On-demand CRM remains an ongoing challenge, but social networking promises to be the real wild card.
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CRM has been a boon for the professional services industry almost since Day One, a chance to deploy a fleet of consultants to implement new systems and charge handsomely for the service. Many consultancies had gotten used to the idea that it would be ever thus, but on-demand CRM -- which often boasts of not requiring on-site consultants -- has forced the industry to rethink its role.
The age of software-as-a-service (SaaS) is upon us: When customers are able to download, implement, and tweak their CRM systems online without the need for on-site consultants, professional services firms stand to lose a significant slice of revenue. Over the past few years, the industry has been busy coming up with ways to cope with this sea change.
"Three or four years ago, a lot of firms were skeptical about how far [SaaS] would penetrate," says William Band, vice president and principal analyst for Forrester Research. But since then, "the demand for [SaaS] is so great, they've had to adapt to the needs of clients."
One way consultants have done that is to look at on-demand as an opportunity to shift from the nuts and bolts of a CRM system to doing what their name suggests -- "actually consulting with end users about best practices," says Denis Pombriant, managing principal at CRM consultancy Beagle Research Group. It took a while for major firms to see the value in working with on-demand CRM practices but some, such as Deloitte and Accenture, have established internal units to deal specifically with on-demand. Those units specialize in consulting on maintenance and upgrades, rather than on old-school selection and implementation work.
Other consultancies have gone so far as to create customized on-demand applications, selling them directly to existing users of on-demand CRM. Both Pombriant and Band point to Bluewolf, an on-demand specialist that has found success selling its own Salesforce.com application called MediaTrak SalesPak. Designed to allow media companies to monitor breaking news and conversation in the blogosphere, Bluewolf has sold the product to The Economist and Turner Broadcasting, among others.
Band estimates that SaaS currently makes up only 10 percent to 12 percent of the CRM market, but the rapid growth of companies such as Salesforce.com and NetSuite could nearly double that penetration by 2009. That said, Band doesn't anticipate that SaaS will ever overtake on-premise CRM completely.
"We're in a transition state and we'll be in a transition state for many years," Pombriant says. "Many major applications are still on-premise and behind firewalls, and we'll continue to see that for a long time."
While the rise of SaaS has been a drain on the consulting industry's billable hours, another popular technology has provided an opportunity for growth. Services-oriented architecture (SOA) is a hot topic within the CRM community, and plays to the strengths of the consulting industry.
"It's a good thing for consulting," Band says. "Building composite applications is the bread-and-butter work of large consulting firms. They're working to adapt their skill sets and are happy to see [the SOA] trend." He cites Capgemini as having positioned itself strongly as an SOA consultancy.
Social networking tools have caused a stir in many industries, enough so that Band is currently working on a white paper about the intersection of social networking and CRM. Businesses, he says, are more and more concerned with having a presence on Facebook and Google's YouTube, but most consultancies have yet to leap on board. That's primarily because the social networking phenomenon has come onto the scene so rapidly, consultants haven't had time to process it.
"I see a big interest in the client side about how this technology is being used, but I don't see consultants developing a point of view -- or methods and practices -- to deal with it," Band says. "No one's really figured it out yet." Nevertheless, he sees social networking as a significant growth area for consultancies in the future, as the tools themselves evolve and mainstream attention toward the space intensifies.
TOP 3 VENDORS in Professional Services: Source: Beagle Research Group
The vendor believes consulting on business processes, not solely on software implementation, is the key to unlocking a valuable customer experience.
Magic Quadrant '08: With calm but constant growth in the CRM service provider space, the largest firms still lead the way.
destinationCRM Exclusive: The consultancy gathers its resources and expertise in software-as-a-service CRM -- and stresses that SaaS may not be right for everyone.
Dreamforce '08: Salesforce.com's partners capitalize on conference momentum with a number of new announcements and product releases.