IT executives take a more modular approach to CRM software

Can software be both a suite and highly modular? CIOs from a number of industries are saying yes, at least when the software is intended for customer relationship management (CRM) applications.

CRM was supposed to be one of the major pillars in Web-based networking and e-business, alongside enterprise resource planning (ERP) and supply chain management (SCM) suites. But even within its own cosmos, CRM was to be the glue between sales force automation, marketing, ordering, inventory, and customer care, providing visibility from the front end to the back end.

"One of the biggest problems was that the CRM industry advertised it as a magic pill and a lot of people believed that,” said Jim Prevo, vice president and CIO of Green Mountain Coffee Roasters Inc., Waterbury, VT. The company’s grand design for a large suite of CRM capabilities with extensive hooks to other e-business functions has been scaled back substantially. And cost was not the primary reason.

“We could have gone more broadly, but then it becomes a change management problem. People are more successful when they focus on a smaller number of things and get them up and running,” Prevo explained. “When you spread yourself too thin, you tend to pay the penalty of lost time.”

Cost and complexity are the two most prominent reasons a more modular CRM approach has taken hold with IT executives. But newer CRM products have been redesigned so that data models are identical within the suite of capabilities and to other packages such as ERP or SCM. Theoretically, this should make integration a lot easier and encourage the use of best-of-breed products for specific pain points within an organization.

In addition to more homogenous data models, the “Rent An App” option has taken hold with outsourced CRM. Application service providers such as Salesforce.com and RealMarket are finding a receptive customer base, and a stagnant economy may attract even more. According to a recent survey from the Aberdeen Group, 24 percent were already using some form of hosted CRM, while more than 50 percent of IT executives and staff said they’d consider it.

CRM vendors and service providers have had to be more resourceful as IT spending across the board has declined. While the U.S. market for CRM hardware, software, and services was growing annually at more than 30 percent in the late 90s, the $15 billion market is now creeping along at about 3 percent, according to Denis Pombriant, vice president of CRM research at Aberdeen.

Nice, but not necessary
Part of CRM’s flattening is the growing recognition among enterprises that it’s nice to have but not essential. CRM is secondary to something like ERP and its financial and accounting packages, or SCM and its hooks into daily operations that are strategic in nature—inventory, purchasing, and order flow, among others.

“CRM would replace things that are already in place and work well enough. It would make us a better organization, but it’s not totally critical to our business operations,” said Robert Moon, CIO of ViewSonic Corp. While CRM might make it easier to consolidate many of marketing’s databases, that alone isn’t a powerful enough ROI to proceed with implementation, Moon added.

Contrast that with the accounting package the company got with its Oracle11 ERP suite. “We used to be two months behind on closing the books, and now we can do it in three days,” Moon said. That’s an attention grabber for any enterprise’s executive officers. “The ROI isn’t as clean and clear on front-office applications as it was for the back office.”

ViewSonic is using Oracle’s CRM package but only for its online store, where it sells accessories and overstock. “That didn’t require a large investment, maybe $100,000, but we did $600,000 in online sales last month,” Moon said, adding that the goal is to boost that to $1 million per month. Not bad for a $100K bet.

More revenue, less overhead
Pacific Coast Feather Co. in Seattle implemented CRM for a similar reason: It wanted to tap a new revenue base without additional overhead to support it. For Pacific, that challenge was magnified since the customers it was targeting were small and medium-size businesses, many of which still use fax and phone orders, a costly way for Pacific to operate, according to CIO Gwen Babcock. The company needed a package for Web-based self-servicing for this new customer base.

“As we looked at possibilities for what software was required, there were many aspects of CRM applications that we didn’t need: marketing campaign management, mobile sales force management, customer profiles, and targeting. Even the call center was not part of the phased approach for us here,” Babcock explained.