In 1998, Government Computer Sales (GCSI), a Washington-based technology reseller to state and local governments, stopped looking for new customers.
Instead, it embraced the well-known business wisdom that it is easier and less expensive to sell to existing customers than to acquire new ones. The company froze the number of state governments it had contracts with and started concentrating on better serving its customer base. As a result, unit shipment sales rose by 22 per cent that year and marketing expenditures dropped by almost half.
If making more money is that simple, why didn't GCSI adopt this business strategy sooner? Because it needed better intelligence about who its customers were, who were the best ones and what kind of relationships those customers had with the company. GCSI got that information by installing a customer relationship management (CRM) system from Pivotal in Vancouver, British Columbia. According to Bob Quick, director of information technology at GCSI, Pivotal's Relationship software showed one crucial fact: Twenty per cent of GCSI's customers accounted for 60 per cent of its revenues.
CRM software, also called enterprise resource management (ERM) software or customer interaction software (CIS), is designed to uncover exactly this type of information. IT departments can aggregate and automate front-office tasks-such as sales, marketing and customer support-and create a unified data store in the same way that enterprise resource planning (ERP) software has allowed them to collect and codify the data and processes associated with back-office functions such as accounting, inventory and human resources. With one window to customer information, a CRM-enabled organisation can provide better customer service by giving every employee the complete history of a customer's needs, problems and purchases; target potential sales by identifying the most lucrative customers and designing products for them; reduce internal costs associated with redundant data stores and mistakes caused by misplaced or incorrect data; and highlight suboptimal processes.
Although these sound like pie-in the-sky claims, companies are reaping benefits from CRM. But bringing CRM software into your company isn't always easy.
Selecting the right package can be confusing; the field ranges from super-easy, Web-based data mining tools to extensions of ERP applications. Integrating it can be expensive. In fact, some companies have spent more than $1 million to customise and integrate CRM software with their existing infrastructures. And few can report hard numbers for return on investment.
In part, the slow march of CRM through front-office departments is due to the software's fractured ancestry. Several technology trends are converging to create the CRM marketplace. From one direction, vendors that built their businesses by automating the traditional sales, service and marketing business processes-companies such as Siebel Systems , The Vantive , Remedy , Clarify , Saratoga Systems and SalesLogix -are adding to their existing applications in order to build an integrated suite of products designed to manage the whole customer life cycle.
These established vendors are running headlong into the Young Turks of CRM, who launched companies based on the premise that the Web will be the primary sales channel of the future. These Web-centric CRM developers include Firstwave Technologies , Pivotal, Onyx Software and Epiphany, all of which have designed solutions that, from the start, cover most front-office sales, marketing, support and e-commerce activities. With their products built for browsers, they often have a jump on their more established competitors, which must retrofit their software for the Web. At Information Spectrum of Annandale, Va., Director of Web Services Bob Nicholson, a Department of Defence contractor who installed a Firstwave system in January 1999, investigated several sales management packages before he settled on Firstwave. Each of those products had a browser-based module, he explains, but it wasn't typically comparable to those that were Web-centric. On the other hand, the newcomers don't have the advantage of an installed customer base, which is why they tend to target midmarket customers.
Creeping up on both the expanding sales-force automation (SFA) vendors and the rising Web-based CRM companies are the ERP vendors, which are looking to give the front office the same automation and integration features they gave the back office. Their strategy often centres around acquisitions; for example, Baan bought customer service vendor Aurum Software. What these vendors can offer is integration with their ERP offerings, although that may take a while, according to Chris Martins, a senior analyst at Boston-based consultancy Aberdeen Group "The more established solutions have significant investments in back-end technologies that have to be integrated," he says.
All these players are jockeying for a slice of an especially desirable pie, since CRM is the buzzword du jour, with an attractive compound annual growth rate of 41 per cent between 1997 and 2001, according to Aberdeen Group. A 1998 market forecast by Aberdeen expects software license revenues for CRM to hit $4.45 billion in 2001. Martins says CRM is growing faster than the ERP market, and Siebel Systems President Tom Siebel boasts that enterprise relationship management (his term) sales will surpass ERP sales by 2002.
The smooth adoption of CRM is also being impeded by technical problems of integrating the software with an existing infrastructure. For every green-field company that is willing start from scratch and adapt its organisation and processes to the software such as Information Spectrum-which used to track its bids on government contracts using Excel and created reports in PowerPoint-there is an opposite, such as Ontario Store Fixtures of Toronto, which manufactures high-end retail display systems.
Two years ago, Michael Johnson, a senior applications specialist with Ontario Store Fixtures, bought Pivotal's Relationship software to help the sales force, and the software was just what the company needed. It put the right information in the right place at the right time, according to Johnson, and had enough business value to stand alone.
