42 3.4 The analyst's viewpoint on CRM
3.4
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The progression from MRP to ERP was a landmark shift that revo-
lutionized the way the analyst industry worked. In addition, the
management consulting industry reaped significant rewards from
the integration work. This expertise colors the outlook of many ana-
lysts as they approach the CRM application area.
CRM as an application area comes from far more diverse begin-
nings than ERP and involves more areas of expertise.
Today's CRM suite-based solutions each began as a best-of-breed
solution within a particular application and expanded into new
areas.
The analyst's viewpoint on CRM
As mentioned previously, analysts come from a wide variety of backgrounds.
When combined with their somewhat opinionated nature, this makes for a
number of different viewpoints on CRM. However, there is agreement on
definitions and descriptions of CRM as it relates to technology.
Perhaps the most overriding issue in CRM today is the debate over
whether a suite-based approach or a best-of-breed approach is preferable in
CRM. In a suite-based approach, a single vendor's system is installed to solve
the total of the implementing company's CRM-specific business require-
ments. By contrast, in a best-of-breed approach, multiple applications from
multiple vendors are used to better fit the business requirements. Such appli-
cations could include call-center applications, sales force automation, and
analytics. As the discussion of this issue continues, it is important once again
to recognize the influence that the ERP movement has had on the analyst
community.
The underlying assumption of the ERP revolution was that having a sin-
gle, fully integrated system that could manage most, if not all, of a company's
accounting and purchasing processes would result in net cost savings as a
result of reduced inventory levels, lower overhead costs, and faster cycle times.
To a certain extent the approach worked. Despite astronomical costs for
implementation, many large corporations such as Fujitsu and Chevron
reported net savings from the implementation of ERP systems.
It also made for lucrative and interesting work for analyst firms. Compa-
nies that were founded on MRP strategies, such as AMR Research, suddenly
found the movement toward ERP generating a lot of business. Let's not take
this for a disparaging remark, however. This was indeed an IT revolution.
3.4 The analyst's viewpoint on CRM 43
Companies were redesigning their business processes, taking disparate sources
of information, and, when the gods were smiling, making their leaner compa-
nies more efficient. In short, the work was interesting.
Is it any wonder, therefore, when faced with the CRM conundrum that
many of the same companies with strong ERP backgrounds also believed that
a suite-based approach would ultimately prevail over best-of-breed. Forrester
Research, for example, shows a strong preference for CRM suites and has gone
so far as to say that many best-of-breed vendors will be gone (soon).
Point solution vendors will either be acquired or fall by the wayside as
firms look to a handful of vendors...and integrators...to implement,
integrate, and continuously upgrade their contact centers. 8
While Gartner's current philosophy on best-of-breed as an application
strategy is more balanced, it too shows leanings toward suite-based approaches
in the long run. Consider, for example, the following quote from a Gartner
presentation:
Building and maintaining best-of-breed front-office solutions across
sales, service, and marketing areas are harder than they seem. A best-
of-breed approach is becoming less viable in the long term because of
the complexity and expense of maintaining disparate front-offlce sys-
tems, as well as the inability to provide a transparent business process
across all customer interactions. A high degree of workflow and
business-process transparency is generally only found in a suite.
Application suites are typically easier to implement than interfaced,
best-of-breed departmental solutions; they offer a common look and
feel and reduced support overhead. However, the reality is that,
through 2004, most enterprises implementing CRM strategies will
be required to integrate applications from multiple vendors (0.8
probability). This is due to the overall immaturity of front-office
suites (e.g., lack of industry-specific functionality and light function-
ality in one or more CRM areas), economics (e.g., already installed
point solutions), and cultural habits (e.g., local support required). A
suite at the core, complemented by best-of-breed applications and
technologies is a likely scenario. 9
m
m
"Kick-Starting Contact Centers," Forrester Research, Mark Zohar, Bob Chattham, Gregory Scaffidi,
and Theo Dolan.
"CRM Vendor Analysis and Evaluation," Gartner Spring Symposium, ITXPO 2001.
I Chapter 3
44 3.4 The analyst's viewpoint on CRM
This quote is particularly apropos for two key reasons. It correctly identi-
fies one of the problems with a suite-based approach ("immaturity of front-
office suites"). But by indicating that CRM vendors can gain the depth within
their products by 2004, Gartner also reveals its bias toward this approach. And
why not? After all it worked for ERP, right?
Well yes and no. Without question, the backbone of ERP systems was a
suite-based approach. That said, a lot of companies sold best-of-breed solu-
tions alongside these implementations. PeopleSoft, for example, had an ERP
solution of its own; however, a sizable portion of the company's revenues
came from implementation and integration of their human resources solution
sold alongside SAP implementations. Similarly, Manugistics and I2 were and
are best-of-breed supply chain companies. Although ERP companies initially
tried to offer competitive products, they lacked the core expertise to signifi-
cantly compete in the supply chain space.
CRM is even more difficult to manage within one application. There are
exponentially more customers relative to suppliers; the separate processes that
surround these customers (data mining and analytical CRM, sales force auto-
mation, workflow, customer interaction management, etc.) each require
highly specialized expertise and generally more touch-points need to be sup-
ported as well. For a suite-based approach to be truly viable we are asking an
IT vendor to be analogous to an individual who has Ph.D.s in statistics, phys-
ics, chemistry, and English literature~possible, perhaps, but improbable.
In addition, the concept that suite-based CRM packages offer better inte-
gration is specious. In order to ramp up functionality in disparate areas, many
CRM vendors have increased their capabilities primarily through acquisition.
For example, recognizing that its application had poor analytical function-
ality, Kana merged with Broadbase, which, in turn, had poor e-service capa-
bilities. Primarily these companies are forced to integrate their products at the
database level. While the products may have a similar look and feel, the pri-
mary means of integration are the same as those available to best-of-breed
vendors.
With the advent of portals and Web service applications as the primary
means of interaction to multiple applications, it is also likely that the look-
and-feel argument will become less important. As agent and employee portals
become increasingly common, the application integration work will become a
de facto backbone, one that CRM vendors will be able to plug into. The uni-
versal backbone, perhaps the holy grail of the IT world, might well be
attainable through open integration technologies such as XML. This topic is
discussed in greater detail in Chapter 4.
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