverage existing investments and tie them together to trade information. Then the software can make intelligent decisions to alert and notify users." Millar attributes this shift in thinking about enterprise apps to the fact that many are not really satisfied with results of implementations over the last year and are looking for the next step to make these applications play together better.
As recently as a year ago, experts in the CRM industry were telling me that a successful CRM project had to be enterprise-wide, and they were defining that term as meaning that every member of an organization could sign in to the application. While no one is disputing the value of user acceptance, universal access to a CRM database is no longer enough. These experts agree that CRM will never be enterprise-wide without universal access to all databases that contain customer information. In order to make fully informed decisions, a user can no longer rely on front office or back office applications that exist in a vacuum. In other words, CRM by itself cannot deliver the elusive 360-degree view of a customer. Even if it could, users want to do more than just view a customer history; they want to affect it.
"The best way to turn data into a company asset is to allow as many views of it as possible," says Mason. "If you have account data in ERP, you want to make sure it is same the sales are looking at. If someone sees that Account X just bought a product last quarter, it may be time for an upgrade or a complement. Integrated CRM empowers upselling and generates revenue. If there's contract info in back end and a call center rep doesn't have access to it, they might be giving free service. If they do have access, they can let the customer know it's about to expire and offer a new one. It really empowers them as sales/decision makers."
Automating processes not only reduces labor, it also ensures that a system is used effectively, making it more likely that the solution is deemed a success. "The problem is that with many applications there are no end user automation tools," asserts Millar. "People are constantly going to systems and checking for things and performing actions based on that information. Having to perform those operations manually makes it less likely to be used effectively, so they don't get the advantages they're looking for and deem it a failure. Automation a big piece of why organizations purchase technology, and VARs can't afford to ignore that."
Alex Jeon, president and CEO of Poxen (Palisades Park, NJ), says that initially VARs were driving his company's focus on CRM/ERP integration, but that is no longer the case. "Considering CRM's initial hype, customers are learning from expensive mistakes that delivered only small bit of what was promised. End users are becoming more sophisticated and skeptical and are increasingly intent on not making the same mistakes they've seen other make."
Open Systems, New Tools Ease Integration
"The desire to integrate these applications is not new," says Keith Peers, MEI's director of product management. "But improvements in the technology and technical standards are now making it possible." Vendors in all sectors seem to be moving away from proprietary and closed solutions to more open standards. Many products have out-of-the-box interfacing capabilities or integrators can buy a "bolt-on" interface. There are a wide variety of tools for everything from data cleansing (making sure the data is appropriate to the database), moving the data, and EAI middleware to broker the integration. "The ideal solution could involve several tools not just one," warns Mason.
XML (extensible markup language) has also been cited as one of the factors promoting the integration of various data sources that were once disconnected. With an increasing number of products supporting XML output, VARs may be able to spend less time on converting data and enjoy higher reliability. In December 2001, the OASIS Customer Information Quality Technical Committee accepted the submission of CRML (customer relationship management language). This XML schema includes a vocabulary of metatags specifically designed to define customer relationships. In a press release OASIS (an XML standards consortium) claims that the acceptance of this standard will "improve the interoperability of XML-based data and applications."
Don't Forget About The Human Factor
Given the mature state of CRM technology and the wide variety of integration tools, the greatest challenges facing integrators may have little to do with the technology itself. "The initial business steps are crucial," says Jeon. "Those are going to be determined by the customer, and that's going to vary from one implementation to another."
A successful integrator will need to make the best use of skill sets from both business and IT staffs, says Mason. "Some clients just think it's IT. From a business perspective, you have to determine what the processes are and what data users need to see. Integrators need to assess how data affects functions and which system is really the 'system of truth' if the data gets out of synch." Business users and their IT counterparts may have to be consulted in decisions regarding whether real-time synchronization is necessary or how to evaluate clean data.
VARs with strong vertical presence may have an advantage in this regard. As Millar points out, "A VAR has a better notion of what a business/segment is doing than we do as vendors and, as a result, is able to address those needs better." While manufacturing and retail remain strong potential markets, Jeon says that finance and insurance are becoming more concerned about customer loyalty and raising the bar for customer service. Poxen has also seen growth in the pharmaceutical industry, which continues to generate tremendous income.
Serve No Solution Before Its Time
"The biggest mistake we've seen integrators making is that they don't leave enough time," says Mason. "They figure it should be easy because you just have to pull from one place to another. For instance, if data is dirty and they don't have time to cleanse it, they might decide to deal with it later. When that bad data keeps the system from working effectively, users feel disempowered and won't use it.
Evans acknowledges what he calls the "atrocious record" of CRM implementations. He believes that the major reason is that systems have become too big and complex. As a result, the deployment is so difficult and time-consuming that users don't accept it. The second potential pitfall is that companies fail to take the necessary time to plan an implementation. They haven't thought through the infrastructure requirements or the results. As a result, companies may not be prepared for an increase in orders due to a successful CRM strategy and blame the system for the failure.
Jeon agrees that going too quickly is a likely contributor to the number of installations regarded as failures. When customers attempt to deploy a complete package to do everything all at once, it inevitably falls short of what the sales team promised. "Consultation is key to closing the gap between promises and expectations," says Jeon. When a customer has realistic expectations regarding the implementation and the amount of time it will take to deploy (and make the inevitable iterations) it is much more likely the project will be regarded as a success.
As customers demand greater value from enterprise data and are increasingly pessimistic about CRM results, there is increased pressure on VARs to deliver ROI on a solution. Successful VARs may find that integration with other solutions is the way to deliver that payback. "The dirty little secret of CRM is that customer information is rarely in the customer service system," comments Chris Martins, CRM and customer service research director for the Aberdeen Group. "Everything about customer history has to be available in a successful CRM deployment, and you can't provide that without tight integration."