CRM: Vertically Challenged
Since the early 1990s, customer relationship management (CRM) has evolved to include Sales Force Automation, Customer Support, Call Centers, Campaign Management, and Customer Portals. Over the last 15+ years, IT professionals and business users have been trained to view the CRM system as the infrastructure for every customer interaction, resulting in numerous extensions and customizations for transactional functionality to address the specific business initiatives that have emerged in their industries. More often than not, this approach has added significant complexity to IT operations and on-going maintenance, and has also generally failed to address the rapidly changing business climate.
The consolidation of the CRM vendor market, reflected in Oracle's acquisition of PeopleSoft and Siebel and the subsequent technology (con)fusion, has left customers with even fewer choices for their CRM investments. Additionally, CRM on-demand offerings such as Salesforce.com and SugarCRM have driven traditional CRM vendors into market wars that have resulted in "one-size-fits-all" solutions and service packages designed to offer the broadest appeal. While this strategy is good for the economics of the software vendor, it is less beneficial for customers facing unique vertical business challenges.
The end product is a CRM industry that has become vertically challenged. Most call centers manage calls in a similar fashion with basic sales force automation and opportunity tracking deployed horizontally across disparate verticals with some customization. However, the demand for more industry-specific transactional functionality in quoting, pricing, contracts, commissions, channel incentives, and channel-related transactions has presented CRM vendors with a formidable challenge, as these processes are not horizontal or generic in nature. In simple terms, the way a pharmaceutical company negotiates deals, manages pricing, and handles its channel relationships is fundamentally different from the way a semiconductor company does. Generic solutions offered by large CRM vendors, often designed for the consumer packaged goods and retail industries, simply cannot meet the unique business requirements of different verticals. The attention companies are now focusing on pricing and revenue transactional business processes is understandable as these tightly linked procedures have a direct impact on gross margin and net revenue. Data from two recent surveys conducted with more than 90 semiconductor manufacturers by the Yankee Group and also by Accenture demonstrates that over 80% of companies have resorted to developing home-grown solutions to cover the operational shortfalls of their CRM and ERP solutions.
(Falling Short in the) Semiconductor Industry
Several semiconductor companies have attempted to customize generic CRM offerings to address quoting, pricing, contracts, design registrations, ship & debit, and POS reconciliation. Many of these organizations have been challenged to produce the business value they expected at the onset of these projects for the following reasons:
Inability to triangulate purchasing entities, end customers, programs, and assemblies around the world
Limited ability to support sophisticated pricing with margin control in a transactional system
Use of simple role-based security, which effectively rules out opening transactions such as quoting and design registrations to channel partners
Lack of industry specific processes such as ship & debit and POS data handling built into the system
Failure to understand the true scope of integrating different pieces of a solution (even when offered by the same vendor)
Unlike many generic CRM systems, which offer "soft" ROI and efficiency improvements, software that tackles the transactional nature of customer and channel interactions often demonstrates a measurable hard-dollar impact on gross margin. Failing to implement software with transactional functionality can also have a long-lasting effect on a company's ability to control revenue leakage and financial reporting accuracy.
Overcoming the Vertical Challenge
Many semiconductor organizations have chosen to augment their CRM and ERP investments with solutions that deliver more industry-specific transactional capabilities. Approximately 30 semiconductor companies -- and almost 400 of their distributor partners -- are providing a visible example of this trend by utilizing revenue management solutions from Model N High Tech, which are designed to address the industry-specific needs of semiconductor and component manufacturers. Companies such as ON Semiconductor and Microchip Technology have Model N deployments supporting more than 2,000 users worldwide and are successfully managing opportunities, quotes, prices, and contracts. These deployments are delivering significant measurable value by increasing the number of managed sales opportunities, boosting quote volume, reducing quote cycle time, increasing quote-to-order conversions, and reducing price and margin erosion. Beyond the talent of the IT departments and business stakeholders who committed to these implementations, a key factor in their success was the solutions' vertical focus, which enabled rapid deployment and high user adoption.
Overcoming the Vertical Challenge with Industry-Focused Solutions
Customer and channel transactions such as pricing, quoting, contracts and channel incentives are tightly integrated, industry-specific processes that directly impact gross margin. Recent consolidation within the CRM industry and the ensuing battles over market share has left little room for investment in the individual needs of specific industry verticals. Revenue management software is a growing example of how to plug this vertical gap by helping companies manage customer and channel transactions and provide industry focus that improves margins and secures user adoption.
About the Author
Chanan Greenberg is senior director of business development and marketing for Model N's high tech vertical and has worked closely with more than 50 semiconductor companies in recent years. Prior to his role at Model N, Chanan filled EVP and CEO positions for 12 years, selling technology solutions to high tech OEM manufacturers and bid-life cycle solutions to defense and government contractors.