Back in the late nineties, CRM (customer relationship management) was all the rage. According to Gartner Group, the market peaked in 2001 at $6.7 billion before collapsing in 2002. More recently, however, CRM is back—once again—on CIO’s radar screens.
“CRM became a central theme for the CIO a few years back when it really should have been driven from marketing or sales,” said David Holtzman, U.S. lead for the Customer Centricity Growth practice at PricewaterhouseCoopers (PwC). “A lot of vendors sold CRM directly to CIOs as a business panacea.”
Well-marketed by vendors like Siebel (and others no longer with us), CIOs bought into the hype that CRM would solve complex customer problems by providing integrated marketing, sales and service automation. Result: An awful lot of CRM implementation failures.
Many of these failed projects trying to adopt what were often well thought-out vendor packages that were in actuality too complex for users. Some software never even made it off the shelf. And the CRM name lost its cache.
“I would estimate that 50% of CRM projects failed,” said Holtzman. “They were either led by IT instead of a specific business unit, or the business side hadn’t worked out what they needed to operate better in the real world.”
Another problem, Holtzman believes, was that CIO’s erred by choosing a big bang approach. CRM implementations attempted to span the entire organization, taking in every facet of sales, marketing, customer service and support. Such a methodology was doomed to failure.
The good news is the technology itself has improved to the point where CRM is now making a major comeback in the enterprise. A recent PwC study found that CRM placed No. 2 in budget priorities, behind compliance related products.
Particularly in the financial services sector, IT financial compliance management spending has increased to between 10% and 15% of IT budgets in 2006, up from less than five percent in 2004 (according to a separate Gartner Group study).
PwC research shows, however, that the era of cost cutting, efficiency and compliance is finally giving way to a focus on customer centricity. It is this shift that is feeding the renewed demand for CRM.
“Although compliance is still getting a ton of money, CRM places number two or three in our surveys,” said Holtzman. “Companies are again realizing the value of CRM. By stitching their information silos together, they can gain a better understanding of who their customers are and what they want.”
The CIO’s Role in CRM
So if CIOs should not be the ones directing the implementation of CRM, what should their role be?
Holtzman states the CIOs do belong at the table when CRM is being discussed. But instead of choosing the software and championing the implementation, they should act as an advisor to a line-of-business executive or the chief marketing officer (CMO).
While the business head determines what is needed to improve overall efficiency, the CIO can assist in the selection process by evaluating the pros and cons on the various software packages available. He can partner with the CMO to decide which package meets their needs.
In addition, the CIOs job is to honestly offer advice on which packages can and can’t be easily implemented in the enterprise. This has a lot to do with the existing technology infrastructure.
“Instead of being involved in the basic process functions of CRM, the CIO’s role is to figure out how to take the data in the underlying application layers in order to answer essential business questions about profitability, market penetration, the value of each customer and so on,” said Holtzman.
CRM, after all, touches many of the applications that IT manages. The CIO is the one who is best aware of what data elements reside in which systems and can supervise the mapping of data from core systems into the CRM database.
“It’s the business unit head that knows what he is trying to accomplish and the CIO that understands the tech environment,” said Holtzman.
While the big bang may have been in vogue before, the most recent wave of CRM installations has followed a more conservative course.
“People got beat up badly with overly elaborate CRM initiatives and went back to 100 day projects on a much smaller scale,” said Holtzman.
Smaller and shorter projects, therefore, are the name of the game. Once completed, it’s up to the CIO and CMO to showcase their ROI (return on investment) and expand their CRM activities further into the enterprise. As a result, CRM has blossomed at a departmental level and, albeit quietly, it has begun to live up to some of that early hype.
Its success is even propelling CRM to the next level. With CRM performing well in multiple departments, a need is created to tie these systems together. And that is now beginning to happen, according to PwC.
“Confidence is returning to attempt larger projects due to the success on smaller implementations,” said Holtzman. “Organizations seem to have learned from the big bang failures to lay it out gradually so the organization can change with it.”
Like many big projects, the best approach, therefore, is to tackle CRM in stages. Try it out in targeted areas of the enterprise and build it up from there. That must be accomplished, though, against a long-term vision and tightly tied into business objectives.
But even then, Holtzman cautions the technology should not be applied sweepingly. Instead of trying to make a CRM system do everything for sales and marketing, make it do a few vital things really well.
“Keeping even large-scale CRM projects very focused on specific core elements,” he suggests. “CIO’s can look like heroes if they implement CRM sensibly and avoid a big-bang approach.”