Past Is Prologue for CRM
Welcome to CRM magazine's annual debriefing, 2011-2012 edition. Every year, we examine occurrences and trends that we've seen to get a final assessment of where things stand in our industry and place a capstone. Doing this also lets us (and you, our readers) perform a level-set for the year to come, giving us all a good idea of where to look and what to watch for.
An article like this can only cover so much ground, so we try to narrow the focus to a few key items and juicy speculations. The opinions and insights of our sources, while trustworthy, are not the end of the discussion—they're only the beginning. If we can spark a few conversations or debates with this piece, we call it a job well done. Write in once you're done reading, and let's talk about where 2012 will take us.
A Rebuilding Year for CRM
While 2011 was marked by a number of noteworthy events, the overall opinion is that it was a year of recalibration. So many things have shifted in the past couple of years, it's only natural for the CRM industry (and the world at large) to take a moment to find its footing.
"This was a recovery year," says Esteban Kolsky, founder and principal of CRM consultancy ThinkJar. "Following two brutal to negative years in the industry, we saw 2011 as the time when the market finally stabilized, some long-delayed deals started to come in, and some visibility was more apparent into clients' budgets and plans for the future." Kolsky shares the opinion of his colleagues that there's a lot to rebuild before we start building anew, "but the backlog seems to be quickly dealt with, and some new and innovative projects are starting to show up."
He's not alone in that assessment. Denis Pombriant, principal of Beagle Research Group, points to certain movers and shakers to support this. "This was generally a good year for CRM. Dreamforce 11 was a big success, where Salesforce planted another idea in the industry's consciousness: the social enterprise as well as the social customer," Pombriant says. "Combine that with [industry award and recognition] programs like CRM Idol and I'd say the outlook is very positive—new companies continue to emerge with their own unique value to offer, without the inertia of what came before."
CRM Idol is a competition started in 2011 by industry celebrity Paul Greenberg. Similar to the American Idol TV show from which it takes its name, CRM Idol gives a shot at the spotlight to those who might not otherwise have access—in this case, up-and-coming vendors whose messages might otherwise be drowned out by established companies or simply lost among their fellow upstarts. Contestants get face time to pitch some of the CRM industry's most influential voices, and can win various prizes, including consulting services and free business software.
As a judge for the contest, Pombriant has some unique insights about the contestants, which you can read in his column, "CRM Idol, Reviewing the Review" (page 40).
While looking to what's new and different is important, the activities of familiar companies and existing apps are not to be ignored either. "Established vendors continue to update their offerings for a changing world; Sage Connect is an example of this," Pombriant says, referring to Sage's ongoing efforts to modernize its products with cloud capabilities. "I'm also encouraged by the continued rollout of Oracle Fusion, and Microsoft Dynamics had a good release as well, a nice, robust product."
As momentum returns to CRM, it will be necessary for vendors and industry experts alike to help guide wise decisions to prevent chaos. "For users, the hurdle still is that there are so many things going on in CRM," says Laurie McCabe, founder and analyst at the SMB Group. "It's like vegetable soup—everything overlaps and intersects, and it can be difficult to match business needs to all the available technology options. The big question remains, "Where do I start?" The industry has a lot of moving parts, and the rise of social media has made it even harder to deal with the fire hose of information. It's more challenging for the average company to make sense of it all."
Social CRM Remains Big
Indeed, the continually rising importance of social media as the meeting place for customers and the businesses that serve them is at the front of most pundits' minds. "Social CRM has really come to the forefront," McCabe says. "This time last year, people were still getting their heads around it; most were taking a siloed view. Now they realize they can't have a piecemeal approach to the social component any more than they could with traditional business apps."
Social technology use tends to look different at the extreme ends of the business scale, with start-ups and small businesses able to gain the greatest relative benefit for the least investment. "The uptake in social technology has been much faster with SMBs," McCabe says. "Smaller businesses saw social as a low- or no-cost alternative to their other community-building efforts, and many weren't doing anything at all. It's easy to dive into social without a large outlay of money or time. Medium businesses aren't jumping on the social train as fast."
Kolsky concurs. "Certainly the birth and rapid explosion of social CRM was a noteworthy event, since we can begin to experiment and see what social can bring to CRM across all functions," he says. "Of course, social being the hype-du-jour, a lot of the new projects were about Social X," he quips. "The interesting thing about that, though, is that Social X changed from 'What is it?' to 'What shall we do?' which brings more interesting projects."
Despite social CRM's prominence as a discussion topic, though, there doesn't appear to be the sort of retreat from traditional CRM that many feared. "For the most part, what stayed the same was the concept that CRM is CRM," Kolsky says. "Even though vendors have tried to invent a new market with social CRM as a new tool, we finally managed to make users understand that it is not about a new market, but rather how to optimize and extend what is there."
Investing in the Future
So if this is a rebuilding year, what are some of the building blocks? We saw significant merger-and-acquisition activity in 2011, some of which is still unresolved. Most of the notable moves fall into the broad category of communication, with several large plays in mobility especially.
