CRM is getting to be another glorious way of spending your technology budget
when consultants and vendors worry you by telling you that you are not
leveraging your IT assets, not enough to make your organization a
customer-centric one. While white papers and CDs on the subject gather dust on
shelves, the CIO is inundated with ample advice on which one to go for and how
rapidly a CRM solution can be implemented. The ERP vendor professes to do the
best job with his extended ERP capabilities; database vendors remind you that
CRM originates from customer data and that they are the right ones to do it; and
specialist vendors claim that CRM is their religion! The same discourse would
probably have been imparted to marketing and business unit heads. Even the CEO,
fresh from a strategy seminar or an advanced management program, would recommend
his bit. By now, the CIO finds his grip weakening and rushes to decide on a CRM
solution and justify his appointment to the top management. Given the
circumstances under which the decision is taken, what are the chances that your
expectations are met?
According to Insight Technology Group, 65% of CRM implementations failed to
meet expectations and barely 15% met all expectations–simplified, this means
that the odds are that two-thirds CRM implementations did not deliver, despite
the fact that CRM has emerged as a high-priority business and technology
initiative in most organizations across multiple industries. So what does it
mean when one says CRM did not deliver? It means that the organization failed to
transform itself from a product market-centric organization to a
customer-centric one. It couldn’t leverage data from multiple points of
customer contact to anticipate customer behavior. And in the process, it failed
to retain customers, cross-sell to customers, or maximize profitability per
customer. These form the bare minimum delivery points for any CRM solution.
CRM is not an IT project, it is a strategy initiative implemented through
technology. Says Sanjay Tugnait, principal consultant (CRM practice) at
Pricewaterhouse Coopers–"CRM is not a marketing project, as most people
think, because the use and impact of CRM is different for various vertical
industry segments." The goal of marketing may be to reduce costs through
marketing automation, increase revenues, improve marketshare and effectively
utilize the marketing budget. But these depend on the business processes within
the organization and the IT infrastructure. This is where IT contributes to
developing the business case. "At PwC, such information-enabled enterprises
are called market-intelligent enterprises. To achieve this business model,
global investments in CRM are evenly spread across the value chain in the areas
of marketing, sales and customer service," adds Tugnait.
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The basic concept of CRM involves segmenting customers depending on their
behavior and creating differentiated service levels for them. This is easier
said than done–it requires organizational readiness to be able to track
customer behavior, integrate it with other business processes, make decisions
corresponding to these behavioral patterns, and deliver effective service
through the business process. The technology involves a progressive approach
toward gathering customer data via multiple, interconnected, delivery channels.
This is achieved by aligning all processes and making them customer-centric and
automating these integrated business processes with back and front office
operations. This is the operational part of the CRM exercise. Once this is done,
specialized analytic tools are planted on top of this infrastructure to be able
to derive actionable knowledge out of the integrated customer data that is
gathered. This part is called ‘Analytical CRM’. The success of a CRM
implementation, thus, depends both on operational strength and analytical
capabilities. Depending on the vertical, the operational CRM platform sits atop
the core integrated business system and unifies customer data capture. For
example, for the telecom industry, the CRM plugs into the OSS (operational
support system), for banking, it is the centralized banking platform that does
the trick, and for manufacturing, it is ERP that companies turn to.
Interestingly, in the CRM solution space, there are specialist vendors in the
operational and analytic areas. For example, Siebel, mySAP.com CRM, Oracle CRM
are operational CRM vendors, whereas SAS, E.piphany, Teradata are CRM vendors
dealing in the analytical area. In a way, analytical CRM products help
accelerate RoI from a CRM initiative.
According to a Gartner report, enterprises are increasingly turning towards
CRM analytics, hoping to distill valuable insights from collected data. The
report predicts that during 2002, enterprises will seek to attain and leverage
greater customer insight by doubling their analytic efforts, granting
broader/deeper access to the data, and exploring advanced data-mining
techniques.
In India, information provided by vendors reveals that there are more
operational CRM implementations than analytic ones but the trend seems to be
that such enterprises are turning towards analytics to seek the full impact of
their CRM efforts. Some of the successful CRM implementations in the country are
Bharti Telecom, DCM Shriram, RPG Cables, ICICI Bank, Airtel, Orange, Goodlass
Nerolac Paints, BPL, StanChart Bank, and Citibank. While Siebel leads in the
operational CRM market, the analytic space seems to be led by SAS which has a
presence in multiple verticals, followed by Teradata, which is the market leader
in the large financial services vertical.
When organizations set out to pursue CRM initiatives, they find the costs
prohibitive. There are costs associated with realigning business processes,
integrating applications, data warehousing, the associated consulting fees and
product licenses among others. And given the statistics that CRM implementations
are very complex and often fail to deliver, this is daunting enough for a CIO to
backtrack on his plans. But the examples of those who have hit the CRM target
bang on are on the rise. This suggests that the benefits of CRM initiatives are
significant and can justify the investments. If implemented correctly, CRM adds
tremendous value to the business in terms of improving customer retention,
improving productivity, enhancing revenue, and advancing competitiveness. After
all, business models and processes can be copied, but customer knowledge and
relationships can never be duplicated–and that’s perhaps the biggest RoI of
any CRM implementation.
Easwaradas Satyen in Mumbai
The Hidden Costs of ERP
Many who have implemented ERP packages
agree that certain costs are more commonly overlooked or underestimated. ERP
veterans vote the following areas as most likely to result in budget overruns:
Training:
Training is the near-unanimous choice of experienced ERP implementers as the
most elusive and consistently underesti—mated budget item. Training expenses
are high as the staff invariably has to learn new processes.
Integration
and testing: Testing of ERP integration should
be process-oriented. Instead of plugging in dummy data and moving it from one
application to another, it is ideal to run a real purchase order through, from
order entry through shipping and receipt of payment.
Migration
Issues: Moving corporate data, such as customer
and supplier records, product design data from legacy systems to new ERP is
expensive. Although few CIOs will admit it, most data in legacy systems is of
little use. And they are more likely to underestimate the cost of the move. But
even clean data may demand some overhaul to match process modifications.
Data
analysis: Often, the data from the ERP
system must be combined with data from external systems for analysis purposes.
Users with heavy analysis needs must include the cost of a data warehouse in the
ERP budget–and they should expect to do quite a bit of work to make it run
smoothly.
Waiting
for RoI: Get over the misleading legacy that
the companies begin to gain value from the application as soon as it is
installed. Most don’t reveal their value until companies have had them running
for some time and can concentrate on making improvements in the business
processes that are affected by the system
Post-ERP depression:
Expect a drop in performance when ERP systems go live. Everything looks and
works differently from the way it did before. When people can’t do their jobs
in the familiar way, they panic and that could send your business into spasms.