We’re roughly 20 years into the CRM trend and it’s worth asking where we go from here. Grandview Research recently estimated that the market would be worth $81.9 billion by 2025 (1) and Gartner and others publish annual reports indicating the market’s vibrancy.
But you can hide a lot within a dollar amount, not for any sinister reasons but simply because we don’t know the future and product values decline over time. For instance, there is a long-term commoditization trend ongoing in CRM. Few people now recall that at its inception, CRM was just another on-premise client-server solution set running on networks of PCs or Unix devices. The price was about $2,000 per seat, plus implementation and other services—just for SFA.
Cloud computing ushered in the era of SaaS, or vice versa, which caused significant commoditization not only in CRM but more slowly in back office systems too. Commoditization means lower costs for the customer which enlarges a market but at the same time, it also means shrinking margins for vendors who constantly need to rethink how to efficiently and effectively get their products into the hands of customers.
CRM is far from alone in this, commoditization and price erosion are the economic way of the world. But CRM has also been very good at reinventing itself so as to offer new products and services. CRM has grown to encompass nearly all aspects of the vendor-customer relationship. However, even that trend will have its limits and the further out into the future we care to look the more these macro trends will figure in how that future rolls out.
Therefore, it’s vital to have a framework or a filter through which we see the world if we’re going to do justice to our predictions of what will make up that $81.9 billion or however much it turns out to be. Here are mine.
- There will be consolidation in the number of primary CRM vendors as developers align with platforms. The platform is rapidly becoming the basis for CRM because no single vendor can supply solutions in all of the proliferating CRM niches. Platforms make it far easier for customers to select best of breed solutions that integrate with core CRM functionality from one of the majors. The major CRM vendors will likely include Salesforce, Oracle, Microsoft, and SAP plus one or two others that can build credible platforms.
- The overall number of CRM vendors and solutions will likely increase. Emerging and mid-range CRM vendors are already selecting their preferred CRM partner based on platform and very importantly based on ecosystem. A primary or major CRM solution will be known as much for its technology platform as for its ecosystem and the services it provides to help smaller partners to penetrate their markets.
- A great deal of new CRM growth will come from industry CRM aimed at vertical markets like healthcare, finance, insurance, manufacturing and the like. These solutions will come from small or emerging vendors working on a major platform. This two-tier solution will enable those with specific vertical market expertise to do what they do best while avoiding the chores that generations of software vendors once had to endure and pay for. This includes buying and operating a computer room full of gear and software like operating systems, databases, and middleware.
- The CRM majors will less resemble their former selves, i.e. CRM companies, and take on the aspects of platform providers responsible for franchising operations with partners. At the same time the original CRM applications will increasingly resemble demonstration projects for others to emulate. The strong possibility exists that these platforms will spawn and support whatever the next iteration of enterprise software turns out to be.
- We are entering an era that will turn conventional IT into a public utility. Cloud computing is a necessary first step. At the same time, the issue holding back utility formation for the moment is integration. Many schemes exist for integrating disparate systems but they often produce brittle systems that fall apart. What’s needed is an equivalent of SQL for integrating systems. The solution is not a programming language like SQL but API based tools and integration facilities. API integration is another driver for reducing the number of primary CRM providers and accentuating the importance of platforms because platforms will take on the majority of integration work. With good integration facilities developers need not be as concerned about picking one platform and being frozen out of deals.
With that premise we can now ask what the CRM market will look like at the mid-point of the next decade. Here are some ideas.
- The AI and machine learning trends will top out. They won’t go away but they will reach points where their particular landscapes are blanketed. This means that chatbots, recommendation engines, next best offer facilities will begin approaching their asymptotes. In other words, progress will slow as niches get covered and the easy problems get solved. Being a competitive business at mid-decade will mean having all of these capabilities down pat as well as things we’re not discussing like communities and customer journey mapping.
- There will be two kinds of CRM user plus several types of technicians. Customers will be the primary users as AI and ML get good enough to do rote customer interactions. Scheduling appointments, arranging returns, triaging service and analyzing market trends and opportunities will all function through bots at least for the first level of response. The second type of user will be employed by the vendor. This user will come in several flavors from administrator to techie and thus will overlap with the types of technicians. CRM systems will support vendor employees’ efforts to perform one of a kind jobs and to help customer facing employees to help customers. Finally, we’re already seeing technicians in various jobs doing things that require no coding, some, or traditional code development. That will continue and likely accelerate.
- As noted above vertical market or industry-oriented CRM will continue to advance. There is a great deal of white space in CRM to be claimed and this will be where humans will add the greatest value as we continue to bring CRM to businesses that were once completely manual.
- There is a healthcare revolution beginning in which CRM will play an outsized role. Conventional healthcare solutions that deal with patients and their treatment (not insurance systems) are huge repositories that were designed to capture and deliver data to highly trained physicians for interpretation. But as healthcare responsibilities devolve and, in an effort to curb costs, people who are still highly trained but less so than doctors, will need and get assistance from systems that look a lot like CRM. Systems of engagement built on CRM platforms and layered over traditional systems of record will greatly aid in this transition and improve service.