Microsoft acquired Skype for $8.5 billion, bringing the first name in consumer VoIP into the portfolio of the software megacorp. Microsoft's mobile technology has been greeted with lukewarm reception at best, so leveraging Skype could give the company an important new avenue to pursue. Growing interest in mobile computing makes the Skype grab that much more attractive. Similar activity included VMWare's acquisition of microblogging and enterprise collaboration vendor Socialcast, and Polycom's purchase of HP Video Conferencing Assets.
Google snagged Motorola Mobility for $12.5 billion (pending approval), continuing Big G's quest to become all things to all people. The acquisition will fit into Google's Android division alongside TalkBin, a mobile software vendor acquired in April 2011 for an undisclosed sum.
Also still under scrutiny is the proposed merger of mobile providers AT&T and T-Mobile. The $39 billion deal is being contested by the Department of Justice on antitrust grounds; AT&T, the acquiring entity, has filed a countersuit claiming the DOJ misunderstands the mobile carrier market and that blocking the merger would hurt consumers.
There was some movement in the analytics space as well. HP made moves to acquire Autonomy ($10.3 billion, pending) and Vertica. Other acquisitions of note include a pair by Oracle (mobile commerce vendor ATG and KM vendor InQuira), and Infor's $2 billion merger with fellow ERP company Lawson.
"I think that the Oracle acquisition of InQuira was significant, as it put an end to the number of traditional KM-only vendors," Kolsky says. "It brought some chaos—limited—by eliminating an OEM vendor to some of the existing CRM and customer service vendors, but that is now under control. HP acquiring Autonomy later in the year also brought a sense of KM-is-dead feeling to the market, and that is something we are going to work through in the next few months."
And not to be outdone by Salesforce.com's acquisition of Assistly, Oracle sent shockwaves throughout the industry when it announced plans to acquire RightNow Technologies for $1.5 billion. (See coverage on page 13.)
Another recent move is the acquisition of EFM vendor Fizzback by NICE Systems. Valued at $80 million, it is expected to augment NICE's command of customer experience and sentiment by adding voice of the customer insight in real time, with direct, indirect, and inferred feedback considered.
And of course, there were a series of pickups by Salesforce.com from December 2010 to March 2011. The first, of Ruby development software company Heroku, made big waves when it was announced this time last year. "Heroku highlights the concept of 'Facebook commerce,' building communities that live in other applications than one's own site and forums," Pombriant says.
DimDim, a collaboration vendor, was snapped up by Salesforce in January for $31 million, adding to the cloud-computing giant's social enterprise prowess as headlined by Chatter.
But the biggest deal of all was Salesforce's $326 million acquisition in March of Radian6, a social media monitoring and engagement platform provider. It's still being discussed today as an example of a great fit. "Salesforce-Radian6 was a huge acquisition," McCabe says. "It gives Salesforce a very strong platform in social media monitoring to augment its other social components."
All the above acquisitions are significant, but it might be too soon to expect results from most of them. "They show various markets consolidating, and most of them will take several years to have significant impact," Kolsky says. "I am just waiting to see where they go."
Dark Spots for CRM
Not everything was positive in 2011, of course. "Analytics remains the elephant in the room," McCabe says. "The more things we do, the more data we generate. That data can't just sit; it has to be used to have any value. The social explosion has made that need more obvious and urgent." Despite the analytics and KM acquisitions mentioned earlier, that segment of the industry remains an outlier. "Businesses need analytical power, and they need to get it in the app so every job can use it," McCabe says.
There is also a continued insistence on adding "cloud" to every company's list of core competencies, whether or not the concept is clearly understood. "The divide between multitenant and single-tenant hosted applications solidified this year, but both can't be the cloud separately," Pombriant says. Some people are still pushing the idea of a private cloud, which only adds to the problem. "Confusion is harmful, and this could be a drain for the next ten years."
Fortunately, there is a silver lining to this cloud talk. "Salesforce's new Database Rights Option (DRO) will open up more subscriber revenue in the industries that have shied away from cloud options," Pombriant says. Financial services businesses in particular have avoided software-as-a-service because of regulations about where customer data resides. DRO allows companies to keep that information locally, sacrificing neither security nor ease-of-use.
Where Does CRM Go from Here?
Enough for 2011 already. We've looked at where we've been; where are we headed? There are a number of trends that experts already see developing, or are expecting to burst upon the scene in 2012. Let's have a look.
One thing we can expect is the continued shift from annual licenses to subscription-based software and services. "When I look to the future, I ask, 'What are the current economic trends?'" Pombriant says. "We have a mushy economy, which may fall back into recession. Demand is flat. Business depends on a vibrant economy and growing demand, so vendors must keep demand high with existing customers."
Software-as-a-service makes it easier to keep demand high, by lowering the barrier to entry, limiting buyer's remorse, and spreading out costs over time. "Companies like Aria and Zuora have made a business of helping companies make their products into subscriptions," Pombriant says. "There will be more subscription orientation in the industry, and we're on board with this. On-premises apps are aging out, and companies are looking in greater numbers to replace them with SaaS."
