Front office

  • April 24, 2016
  • Zuora-Logo-Navy-largeZuora, the company that made its bones in subscription billing and payments held its annual user meeting in San Francisco last week and staked out some new turf. It had always been back office focused but its latest messaging includes elements of the front office. Perhaps it’s no surprise given co-founder and CEO Tien Tzuo’s history of having been an early luminary at Salesforce rising to the CMO position before he left.

    The new turf straddles the two worlds we’re most accustomed to dealing with, the front and back offices. This area, let’s call it the middle office, takes data from either side, changes it, and passes it onto processes that go in both directions. Among the applications that act this way are compensation management, subscription billing, customer success management, and possibly HR. But each application area does different things for different reasons.

    Compensation management

    Xactly may be the best example of a pure play comp system though certainly Callidus Cloud should be included. Sales incentive compensation used to be a pure back office thing because it tallied up sales and applied some algorithms then cut checks. But today, comp management is also about motivating people within an active quarter by identifying best opportunities and ensuring appropriate resources are applied. For this, the marketing and sales automation data is useful and derived information is fed back into SFA. That’s a long way from pure compensation.

    Subscriptions

    Of course you need to make the subscription bills accurate and get them out efficiently, but these systems throw off huge amounts of customer data concerning uptake and use which are valuable in helping to sniff out early warning signs of disaffection, churn, and attrition—all things to avoid if you are a subscription company. It is in this area that Zuora is making a bigger footprint thanks to its acquisition of analytics company FrontLeaf last year. The subscription data run through analytics can easily kick off processes that use billing, sales, and service, another front to back situation.

    Customer success

    Full blown customer success takes a page from subscriptions by capturing subscriber data and marrying it to other client data to produce compound metrics that can give managers a better understanding of how well a business is doing with the customer base. This area might see renewed competition with subscription billing vendors in the months ahead.

    HR

    Long associated with payroll and mainframe back office systems, the HR or HCM systems today are lending their data and insights to front office processes like field service and professional services automation influencing deal structure, reporting, and more.

    We could also easily add CPQ to the list too because back office catalogs, price lists, and pricing algorithms come to the service of SFA via CPQ to close better deals.

    So all of these application areas are staking out positions that are neither fully back office and certainly not fully front office either. They are opening up new territory and that is potentially very exciting because the other territories are rather full of settlers and we need somewhere else to occupy.

    I don’t know what to call it but that will come and I hope we avoid something as cliché as the middle office. This new area strikes me as another dimension. We’ve talked about systems of record for a long time and those systems belong to old school front and back office systems. But the new territory embodies more of what you’d expect from a system of engagement, a system that leverages all of the data businesses collect and actually turns it into unique and valuable IP.

    That’s what struck me about Subscribed last week. In so many words Zuora said we’ve done a pretty good job since 2007 of building a solution to the subscription billing problem. But now there are other challenges.

    Sales compensation added several important business processes once businesses were able to take their eyes off of the quarterly challenge of writing commission checks quickly and accurately. Incentive comp became all about doing the right business and boosting profits through being more intelligent actors in the market.

    I think something similar will happen with subscriptions. Now that the billing and payments issues are resolving Zuora is training its guns on pricing and packaging. Think about it, when your products are more or less electrons, innovation can easily happen around how you package and price and it can happen at much faster rates than we see in traditional product development—if you have agile systems.

    This is why the emerging middle ground is so important and why it’s one more thing to keep an eye on even if you’re not an analyst.

     

     

     

    Published: 2 years ago


    We are now through almost 15 years of the century and for all of that time I have been analyzing the CRM industry as it has evolved. This year, rather than simply reviewing some of the progress we made in the industry for the last 12 months, I think taking a broader view of the decade and a half might be more interesting. It certainly gives us a great perspective on how far we’ve come.

