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Minnesota Technology Magazine - Winter 2007

Long-Term Relationship

Once regarded as a fancy electronic Rolodex, CRM software has made some big strides of late. Can it help you turbocharge your marketing efforts?

BY PHIL BOLSTA
Phil Bolsta is a Blaine-based freelance writer.

Shari Brandt, Magenic Inc.

Customer relationship management (CRM) is growing up. Where they were once viewed as little more than electronic versions of a Rolodex, CRM systems are increasingly being used in a more integrated fashion. “People shouldn’t think of CRM as simply a technology, but as a corporate-level strategy focusing on creating and maintaining relationships with customers,” says Shari Brandt, national director of marketing and alliances for Magenic, a Minneapolis-based software application development firm.

Indeed, the value of a CRM system goes far beyond the tracking of customer-related interactions. “Smart companies are now creating integrated end-to-end systems that encompass marketing, sales, and customer service,” Brandt says. “The system should track all aspects of sales, identify factors important to clients, provide customer support, and handle customer inquiries and complaints.”

While the major market research firms might not agree on the total size of the CRM sector, they all agree that it’s continuing to grow. With CRM becoming so prevalent, it’s also crucial to identify where the “source of truth” resides regarding customer, product, and sales information. Non-CRM organizational systems may also contain this type of data, and business leaders need to be confident that their business decisions are based on accurate information. Consultants such as Magenic work with clients to ensure that their CRM and back-end systems are integrated accurately and efficiently.

Brandt identifies three fundamental components of CRM:

1. Operational

Automating sales, service, and marketing processes helps companies manage their clients. Many call centers, for instance, use CRM software to retrieve information when a customer calls in. “Creating a customer-centric feeling as you are dealing with a client is what will bring the customer back to you for future business,” Brandt says.

2. Analytic

Analyzing customer data and behavior can reveal opportunities for cross-selling and up-selling, determine customer satisfaction and retention rates, help with financial forecasts, and lead to more targeted marketing campaigns.

3. Collaborative

Automated CRM processes are frequently used to generate automatic personalized marketing based on stored customer information. That includes the sending of automated e-mails and automated letters to customers.

Why is CRM evolving so rapidly? Better technology and lower costs. “The analysis piece of CRM was lagging behind because the collected data was locked in companies’ systems,” Brandt explains. “With today’s business intelligence tools, end users can now access data that was formerly only available to their IT staffs. Also, as more people move their CRM systems from a mainframe to a Windows platform, it’s become less expensive to do all these extra things.”

MANAGING COMPLEXITY

Indeed, today’s CRM systems can handle layers of complexity that were unthinkable not too long ago. Case in point: Compellent, an Eden Prairie-based provider of modular data storage solutions, was faced with a challenge before opening its doors in 2004. With no direct sales force, the company planned to sell its products exclusively through business partners. Company leaders knew they needed to have the right business systems in place to manage the complexity of selling and servicing worldwide through channel partners.

Enter Axonom, a Bloomington-based CRM provider to high-tech manufacturers and distributors. Axonom worked closely with Compellent to design an integrated CRM and ERP (enterprise resource planning) system. “From day one, we were able to use Axonom’s solution to proactively anticipate and forecast demand, and to effectively manage opportunities that led to rapidly increasing sales volume and industryleading customer satisfaction ratings,” says Michael Beach, Compellent’s vice president of sales operations.

A primary focus of Axonom’s CRM solution was online quoting and ordering. “The whole quote, order, and build process is quite complex, and then you throw in the added complexity of relying exclusively on channel partners for both sales and service,” says Mike Belongie, Axonom’s vice president of sales and marketing.

Let’s say a channel partner in Taipei wants to build a quote at 3 a.m. Minnesota time. Rather than staff a sales call center 24-7, Compellent drives down costs and increases customer service by providing sophisticated online tools. All the business partner needs is a browser. Axonom’s online product configurator coaches channel partners through the entire process. Built-in rules eliminate the possibility of placing an inaccurate order. “If a customer chooses a particular chassis, the system responds by listing the 16 components that must accompany it,” Belongie says. “The user literally cannot make a mistake.”

Axonom’s solution generated a significant ROI for Compellent right out of the gate. “First of all, no mistakes means no misquotes,” Belongie says. “That also translates into greater forecasting accuracy. In fact, Compellent has 95 percent forecasting accuracy to the manufacturing floor. And built-in incentives reward lead registration with better pricing.”

Lead management is a huge payback area. “The automation of leads, both incoming from the channel partner and outgoing to the channel partner, is something that companies historically have had trouble automating,” Belongie says. “That lead has to be tied to both the channel partner and to the end prospect. If companies don’t have systems like this, they can’t connect the dots between what the channel partner does with the leads. With our system, every time the channel partner interacts with the lead, both the channel partner and Compellent have visibility into that.”

Axonom’s flexible CRM software architecture enables its customers to rapidly respond to change. “If Compellent learns over the weekend that a competitor has dropped its price on a particular hardware component, Compellent can alter the internal product configurator quoting engine to make changes on the fly to counteract market forces,” Belongie says. “Those changes are then easily and universally adapted in real time by all of its channel partners.”

