Preview: Worldwide demand for CRM applications

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Worldwide demand for CRM applications
Organizations are increasingly thinking in terms of IT systems that are linked right across an enterprise –
and beyond. From the flashy web page advertising the latest range of products, through order processing,
customer accounting and after-sales support, to raw material purchasing, businesses need integrated IT
systems as never before.
The scramble to cope with the demands of electronic commerce (e-commerce) is one of the main driving
forces. In the emerging world of e-commerce, businesses must be able to present a consistent image both to
their customers and to their business partners. Inevitably, this means that IT applications must be accessible
– either to users who want to use them directly or to other applications that need to invoke business
processes.
Installation of a customer relationship management (CRM) system is central to most organizations’ plans
for electronic commerce. Industry forecasters are agreed that the markets for CRM software and services
will grow rapidly in the next few years. US researcher AMR Research, for example, predicts a worldwide
market for CRM of $16.8 bn by 2003 – up from $3.7 bn last year and representing a compound annual
growth rate of 49 per cent.
Frost and Sullivan is less bullish but still puts worldwide annual growth at 30 per cent now, rising to 43 per
cent by 2005.
The market in Europe is especially buoyant. Researcher International Data Corporation (IDC) says that
from 1997 to 1998 the European market for CRM grew by 47 per cent and expects this trend to continue
through 2003. It says that front-end applications – such as sales, marketing and customer support – and help
desk applications are the fastest-growing segment in the applications market.
IDC expects further integration of front and back-office applications to increase demand for CRM products
even more. Bill Crothers, managing partner for CRM systems in the EMEA (Europe, Middle East and
Africa) region at Andersen Consulting, says the stunning growth figures are the result of a marked change
in business strategy: ‘A survey we conducted last year with the Economist Intelligence Unit found that
there is a shift in business strategy from cost-saving management to growing the top line. With e-commerce
you need insight into what your customers are doing and what they want.’
He goes on to say that often the IT systems needed to gain this insight already exist. But they must be
brought together: ‘You need to draw together the different strands that give you insight into the customer –
data warehousing and data mining, for example – and feed those back to customer support in the call
centre.’
CRM demands close integration of a wide range of applications. Indeed, the scope of CRM starts to blur
the traditional distinction between ‘back office’ applications such as production control, distribution and
accounting and ‘front office’ applications such as order processing, sales force automation and call centre
support.
The CRM products currently on the market fall into three categories – customer support (call centre),
marketing automation and sales automation. They all require links to applications such as order processing
and data stores such as product and customer databases. They also need links to the web.
Two clear ‘integration’ strategies have emerged. Businesses can use one of the many so-called
‘middleware’ solutions – IBM’s MQSeries or Microsoft’s DCOM, for example – and tie their existing
applications together.
Alternatively, they can buy in one of the growing number of integrated packages – many of which have
emerged from the enterprise resource planning (ERP) market that grew so rapidly at the end of the 1990s.



Leading suppliers such as SAP, PeopleSoft and Baan have all planted a flag in the CRM market with
extensions to their existing ERP packages.
Smaller ERP software suppliers have opted to offer links to market-leading CRM products such as Siebel
and Oracle. In both cases, the creation of a seamless technology environment that can provide effective
customer support is likely to be costly and time consuming – but businesses will have to bite the bullet and
make their choice soon.
Technology is not the only area where integration is important, however. Mr Crothers from Andersen
Consulting sees technology as only one of many changes that companies need to make to cope with the
new business environment. He says: ‘The technology is not really the challenge. Much more difficult is
bringing the business processes together. You have to break down the barriers between the “silos”. You
have to get sales and marketing working with customer support. The real challenge is to get these people to
work together to meet the same objectives.’
Businesses worldwide will have to face this challenge in the next two years, or find themselves isolated.
There are undoubted benefits that will come from meeting the challenge successfully.
According to a survey of the CRM market, published in January 2000 by Granville Equity Research, there
is every reason, despite the cost, to rate CRM as bringing a massive return on investment. It cites examples
of Novell increasing quarterly revenues by $20–$30 m and Boeing cutting help desk costs by 20 per cent.
The survey also notes, however, that the failure of CRM projects is high – between 55 and 75 per cent –
and the cost can be daunting. An unnamed bank is reported to have spent $100 m on CRM software with no
result.
Source: Philip Manchester, Financial Times, 2 February 2000. © Financial Times.

Questions
1. Why is ‘installation of a CRM system central to most organizations’ plans for electronic
commerce’?
2. Summarise the different types of CRM applications that are being developed in the
e-business and different approaches for introducing these types of applications.
3. The article is very positive about CRM applications. What can you identify as weaknesses of
the CRM approach from the article or your own experience?
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