Trend Watch: Social Networking Is the Newest Link in the CRM Chain

Social networking is hot. The concept has been powerful enough to entice even reluctant venture capitalists burned by dot-coms to pour millions into companies with products in the sector. Business software providers are looking to cash in on the hype by applying the social-networking concept to corporate sales. There are applications for people who want to meet others in their field or job hunt (Ryze, LinkedIn), as well as software to help sales forces and business development executives share contacts (Contact Network, Spoke). Although social- and business-networking applications are very different, business networking is directly benefiting from the popularity of social networking, according to Ian Jacobs, an analyst at The 451. Since so many people are familiar with social-networking companies like friendster.com and Tribe.net, it takes less explaining for business-networking companies to educate clients. "It cuts down greatly on the education time," Jacobs says. Social-networking applications are based on six degrees of separation for meeting, dating, or socializing with a friend of a friend of a friend. But most business-networking applications rely on two degrees of separation. In most cases a salesperson is trying to arrange a meeting with a new prospect. Using the business-networking application he can see that a colleague has a close friend in marketing at the prospect's company. The salesperson then asks his coworker for an introduction. That coworker can participate in the introduction or decline. Most business-networking applications are used in conjunction with sales force automation applications. The early adopters included professional service organizations and financial services firms along with sales forces in large companies. Cesar Brea, CEO of Contact Network, estimates the business-networking market currently to be a few hundred million dollars. He is confident that it will blossom to reach several billion dollars over time. But some observers are skeptical of business networking as an application or service separate from CRM, and claim it instead is more likely to evolve as a feature within CRM, much like early contact management capabilities. "The concept is too narrow," the 451's Jacobs says. "It is something that might just be a feature in CRM systems. In a year to 18 months from now many of these companies will be bought by traditional CRM suite vendors. Expect a lot of mergers and acquisitions in this space. All the big players are looking at this." The problem for widespread adoption, according to Jacobs, is that "the social-networking companies all live in a rarified world with high-tech folks and VCs on board. They live and breathe networking, but that is not how an agricultural business in Kansas thinks at all. It's not even on their radar screen. It's going to take a lot of time to filter down to all levels of the business world." --Lisa Picarille