For example, call center technology will be used by providers including HMOs and other styles of plans as well as pharmacies and tertiary providers to proactively check in with patients to, for example, ensure that people take their meds on time. This will all be in the service of a new healthcare paradigm aimed at wellness rather than recovery.
- Blockchain deserves a special call out. Its great strength is its ability to track and trace events such as the provenance and lifecycle of drugs such as opioids. Creating a blockchain for prescriptions will aid in wellness and prevention and help cut down on misuse of drugs. Blockchain and platform technology will accelerate the integration of front and back office systems to support business activities that start with raw materials and end with profits.
The next half decade is full of promise and opportunity but they will be different kinds than what greeted us at CRM’s inception. Tomorrow’s CRM will be highly specific, niche oriented and technically demanding. The key challenge today is to get current CRM into the hands of young people so that they can learn and become CRM natives. Large analyst firms are already predicting that, in addition to CRM’s forecasted revenues, the industry will influence at least a trillion dollars’ worth of business activity in that time frame. It goes without saying that you can’t use it if you don’t know it so education should be the first order of business throughout CRM.
The software platform is likely to be the new battleground in enterprise software. This is not to say that analytics and security are not important but they are being handled in different ways. Security is being handled in ways that address both hardware and software vulnerabilities but these things aren’t what customers or consumers spend their days thinking about. While everyone wants security, few know enough about it and the attitude is that security is someone else’s job. So both of these topics will be dealt with but they aren’t likely to be competitive differentiators, at least not yet.
But platforms affect more people and importantly they are key to making and saving money, topics the C-suite cares deeply about. Some of them might not know data from database but they all know profit and loss.
The software platform can be directly linked to making and saving money, which is why it is such a potent potential differentiator. We live in an era of commoditization. It’s hard to find true differentiation among competing products, which naturally leads to price wars. More than that, the pace of new product and new category introduction has declined precipitously over the last decade meaning that vendors find themselves in zero-sum competitions in which winning new business means poaching someone else’s customer.
So if there’s a lack of strategic differentiation there’s a load of tactical opportunities. Without strategic differentiation we face a market in which the first to react often wins the prize. And since so much of business is undergirded by information technology, the most adaptable technology—embodied in a platform—is the one most likely to help a vendor either make or save money. So we have the platform but where do platform wars come in.
A generation ago we faced a similar situation in which the answer was not the platform but the whole product. However, in retrospect they are the same. Whole product refers to all of the things a vendor in a mature market hangs to attract customers aside from the core product. Whole product consists of not only the core but the policies and procedures, financing and documentation and many other things.
The need for whole product was a driver of CRM’s evolution. Systems were imagined and built to capture customer feedback and to support employees striving to satisfy them. But CRM was an expensive proposition, especially in customer service, which required agents initially. It’s one reason so much energy has gone into developing indirect and self-service support.
Today’s problem is slightly different in that vendors all more or less recognize a need to alter their processes on the fly. It’s no longer enough to offer the support a vendor feels is right even in multiple channels. We must now support and service customers as they wish to be treated and that dimension is always changing. Such change happens at the platform level.
In this scenario it stands to reason that a vendor with a superior platform will be likely to succeed more or more easily in tight competition. But that’s not the end of the story. You can’t logically run a business on a platform unless your people know how to use it and that requires training—ongoing training.
All of this came into sharp relief last week as I attended the annual analyst kick-off event sponsored by Salesforce. The company has been developing its platform for a long time and just as importantly over the last 2-3 years it has brought forth an online training utility that develops platform skills in the rank and file. Giving customers a usable and powerful platform is the future in my mind. Interestingly, I don’t think the messaging has come together fully.
There’s more substance than shine to the mix, an enviable situation for any vendor. In detail there’s a fine platform and a very useful training utility in Trailhead. Also, there is an extensive list of plug and play platform based applications on the AppExchange. Think of it as the three-legged stool we’ll all need in the future.
What’s somewhat missing in most quarters is the realization and effective communication that this stuff is no longer optional, that business supported by platform fundamentals is what successful vendors will be using for the foreseeable future.
Other vendors, for instance Amazon with AWS and some others, see a different need and work to meet it. But primarily providing cloud infrastructure only addresses half of the challenge and amounts to saving money. That’s a great thing but when faced with making or saving money, 10 out of 9 (I said that right) executives who are given a choice will opt for making in money over simply saving it.
That’s why platform is so important today and why I think the decision point for many business leaders in the next year or two will be over which platform to select. It’s a choice that will have far reaching consequences because platform is foundational and not easily changed.
So welcome to platform wars. It will be a thrilling time if you are a software vendor and you have one. Other vendors, not so much.