    CRM was already a thing at the turn of the century and it had been gathering steam throughout the 1990s. But it suffered from the same troubles that ERP was having at the time. The on-premise software was expensive and it usually cost somewhere between 2 and 3 times the license fee to get the products to work in your business. Part of the high cost of integration was that few vendors had all of the products under one roof — i.e. well integrated. You could buy SFA from one vendor but you’d need to buy call center and service products from others and subscriptions were embryonic.

    Marketing automation as we know it today didn’t exist except in the mind of a Canadian entrepreneur, Mark Organ. It was largely an accounting system designed to help manage marketing spending. It is worth noting today that marketing spending only came under control once we were able to apply analytics and capture great heaps of customer data. We got costs under control because we were able to be smarter about where we spent our resources, not because we watched the pennies.

    In this scheme there was no thought of using software to support business processes beyond being able to cover actual transactions, which is not the same. CRM grew up in a time when transaction management was all you needed so no one knew the difference. But try applying 15-year-old sales or call center software transaction management tools to today’s process oriented business world and you’ll have your clock cleaned by your customers.

    Process orientation is, to me, the greatest difference between then and now. Even though our businesses for the most part still do a middling job of process support today, the tools are much better and any company that wants to take on the challenge can bring together a suite of end-to-end processes supported by modern software.

    So why don’t we do a better job of supporting front office business processes today? I suspect it’s because we don’t know what it is. For instance, consider the customer onboarding process. I don’t think it existed 15 years ago and if it did in your company, it was completely manual. On boarding was well served in cases where there was a big need for installation and training — recall that 2x to 3x multiplier. But onboarding for smaller products was overlooked either because products were assumed to be intuitive (though many weren’t) or because a manual came with them. At any rate, because there was no such thing as a subscription as we know it now, once the sales transaction was completed a vendor simply went on to the next opportunity.

    Onboarding became a real issue when vendors noticed an avalanche of calls to the service center. With some products you could sense customer resentment, especially as third party sentiment sites and communities gained traction. Manuals went on line and FAQs proliferated and that satisfied enough people though it barely solved the problem.

    Today, vendors treat onboarding more seriously, in part because so many things are now bought as subscriptions. With subscriptions if you don’t onboard customers successfully they can easily leave you taking their revenue streams and any investment you’ve made in them out the door. So vendors chase customers today to get them involved with their products after the purchase. They have databases and procedures designed to get customers up to speed and happily involved so that frustration doesn’t rise and lead to attrition.

    That was just onboarding. How many other front office business processes need the same treatment? There are two answers to that question — a lot of them and all of them. There are a lot of business processes that the front office engages in and they all need to come under the jurisdiction of a unified system for many of the same reasons onboarding is so important.

    You might be able to automate support for a single process like onboarding through a Herculean programming effort but if you try to duplicate it for all of your front office processes you’ll go crazy and broke. It’s hard to say which happens first. Yet here we are on the eve of 2015 still talking about individual apps as if it was the eve of the new century. We have apps that will shave a few minutes off a sales rep’s day or apps that will enable a call center rep to get off one call and on to another 10 seconds faster but we still don’t get the results we want.

    Those apps make about as much sense as installing an accounting function in marketing did a long time ago. The route to better front office business processes runs through data and analytics. But the findings must be incorporated into the next customer encounter through machine learning and other nifty tools. Doing this brings us up to the present and reveals the importance of platform, the thing that incorporates all of our data, analytics, social, and mobile technologies into a powerful tool that enables our businesses to change as quickly as our markets.

    That’s the biggest difference between today and 15 years ago. Back then you could run a business based on the old mass production and mass marketing paradigms because few things changed much. Today change is constant and our ability to keep up resides not in our systems but in our platforms. What makes up our platforms and how they’re brought into business challenges is what the future of CRM is about.

    Published: 3 years ago


    If you are a regular reader, you know that from time to time I write about things that appear to be tangentially related to CRM — at best.  My favorite alternative to straight ahead research and reporting on CRM is a strange sounding thing called Peak Oil.

