Someone Forgot to Ask the Customers

If arrogance is a virtue, a profusion of CRM industry analysts will go to heaven without passing go. But it's not. So it's time for these self-appointed "experts" to correct some unsupported and flawed projections they are making. How is it possible that analysts charged with understanding the CRM industry instead make errant pronouncements that reflect a paucity of knowledge? Easy. They just close their eyes, pretend that CRM is a mirror image of enterprise resource planning (ERP), and run off at the mouth or keyboard. Read any of the IT journals or the general business publications and it won't take long before you trip over an analyst predictions that the ERP-related CRM vendors plus Siebel Systems Inc. are about to take over the CRM market. Analysts trying to sell that thought must have the industry under a macroscope, not a microscope. Just look more than an atom's-width below the surface of the CRM industry and the analysts' predictions of an ERP takeover fall apart. But for a moment, let's grab their macroscope and look through it to see what they see: An ERP market dominated by Oracle Corp., PeopleSoft Inc., and SAP AG at the high-end; then Epicor Software Corp., Frontstep Inc., J. D. Edwards and Co., and others that serve midsize and small companies. The need for full ERP systems drops precipitously as you move down the ladder of company size, as does the affordability. The real action is at the Fortune 1,000 level, where Oracle, PeopleSoft, and SAP play--and where their customers are CTOs and senior IT executives. Now let's swivel their macroscope over to the CRM market. There they are, Oracle, PeopleSoft, and SAP--plus Siebel--serving the Fortune 1,000 companies. And there's Onyx Software Corp., Pivotal Corp., Interact Commerce Corp., and other firms serving customers that are lower on the customer size ladder. Hey, it's ERP Part II! Why look any further? The big ERP players will dominate CRM just like they do ERP. Case closed. No, not case closed, eyes closed. Too bad these analysts haven't yet flipped their macroscopes over to get the microscopic view of the CRM market. If they had, they would see the rungs on the ladder getting bigger, not smaller. Bigger because the need for CRM doesn't diminish as you move down the ladder. The affordability is suddenly getting better, too. Current economic conditions have burst the CRM software price bubble, and CRM software vendors are realizing midmarket and small-business CRM is where much of the demand will be once the economy rebounds. And no matter what size the company adopting the CRM technology is, the buying influence shifts away from IT and over to marketing, sales, and customer support. IT plays only a support role in purchasing CRM, except in confused companies that let IT decide how marketing, sales, and service should do their jobs, only to discover later they committed a grand faux pas. As you might expect, this different buyer group has markedly different preferences in CRM software than IT buyers. How could these analyst types have missed all that? First, it seems they use the KISS model--as in "keep it simple, stupid." Who wants to analyze a software market with a plethora of players to track? Especially when they're not glamour companies that attract much investor interest. Next, the analysts are relating something new to something they already know. That prevents them from having to deal with fuzzy, messy uncertainty and doubt. After all, analysts are supposed to have answers, not questions. And comparing CRM to ERP is an easy way to get answers, or so they think. Then there's the "big is beautiful" business model these analysts seem to prefer. I'd suggest that a few analysts just might compare what the big sellers have to offer with what CRM buyers are asking for--and investigate what's in it for the buyer to "go big." The analysts also are considering the "natural affinity" factor: Users of ERP systems developed by Oracle, PeopleSoft, and SAP will prefer their CRM systems, as well. Apparently, analysts can't see down to the marketplace level where none of these companies' systems have much more than 5 percent share of CRM implementations. Ironically, the affinity factor is really a market share cap. These large vendors rely so heavily on the affinity factor to sell their CRM systems that they haven't bothered to create products sufficiently attractive to lure customers not using their ERP systems. But the biggest blunder analysts have made is misjudging who controls the market. It's the customers, not the vendors. When assessing the future of buyer-seller relationships, it makes more than a smidgen of sense to lean heavily on what buyers want and which sellers can supply that. I guess analysts didn't learn that stuff doesn't sell when it's not what buyers want. And if analysts did ask customers where they plan to take CRM, the analysts would get an adult dose of input that doesn't square with their analyst-speak. The findings of a new customer satisfaction study I co-authored, "Multi-Function CRM Software: How Good Is It?" reveals that the criteria highest on the list of customer priorities are what the big guys are worst at providing: ease of implementation, adaptability to specific customer requirements (which is worlds apart from how much functionality is stuffed into the system), and customer focus. Interestingly, the affinity factor didn't appear to increase customer satisfaction. In fact, Oracle just edged out SAP for last place in overall customer approval. It's hard to find any signs of blossoming market share for the ERP-related CRM providers in these ratings by customers. The bottom line is that ERP-related CRM systems have a long way to go before CRM buyers will choose them. Therefore, Oracle, PeopleSoft, and SAP aren't going to become dominant players in the CRM space in the near future--or ever--unless they figure out what CRM is, who CRM software customers are, and what these customers expect. And folks calling themselves analysts need a reality check on the assumptions behind their unsupported and flawed projections that ERP-related CRM systems will soon play a dominant role in the CRM market.