Kolsky says three trends he is tracking for 2012 are analytics, communities, and knowledge. "There is not one specific trend I can show right now, but I certainly know that given the questions I am getting asked and the budgets I am seeing, these are going to be the trends to watch in CRM going forward," he says. They will remain major topics until 2014 or 2015, "since none of these will be resolved in one or two years," he adds. "The perennials—mobile, cloud, and right-sourcing—are also trends to watch, and I think that is more than enough to keep anyone busy for a while."
We should also expect changes to marketing practices, as businesses learn that a megaphone is not as effective as a conversation. "There's an increased trend toward closed-loop inbound marketing, as well as interactive marketing and campaign management," McCabe says. "These all help the business understand and engage customers in a structured way so it's more actionable."
Behind this trend, McCabe says, is the increasingly sophisticated and savvy customer. "As customers and consumers, whether B2B or B2C, we're smarter and better informed; we have more tools and a lot of input," she says. "IBM's concept of Smarter Commerce—understanding how customers are shopping, and listening to them for mutual satisfaction—has gained a lot of traction. Casting a wide net is no longer effective. Businesses must listen and be prepared to react to customers."
One marketing niche that might fade this year is the daily deal site. "I think Groupon's time is over," McCabe says. In addition to that company's reported cash flow problems, there is evidence that a better way is emerging. "Coupons and mobile marketing can be done by businesses themselves through social channels in a highly targeted and relevant way, at a lower cost than by working through the Groupons and LivingSocials of the world," McCabe adds. Much as encyclopedias on CD-ROM had a brief period of popularity before Wikipedia, discount services could give way to direct engagement by businesses that offer deals straight to interested parties via social networking. (See September 2011's Pint of View column for an example of a business that does this very effectively already).
Clearly, though, social CRM is here to stay for 2012 and beyond. "Early proof-of-concept and deployments I have seen of all business functions using social are quite encouraging," Kolsky says. "They make me believe we are quickly moving away from the concept that social is about public networks like Twitter and Facebook, and toward understanding the roles and functions that social and collaboration can bring to CRM."
Taking the Cure(ation)
All the social data being generated means there will have to be a better way of tracking, displaying, and refreshing it. "Video will become more important in B2B marketing," Pombriant says. "As more companies make mobile tech a reality, there will be more need to improve the customer experience and reduce the associated costs, and video is an excellent way to do that. Microsoft could lead here with Lync," he adds, referring to the company's new unified communications server technology.
Beyond Lync and other related technologies, though, there is a new market growing in the heart of social CRM: social content curation. More than a half-dozen companies (including Curata, Storify, Keepstream, and Curation Station) have emerged to make management of social content less haphazard. Curation allows companies to more easily sort through the social stream to highlight the most relevant content rather than just the most current, and helps keep that content fresh. "Curation brings together thought leadership, and makes video more valuable," Pombriant says. He is currently working on research that explores the breadth and depth of the curation market.
CRM Returns to the Spotlight in 2012
If you thought 2011 was a down year, you'll be happy to know that it looks like 2012 will have a better feel to it, barring mishap. But if you felt it was a year of change and growth, you should be thrilled to watch as next year develops toward the next installment of this article.
"I am highly encouraged by the return of CRM to the spotlight across organizations," Kolsky says. "It is hard to pinpoint one data point or trend, but the overall intelligence chatter seems to be placing CRM as one of the key markets for the next two to three years based on what investments and priorities are bubbling up."
While not a trend specific to CRM, there is a new concept spreading through the working world: gamification. Popularized by Jane McGonigal in her book Reality Is Broken, gamification is the use of game design techniques to improve individuals' experiences with things that aren't games. By making a mundane activity more enjoyable, whether through intrinsic experiential rewards or more overt rewards like achievements and community status, gamification can make workers more productive and consumers more enthusiastic about brands.
At an April 2011 UK conference, Gartner Group predicted that, by 2015, "more than 50 percent of organizations that manage innovation processes will gamify those processes," according to a related press release. The analyst firm's statement added that "by 2014, a gamified service for consumer goods marketing and customer retention will become as important as Facebook, eBay, or Amazon, and more than 70 percent of Global 2000 organizations will have at least one gamified application."
One of the easiest examples of gamification to cite is Foursquare. By providing recognition and setting up the possibility of inter-customer competition for the title of mayor or a discount for friends, Foursquare turned shopping and errands from a semi-passive activity into a vibrant pastime.
The benefits of gamification extend beyond consumerism. McGonigal's book contains numerous examples of gamified activities that have helped solve scientific research puzzles, increased philanthropic contributions of resources and time, and helped people deal with chronic illnesses and injuries. And if a company can make the contact center or the CRM application fun and compelling as well—or make providing customer feedback and survey answers more rewarding without resorting to outright bribery—that's a pure win for the CRM industry.
In addition to Gartner, Constellation Research Group is tracking gamification in the CRM industry and elsewhere. On the vendor side, SAP appears to be the most often mentioned major CRM vendor when gamification is discussed. This is still very much an emerging trend, so keep an eye on CRM's reporting and elsewhere for news.
Marshall Lager is the managing principal of Third Idea Consulting, a provider of insight and thought leadership for the CRM industry. Contact him at email@example.com, or via www.twitter.com/Lager.