Selling CRM In An Uncertain Economy
End users may be scaling back when it comes to the scope of CRM (customer relationship management) implementations, but VARs can still realize significant revenue from integration, training, and consultation.
Many early adopters of CRM (customer relationship management) bought into the initial hype surrounding expensive, enterprise-wide implementations and were disappointed with the results. The backlash has affected resellers as news of these spectacular failures gave the technology a black eye, and the soft economy has IT buyers minimizing their risks. "The problem with selling CRM in this economic climate is twofold," says Richard Smith, VP of delivery for CRM consultant and integrator Green Beacon Solutions (Watertown, MA). "Nobody has a budget right now, and the decision makers are afraid of being fired for bad decisions, so they aren't taking any big risks. As a result, end users are looking at strategic buys that solve a specific problem."
When these point solutions deliver results, end users are opting to expand the project to include other areas. According to a December 2002 report from Sage Research, end users prefer a phased approach to CRM. Many of the earlier failures resulted from a push to take on everything at once, forcing corporate culture to change too quickly. "IT spending in corporations is focusing on fixing problems," notes Dan Wiley, VP of partner sales at SAP America, Inc. (Newtown Square, PA). "Customers are looking for a very specific solution to address a very specific need. However, there is a long-term view for an integrated solution. As these point solutions continue to grow, customers are looking for a fully integrated suite that links the entire enterprise." Fortunately, this is an environment in which VARs and integrators thrive. Their business model is already based on relationships and incremental sales, and they provide integration and vertical expertise to combine legacy systems and new applications. VARs can also drive end users' ROI through consultation expertise and other services.
Provide Custom Results At Reasonable Prices
"We're finding that most of our customers have had CRM in place for three to five years," reports Smith. "They are looking for options to improve what they have in ways that will drive revenue." Smith says common requests include integrating postal databases and bulk mail, designing solutions to track customer preferences better, or automating data quality. Successful CRM VARs have to understand current CRM applications, how to link them to legacy systems, and how the business processes work. In many cases, this may include technologies and processes generally considered outside the range of CRM.
Wiley cites the example of opportunity management, a solution for which his company has seen growing demand. "Opportunity management is more than just responding to a sales lead," he says. "It allows users to see into manufacturing and distribution constraints in addition to monitoring the sales cycle. To respond to this kind of opportunity, an integrator has to know how to connect the supply chain and back office financials. An ERP [enterprise resource planning] background is very relevant to CRM."
The most difficult aspect of meeting demand for integration may be successfully balancing end user budget constraints and a reasonable profit margin for consultation and services. Pre-built templates that can be modified, for example, allow VARs to create a solution that addresses specific customer needs or desires without excessive development resources. "Even small customers want to have the customized look and feel of their CRM application," comments Dr. Shahid Izhar, president and CEO of Princeton Information Technology Center (Glensdale, PA). "That will always require some customization of fields and pages based on specific business needs. VARs must choose a product that allows for that without programming so the technology is not a bar and doesn't increase the price."
Integration of multi-vendor CRM solutions can also add to the cost of a project. "Because the long range goal is an enterprise-wide solution, end users are opting for a common platform system that can be commonly grown," says Paul Armstrong, VP of worldwide business development and reseller channels for Aspect Communications (San Jose, CA). "There are still too many issues with standards and interfaces between products." In addition to minimizing the perceived risk on the part of the end user, resellers also benefit from single platform/product line strategies. An integrated product suite is designed to work well together, requiring less development and troubleshooting expertise. Working with a single product line also minimizes training for a reseller's technical staff. "The products keep changing faster with every generation," says Armstrong. "Switches, for example, once had an average life span of about seven years. Now it's down to one. That makes it very hard for resellers to maintain expertise with a wide array of products."
Integrators can also meet the price/performance demands of end users by implementing Web-based CRM applications. "In the past two years, the trend has been toward more Web-based CRM applications because of the widespread availability of Internet and broadband access," says Izhar. "End users are realizing the efficiency to be gained from universal access to a centralized database." Whether customers act as an ASP (application service provider) for their own base or subscribe to a hosted service, the ease of installation and management opens opportunities among SMBs (small to medium businesses). "VARs will do well to sell to SMBs because that market has been underserved," comments Izhar. "In addition, the sales cycle will be quicker in terms of decision making. SMBs have also been ignored by larger companies, and VARs may find less competition at that level."
CRM Integrators Wanted, Must Have Data Expertise
For VARs with expertise in managing data and designing workflows, this may be an excellent time to consider adding CRM to their product portfolios. "CRM integrators are currently leading with voice technologies because it's a major issue, but you have to have a road map for next generation data/voice integration," says Armstrong. "Resellers who don't offer combined voice and data will fall behind quickly. Those who do will realize substantially larger opportunities. As the economy and the market shift, they will be able to leverage both growth paths."
Building a knowledge repository is also part of many CRM initiatives. As companies strive to hold on to customers in a tough economy, they realize that accumulating and analyzing customer data is vital. "Not only do they want that knowledge all in one place, they want it at their fingertips," observes Armstrong. "The demand for access is another strong case for a Web-based solution."
"One big trend we see is real workflow built into business solutions," contends Smith. "Whether it's placing an order or qualifying a lead, users are concerned with how to manage a customer from cradle to grave and setting up a way to maintain the appropriate contact." Smith believes workflow will be a major midmarket trend over the next year and a half. To build a base in what he feels is currently an untapped market for CRM workflow, his company has built a workflow engine for integration into midmarket environments.
Ensure CRM Success By Selling Training, Consulting
One of the lessons of past CRM failures is the importance of end user training and professional consultation. "End user training is the single biggest implementation challenge," according to the Sage Research report. "Customers want training resources to be Web-based, simple to read, and customized for different roles within the company." Not only does training provide an excellent revenue stream, it also prevents end users from becoming frustrated with a solution and abandoning it outright or using it ineffectively.
In many cases, CRM initiatives can uncover ways an organization can be more effective. Whether it's a change in process or employee activities, knowledgeable VARs become invaluable resources for their customers. "Once a VAR puts in a call center, the customer starts asking about how to manage people and processes," says Armstrong. "Even in the midmarket, customers are starting to require workforce management and other consultative services."
Process re-engineering is another area where VARs can provide objective advice about how to cut costs and increase revenue. "The economy has resulted in layoffs, changeovers, and revamping of business processes," says Smith. "As a result, existing CRM practices may no longer be appropriate. A VAR can come into a customer site and re-align those practices to meet current issues."
While the days of enterprise-spanning CRM buys may be over, so are the long sales cycles and two-year, complication-fraught implementation periods. Smaller incremental sales are driving value for the end user at a price point that even meets the needs of the midmarket. "Corporations at all levels are looking for lower TCO [total cost of ownership] and increased ROI," says Wiley. "VARs need to be able to implement on time and give a time line for ROI if they are going to be able to compete today."