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The World is Changing — Are You Changing Enough?
Research Manager, Applications and Solutions, IDC EMEA
Research Vice President, European Industry Solutions
In a period of increasing economic uncertainty, the short-term business imperative for many organizations is to cut spending and reduce budgets. Yet customer retention and acquisition are still necessary to keep revenue flowing in an environment of increased competitive and budget pressure. How can organizations focus on both their customers and their costs? Customer relationship management (CRM) technologies provide a compelling, proven approach to improving customer acquisition and retention. Yet in many companies, there is a disconnection between the business imperative of CRM and IT initiatives to support it. In order to survive in these in tough times, it is time for organizations to evaluate how cloud-based CRM can help adapt to the new “business as usual” without incurring the risk and cost of traditional CRM software.
Responses to the Question, “Which of the Following Business Initiatives Are Leading Your Company Business Strategy Agenda?”
Sales productivity/performance improvement Customer care/service enhancement IT organization responsiveness and efficiency improvement Product or services innovation/development Efficient sourcing and procurement 1 2 3 4
Adjusting to the new “Business as Usual”
We know that these are tough economic times, and no companies are exempt. In the U.K., the CBI’s latest quarterly small and medium-sized enterprise (SME) trends show a drop in employment, contracting orders, and overall sentiment falling at its fastest rate since October 2001. Business conditions are similar in other European countries. While the economic predictions are still uncertain, organizations must adapt to this new environment until late 2010 or beyond. But what does this new “business as usual” look like? In the current environment, companies face increased competition in both customer acquisition and retention. IDC survey results show that only 27.4% of SMEs with 50–300 employees are anticipating an increase in their sales, while only a year ago, 57.2% of SMEs were anticipating an increase. In response to the shortage of customers in the market, the top business priorities for companies in this segment are improving sales productivity/performance and customer service/care, as shown in Figure 1. Interestingly, the third priority is focused on improving IT responsiveness. Clearly, organizations recognize the role that IT has in enabling them to respond to change. If ever there was a call-for-action for IT to help, now is the time.
(n = 250, business size 50–300 employees) Source: IDC 2009
The CRM Imperative for SMEs
From the first two priorities, we can conclude that that there is a significant opportunity for CRM technology to play a strong role in modernizing and improving sales and support operations in SMEs. The third priority, improving IT responsiveness, also appears to be served by effective application of CRM technology. Moreover, the effective use of technology can be very cost-effective in this area, reducing costs while improving performance. We conclude that IT should play a major role in shaping technology to support CRM initiatives in SMEs.
However, alarmingly, IDC found that CRM was the seventh IT priority, behind security, business process management (BPM), enterprise resource planning (ERP), and other initiatives. Why should this be? Figure 2 shows the responses to the question, “Why is your organization currently not using or not considering a CRM solution?” FIGURE 2
Responses to the Question, “Why is Your Organization Currently Not Using or Not Considering a CRM Solution?”
Not part of organization's strategy/business model Project doesn't demonstrate strong ROI Not gaining executive management support or organization buy-in Lack of technical expertise/skilled personnel in-house
The differences between cloud-based and on-premise software begin at the very start of the buying process. Because software does not have to be loaded onto the customers’ servers and the clients typically run in browser windows, prospective buyers can try the full system before they buy at the very start of their buying process. There are significant benefits to this. A wide range of users can try out the system, and this use of the real system can educate users. Also, it can significantly reduce the requests for changes to the software (via configuration). However, perhaps the most important benefit is that it significantly reduces the risks involved in purchasing, as the buying company is buying a known set of services not a promised set of specifications. Cloud computing has another important advantage, it reduces much of the need for upfront spending on applications software licenses, infrastructure software, and the servers needed to run the system. Instead, customers pay a monthly subscription fee that is a fraction of the license fee on competing on-premise products. Another key benefit is that implementation time is generally very quick — subject to the amount of data that has to be uploaded and the amount of configuration users choose to do. It is also a great leveler — small and midsized companies can get the same capabilities as the large companies at a price per user that they can afford. Also their users can get the same capabilities wherever they are located as long as they have an Internet connection or a reasonably capable mobile device.
Lack of project funding/high cost Not enough scale in sales activity to justify project Lack or insufficient acceptance in the customer base 0 5 10 15 20 25 30 35 40 45 (%)
(n = 240, size of business 50–300 employees) Source: IDC, 2008
Clearly, the perception is that CRM has no role in business, is expensive to purchase and implement, and is complex to deploy, and as a result, has a poor ROI. This perception of CRM is driven by companies’ early experience during the initial growth of CRM in the 1990s. The failures of big-bang, large-scale CRM deployments and complex IT projects have been well documented, analyzed, and understood. As a result, CRM is now far more effective at enabling organizations of all sizes to improve the performance of their marketing, sales, and customer service functions by providing tools, automation, and centralized access to customer information across the business.
Yet, many SMEs feel uncomfortable with having their data and processes running on someone else’s system, particularly in the midsized sector. Companies need to trust that their data will be safe in the cloud. Leading cloud providers have invested heavily in secure systems and processes to manage confidential data. In addition, vendors can achieve independent certification against ISO 27001 and SAS 70 Type II standards to ensure they comply with information security best practices.
IDC believes that small and medium companies need to think seriously about whether they are doing enough to keep their customer relationships going through the crisis, while at same time increasing efficiency and reducing costs. For some, introducing or upgrading their CRM systems will be a necessity. The good news is that software as a service makes this far more manageable and affordable, even in the current economic situation. To quote from Charles Darwin, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” In practical terms, it will be the businesses that continue to innovate that will survive and potentially thrive in and beyond the economic downturn. Having the right CRM capabilities can not only help retain customers and maintain sales in the downturn, but also inform and enable innovation while helping companies do more with less. It is therefore our view that small and midsized organizations seeking improvements in the way they manage customer relationships for profit are well advised to evaluate cloud-based CRM as a potential solution to these requirements.
It’s Time to Re-Evaluate how CRM can Help you — In the Cloud
In our view, cloud computing is well suited to SMEs, as it typically reduces overall costs while delivering high levels of usability and functionality. With cloud-based CRM applications, CRM capabilities are accessed over the Internet, in the same way that you access Google or Amazon.com. This addresses many of the issues that have dogged CRM in the past.
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