Today, however, Johnson has an integration headache. Data islands are out. He wants to build a platform-independent, single-window interface into Relationship, into the company's ERP installation (JD Edwards' OneWorld) and also into Outlook messaging. "We want to standardise on as few systems as possible," he explains, "but these systems must interoperate." His strategy is to build a middle tier based on software components that handles the information exchange among these applications. That has meant a hefty load of in-house development and a decision to trim down his ambitions in order to put the project into production within six months. If need be, he's willing to eliminate Relationship from his environment if he can't get it to interact with his three-tier architecture.
Johnson's dicey position doesn't surprise Robert Mirani, director of CRM strategies at Yankee Group, a high-tech consultancy in Boston. "What we're seeing in the integration space is that the implementations are usually very huge, budget-breaking projects that fail halfway through or achieve only 50 per cent [success rates]," he says, or they're vanilla projects that don't provide enough value.
Genicom, which does computer and network installation, services business and designs, and distributes computer printers, used EDS as its systems integrator when the company successfully built a Vantive-based CRM system. Genicom had a tough integration problem: The company not only needed to tap into a planned Oracle database but also had to link directly to the business partners for which it provides printer repair and maintenance services, such as NASDAQ, as well as to its field engineers at customer sites. One of the many goals was to get an electronic notification of a live trouble ticket, generate a report for the repair person that included all the relevant information about the applicable service policy and service process, and send the report to the appropriate remote field office. An off-the-shelf solution was not going to work.
Even though CIO Bill Carney expected to do some work to tie the Vantive and Oracle systems, he was surprised to learn how much. "The two companies said they worked together seamlessly," he says, "and the points where they worked together were seamless, but there weren't enough points." The company spent six months and more than $1 million to customise Vantive to fit its services model and to integrate with Oracle.
For Carney, the effort and expense was worth it, and he has the numbers to prove it. It takes 20 minutes less to answer a service call than it did prior to integrating the system; inventory accuracy is up by 20 to 25 per cent; and billing is now handled by computers, with a 15 per cent improvement in accuracy, resulting in fewer disputes and faster payments.
Other CIOs aren't as definite about the ROI for their projects. Ontario Store Fixtures' Johnson reports only soft benefits so far-a sense that internal costs are down, sales have increased and customers are happier. At the moment, that's enough. What's driving him to adopt CRM is not the bottom line; his motivation is to give everyone in his company the information necessary to serve the customer. "It's about making the customer everybody's business," he says.
Eventually, he may be able to quantify his ROI, like GCSI in Washington. For a 22 per cent increase in unit shipment sales and an attendant decline in costs, many companies would be willing to put up with the challenges of CRM: the jumble of vendors, difficult integration projects and hard-to-measure ROI.
The Notary in the Machine
How to make sure your sensitive records are date- and time-stampedThe paradox of computer access can drive a CIO to drink. Half the time you're making sure that employees have access to company records, and the other half of the time you're making sure they can't touch them. And as more intellectual property goes digital-software, music, blueprints, chemical formulae-it becomes ever more important that your records are secure and tamper-proof so that you can prove, should the need arise, that a concept was stamped as yours at a particular point in time.
Surety.com believes this kind of security is best handled by a third party, especially given the fact that most tampering comes from within a company.
"People need to rely on something to substantiate transactions," says Rone Lewis, Surety's vice president of business development. "Anybody can tamper with a digital record." The company has upgraded its Digital Notary Service (DNS) to version 3.0, with an eye toward making it more reliable over the Internet.
Here's how the service works: Users download Surety's client software at no charge from its Web site (www.surety.com) and drop the document they want to notarise into a repository window (users can also get an API for integration into applications). The DNS software creates what the company calls a "fingerprint" of the document that is transmitted back to Surety, where it is logged and stored. Surety stresses that the actual contents of the document never leave the user's company.
The cryptography of the system is handled by a hashing algorithm (hashing is a mathematical process of analysing the bits in a digital file and producing a value that is unique to those bits); the hash value goes to Surety, which returns a record for the document listing the date and name of notarisation and a cryptographic road map that will enable users to reconnect to a registry at Surety so that they can validate the information in the future. As a way to safeguard against collusion, Surety publishes the hash value in the classifieds section of The New York Times each week under Public and Commercial Notices.
The new version compensates for the uncertainty of the Internet by breaking down the notarisation and validation process into small discrete components in order to eliminate single points of failure. Depending on volume, the cost ranges from 13 cents to $1 per transaction.
Surety believes its DNS system is needed wherever intellectual property is involved. You can even use it to snap a graphic image of a Web site so that you can prove subsequently that something was once there even if it's now gone. As Surety's Lewis says, when it comes to lawsuits, "He who has the best proof wins."
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