    For those of you not familiar with the idea, Peak Oil refers to a not so hypothetical ceiling on how much oil we can coax out of the ground daily.  Indirectly it also refers to the fact that we have not found nearly enough oil to replenish supplies we are consuming and we never will.  There’s only so much of it.  While there is undoubtedly oil left in the ground to be exploited there isn’t enough in part because global demand and consumption keeps rising.  That leaves a gap that now goes unfilled daily.

    Actually, economics like nature, hates a vacuum and the gap is filled every day by several methods.  First and most obvious is higher prices at the pump, at the supermarket, at the travel agent and just about everywhere else.  As we were all taught higher prices depress demand and higher prices reach deep into everything.  I read a while ago that it takes about seven gallons of petroleum to make a car tire.  Have you bought tires lately?  Rubber, plastics and anything made of a carbon polymer is affected by crude prices.

    The second way the vacuum is filled is through clever substitution.  The word “alternative” conjures up jury-rigged contraptions in old movies so I don’t like to use it but alternatives or substitutions can take almost any shape from walking or taking public transportation to eating local to avoid the cost of transportation built into meat and produce.

    Economists like the idea of substitutions and they can spot their use in everyday life.  For instance, if beef costs too much demand for chicken and fish might rise as people shift their demand patterns.

    Switching from meat to chicken is relatively easy assuming you have a flexible palate.  You store it in the refrigerator the same way as beef and use the same cooking and eating utensils, so it’s no big deal.  You can say that your infrastructure costs for cooking are a wash, which makes the switching easy.

    It’s not the same in business.  When it becomes expensive to travel for instance, we tend to pay higher travel prices because switching to something else requires a more serious investment in infrastructure.  But this switching cost drives so much opportunity for front office software makers, especially the cloud companies.

    Customer facing applications are the chicken and fish of business for the foreseeable future.  I’ve read reports and books on the subject that indicate the cost of a new energy efficient and alternatives based infrastructure would cost in the neighborhood of $20 trillion.  I expect we will spend that money because we don’t have many choices but it will take years.  It will be the work of a lifetime for people entering the workforce today just as technology has been mine.

    If you go to this link you’ll see credible information that Peak Oil happened in 2006, it’s already in our rearview mirrors and it’s why we’re paying high gas prices.  More significantly, the cost of energy is now the most significant determinant of economic wellbeing.  Note that while fuel prices are declining now, so is economic activity.  Energy prices hit a zenith in May, which put the brakes on.  There’s significant latency in the economy but wait till the end of the year and observe.  You won’t like what you find.  There will be lower gas prices but also lower hiring rates and the signs of an emerging downturn.

    Meanwhile, back to the alternatives idea.  Some of the most credible alternatives I’ve seen for getting carbon and energy (and their costs) out of front office business processes exist in our industry.  Whether it’s social media and analytics driven customer contact or Web conferences, VoIP or video used as a strategic marketing tool, all the solutions I know of hang off a CRM platform.

    I take briefings every day from vendors who are new to the market and from seasoned veterans.  They all have a basic blind spot when it comes to talking about their solutions.  They’re great at telling me what they have and how it works but when it comes to the practical application of their wares, most are tongue-tied.  I tell them that they need to include phrases that start with “So that you can…” as in so that you can save money while delivering on a customer need.

    In the front office we’ve moved beyond the early adopter phase for most categories, an exception might be social CRM.  Later adopters are a more conservative lot and tend to ask more often for the return on investment (ROI).  Over the last forty years we’ve automated nearly every aspect of business and usually justified the cost of automation technology through headcount reduction.  In the near future, I expect we’ll be justifying new purchases through cost avoidance related to energy.

    What’s interesting to me is that almost all of the technologies introduced in the front office in the last decade will play a role but those roles were hardly envisioned by their creators.

    Published: 7 years ago