A Wake-up Call

We
in India appear to be complacent at the thought that the imminent fall in
software development projects from the US is not going to affect our IT-related
earnings. Chiefly because we are already making news in IT-enabled services,
with the call center market alone being worth $60 million today, and rising
rapidly. But then, let’s not forget that in the development space we couldn’t
really move up the value chain–to the product development level–largely due
to a self-satisfied attitude.

There is a crying need to see today that call centers are only a part of the
much larger customer relationship management (CRM) process. And we must take
steps now to move up the value chain of this process. Indian companies would do
well to position themselves to address the entire spectrum. And not only for the
US market, but the European market too.

The CRM value chain

At the top of this value-chain is CRM consulting. It involves system design,
contact handling strategies, product evaluation and recommendations. The next
layer involves CRM implementation. Here one is concerned with the design and
implementation of new facilities and systems, upgrading of existing systems, and
design and implementation of middleware computer telephony solutions.

The next layer in the value-chain deals with CRM outsourcing. This typically
involves either the complete or partial transfer of a client’s actual customer
care operations, systems and processes to specialized service providers. CRM
training services focus on end-user training of CRM front-office applications
and processes. This involves customer service representatives in contact
centers, and sales and marketing professionals. As far as CRM support services
are concerned, they primarily focus on providing ongoing proactive and reactive
services for installed software and hardware incorporated into a CRM-specific
set of systems and processes.

Business consulting: Key layer

Front-office CRM activities are critical, as they represent touch points for
customers. Typically companies begin enhancing their customer-related processes
by addressing these activities, more as standalone implementations. This would
normally involve several of the activities mentioned above, and would offer
providers the opportunity to provide consulting, integration and outsourcing.

More than half of CRM services revenues currently come from ‘operations
management’. This consists primarily of contact center outsourcing, technical
support outsourcing and hosting. However, what’s clear is that business
consulting will be the key layer as CRM projects entail solving business issues
at a strategic level. Implementation services in this area, while growing
rapidly, will also tend to get more complex, requiring a high degree of
integration across systems and processes. Training services, while small today,
are also likely to grow quickly in the near future. The hard fact–support is
the smallest revenue stream.

The approach to CRM services could vary based on the individual service
provider. Some service providers specialize in particular components of the
broader customer relationship management process, such as sales automation
processes or contact centers. Other service providers take a more comprehensive
approach by integrating various elements of a company’s customer care process
so that the enterprise as a whole operates in a customer-centric manner.

An interesting case in point is Accenture (the erstwhile Andersen
Consulting). Accenture’s total European service revenue reached $3.8 billion
in 2000, with CRM services representing almost 40% of this revenue. The firm has
about 2,300 dedicated CRM service consultants in Europe. Accenture’s CRM
practice offers expertise in the areas of customer strategy, customer insight,
and customer interaction management and brand integration.

Accenture has formed new alliances recently in order to gain more depth and
breadth. It formed an alliance with Vignette Corporation, a provider of
e-business applications and content management solutions. Together they will
jointly market services and solutions for integrating customers online and
offline. Accenture Technology Ventures, the venture capital unit of Accenture,
joined a consortium of second-round investors for a stake in Data Distilleries,
a European CRM analytics provider.

Other major CRM Services vendors include Deloitte Consulting, CSC, IBM Global
Services, EDS, PwC, Siemens Business Services, ICL, and Cap Gemini Ernst &
Young.

CRM market in Europe

The Western European market has been seeing strong growth in the area of CRM
services. This is reflected in the fact that a number of contracts were signed
in 2000. Some of the significant ones are:

• British Airways is developing a
  new range of Internet services with IBM in response to the success of the
  online small discount offered by airlines. British Airlines is planning to
  add functionality that would let customers book tickets from digital
  televisions and WAP-enabled mobile phones. By 2003 the company is planning
  to sell over 50% of its tickets online.

• Logica signed a contract valued
  between $20-50 million for five months with British Energy. Logica will
  assume responsibility for many aspects of British Energy’s customer care,
  including back-office and front-office services, contract management, work
  management, billing, payment processing and credit management.

• John Lewis Partnership, one of UK’s
  most successful retail businesses has chosen Prime Response’s integrated
  e-marketing software solution. The food division of John Lewis will be able
  to utilize customer data from the Internet, e-mail and direct mail, and
  integrate it with historical buying information about each customer.

• Unicredito, one of Italy’s
  largest full-service banking groups, will begin to offer its customers more
  personalized one-to-one customer service. This initiative will be realized
  by using Prime Responses’ Prime Vantage software. This software is
  designed to analyze, plan, execute and track one-to-one marketing campaigns.

• After a successful three-month
  pilot testing with the interactive mobile banking services via WAP,
  Woolwich, the UK building society, has decided to make this service
  nationwide. The service is being provided in association with Vodafone.
  Customer’s of Woolwich will be able to run their personal finances,
  current accounts, savings and mortgages round-the-clock from all locations.
  This ‘banking on the move’ will also provide customers with the
  flexibility of using a full range of channels.

• Sema Group has constructed and is
  managing a CRM system for the Ferrari World Club. The solution includes an
  advanced CRM platform with multilingual integrated customer care using
  e-mail, post, fax, subscription and payment by multiple channels. It also
  includes a website linked to the Ferrari World Club home page and content
  sites that enable online subscription. The contract is worth between $1-6
  million for a three-year period.

• Lloyds TSB Group signed a
  $23-million contract with Chordiant Software for the development of a
  multi-channel e-CRM infrastructure. Andersen Consulting has been chosen as
  the strategic consulting partner to deploy Chordiant software. The e-CRM
  infrastructure will make possible current and historical customer
  information to be shared among the bank’s branches, call centers and
  Internet, WAP and interactive TV banking services.

• Vertex has announced a seven-year
  CRM outsourcing contract valued at $506 million with Eastern Energy in the
  UK. Services provided include customer base management, contact management,
  including Web-based self-service, call center management and billing
  solutions.

CRM has reached a threshold in many industries  across Europe and
continues to penetrate and transform many businesses deeply. The current
economic climate is funneling pressure across the corporate landscape as many
firms struggle to seek competitive differentiation. With the aid of new
technology and business ethics, companies are embarking on new approaches to
building loyalty with customers. These new technologies are evolving rapidly and
shaping the future of many businesses.

Ishan Ranjan is VP, projects, CMIL.