December, 2010

Next year is a strategic opportunity

Recessions are always a good time to rebuild your competitive infrastructure and the slow growth/recession of the last couple of years has been no exception.  On the stock market, the technology sector seems to be doing quite well.  After bottoming in the middle of the summer the software companies especially seem to be rebounding.  Microsoft, Oracle, Salesforce, RightNow and NetSuite are all gainers.

But the drivers for software acquisition remain what they have always been—improving processes, saving money or making money.  Companies whose products can do one or more of these will do well.  And customers will gobble up their wares as they seek out more competitive stances in their chosen markets.  The theme to watch for is replacement as many foundational applications that were implemented for Y2K reach the end of their shelf lives.  Here are some issues to consider.

• Ten year-old ERP and CRM systems will be more than ripe for replacement.  New business processes and better economics will do the heavy lifting to prove the case for new applications.  Many of the conventional vendors like Oracle and SAP will be there as will newer entrants who’ve proven themselves over the last decade.  Watch for names like NetSuite, RightNow, Salesforce and others to command attention.
• Cloud computing.  After several years of debate about what cloud computing is or is not, customers are in a great position with lots of choices for solutions.  It doesn’t matter whether you prefer single tenant or multi-tenant solutions, the economics of running software in the cloud are so compelling that you can find a vendor that speaks your cloud dialect.  Virtually every front and back office vendor has a cloud offering or two.
• Analytics is another solution set that has been in the background for many years.  But new demands in the form of trying to make sense of the mountain of data brought in daily by our social applications makes analytics a necessary add-on.  Analytics solutions are abundant and even SAS Institute, a pioneer in enterprise analytics, has jumped into the market with cloud based solutions for social data.  It is somewhat surprising that Gartner expects only 35% penetration in customer service centers by 2013.  That looks like a great opportunity for differentiation to me.
• It will also be a year for collaboration and I think collaboration may be the first true business social application type.  Judging from the rapid adoption the Salesforce’s Chatter is receiving I anticipate the broader market will see collaboration as a business process no one can afford to ignore.
• Integration will be important in the year ahead too.  There are no so many applications and application types on the market that we can safely give up any pretense that a single vendor could deliver all of a company’s CRM needs. APIs and cloud computing make integration more important and feasible.  More vendors will discover that the winning strategy is to do whatever is possible to pre-integrate their wares with strategically important foundation CRM vendors.  It wouldn’t surprise me to see some vendors begin to organize around specific business processes or types such as channel selling.
• This also implies that many companies will be looking to extend their solution sets with strategic additions.  Any company can optimize its CRM deployment and probably gain competitive benefit by looking at its business processes and comparing their level of automation with the product sets now on the market.  Need a way to keep your sales people in the game?  Try a compensation management system.  It will give them a way to quickly understand their progress in the only way they keep score.  At the same time it will reduce the back office overhead caused by end of quarter commission calculations.
• If you have an interest in bringing out a new product but worry that a limited marketing budget could limit your success, you might first consider a variety of customer analytics that can help you determine which customers have a need, what that need is and how to approach them.
• Or perhaps you are looking to improve service and save money but worry about displacing the good but expensive handholding your service group provides with faceless automation.  Try a social service solution that engages your user community to help answer basic customer inquiries through Twitter and Facebook.  Not only will you be able to maintain a person-to-person approach but response times might decline and there’s no telling what positive fallout might happen when customers help each other.  If you’re monitoring the chatter you might discover that a core group of customers has great understanding of your product and does a super job of helping out.  The help can also turn into articles for your knowledge base.
• The last area for social penetration might be using solutions to analyze your negatives—to identify instances where customers express their displeasure with you on the Web.  It’s much better to deal with an irate customer than to let their anger fester, but first you have to find them.  Social media and analytics can help and it’s a worthy investment.  Our research shows that even the best companies have their detractors but often a vendor knows little or nothing about a problem.

My analysis

To summarize, the year ahead in CRM will be important for replacing old systems and for integrating new niche applications that sharpen your game.  The costs of these additions will be relatively low due to cloud computing and the nature of some smaller niche applications.  The recession ended in July of 2009 and while it might not feel like a recovery right now, there is ample evidence of improvement.  You can use next year strategically to improve your stance as a recovery picks up steam.  There are good products on the market and vendors are still hungry.  If you miss this opportunity, I think you’ll be saddled with your old and relatively expensive systems for longer than you might like.