After three years, Axonom’s CRM solution continues to generate huge dividends for Compellent. “We’ve realized all the benefits while simplifying our business model and reducing our costs,” Beach says. “We also have been able to leverage this system to reduce complexity and cost for our valued business partners. While you might assume that we need an army of IT professionals to deliver and maintain this system and toolsets, our business applications staff is actually very small comparatively; but despite their small number, the value that they deliver to our channel and to our corporation is disproportionately large. Stated simply, this solution has been a home run for our corporation and our partners, and the ROI continues to increase as we grow.”

CRM TRENDS

In a sense, CRM software is like ice cream on a hot day—market share for the most basic options is rapidly melting away. “Companies don’t want a vanilla application,” says Axonom’s Belongie. “Generic CRM is dead. Customers want solutions with built-in functionality for specific business processes.”

Trend #1: Providers have been answering that demand by building specialized packaged solutions that deliver functionality beyond the three basics of CRM—sales, marketing, and customer service. For example, Belongie notes that Axonom’s Powertrak application, which integrates with Microsoft Dynamics CRM, the industry giant’s flagship CRM product, typically solves 60 to 90 percent of a customer’s CRM needs. Embedded tools allow the customer to tailor Powertrak—with optional assistance from Axonom or a third party—until all remaining customer-related requirements are fulfilled.

Trend #2: As the market has evolved and matured, so has on-demand CRM, also known as Software as a Service (SaaS). In this software-delivery model, the software company provides its customers with maintenance, daily technical operation, and support.

One clear leader in the on-demand CRM space is Salesforce.com which was dismissed as a niche player when it was launched in 1999 by a former Oracle executive. Today, more than 550,000 subscribers at more than 27,000 companies worldwide partner with Salesforce.com to manage their sales, marketing, and customer service needs.

Eric Scheel, Reside Inc.

The allure of SaaS is as simple. “There’s no software to install,” explains Eric Scheel, a senior system architect at Reside, a Minneapolis-based provider of Web strategy and on-demand CRM and support. “The application is entirely delivered by Web browser. All the major players like Siebel and Microsoft are now moving into the SaaS space.”

Salesforce.com offers some compelling advantages. First, because everyone on the planet is running the same version, it’s scalable whether the client has a small team of five users or a worldwide team of 15,000. Second, the system is customizable and configurable. Users can set their preferences so that when they log in, they see their data configured precisely to their specifications.

Third, the SaaS model can be implemented with little or no involvement from a company’s IT staff. Traditionally, whenever a CRM provider released an upgrade, it would ship CDs to its customers and expect them to install the new software. “All of that goes away with the new on-demand model because all you do is log onto a Web site,” says Scheel, whose company offers CRM solutions using the Salesforce.com platform. “When Salesforce.com releases a new version, everyone gets all the new features available to them immediately.”

Trend #3: “In the last year, we’ve been seeing many customers begin to use CRM as a platform,” says Brian McMurray, vice president of sales and marketing for InterDyn Business Microvar, a Minneapolis accounting and CRM software services and solutions provider that represents the Microsoft Dynamics CRM product. “What I mean by that is leveraging a packaged CRM product by customizing it to address all the unique requirements of the organization. Microsoft Dynamics CRM and Salesforce.com are both moving in that direction by giving more capabilities back to the customer, who can then add on to the application to fully satisfy their specific needs.”

Scheel can vouch for that. “Salesforce.com and other ondemand CRM providers understand that they won’t be experts in every type of system that can be built,” he says. “They’ve built a few killer apps but now have turned their systems into platforms, which allows customers to write applications that exist on Salesforce.com’s servers. The customer can then offer that application to other companies for a subscription fee. Essentially, you’re leveraging Salesforce.com to create your own revenue stream.”

Trend #4: Another recent development in the on-demand CRM space: “mash-ups,” which are an integration of Webbased services. “For example, if a sales manager has a bunch of leads to call, he can use a mash-up that combines Salesforce.com and Google maps,” Scheel explains. “He logs into Salesforce.com and clicks on a tab that reads ‘Map All My Leads.’ That will generate little dots on a map so he can see where his leads are. Tying a public service into the data in his CRM system enables him to be more productive without having to buy an additional mapping service.”

Of course, a killer app can’t add value if potential customers can’t find it. That’s why Salesforce.com created a directory of more than 400 applications called AppExchange. Once you or your consultant develops an application, simply post it on AppExchange. Other Salesforce.com users can install it into their systems and begin using it immediately.

A BRIGHT FUTURE

The future of CRM grows brighter by the day. How much brighter is open to debate, however. AMR Research, a Bostonbased advisory firm focused on supply chain, enterprise applications, and infrastructure, predicts that the CRM market will grow from $8.4 billion in 2006 to $18 billion by 2010.

That estimate includes all customer management applications, not just the traditional trio of sales, marketing, and customer service. But two months after AMR Research published its study, Forrester Research, a Cambridge, Mass.-based technology and market research company, released its own, less-optimistic report, which forecasts a $10.9 billion market by 2010. How the market grows will be determined by how well the promise of CRM seeps into the corporate consciousness. Gartner, a Stamford, Conn., research firm, claims that as many as 85 percent of businesses don’t see how CRM creates value in their customer bases. As that number dwindles and CRM awareness approaches critical mass, you can expect even more exciting advances in CRM technology and services.