Despite current market conditions, the future for business to business and customer relationship management software is bright – as long as company CEOs keep their heads out of the sand, say industry observers.
Several IT market analysts spoke Oct. 9 at the eCustomer World 2001 Conference in Toronto about what is necessary for a successful future for Canadian businesses.
Jordan Kendall, analyst at Forrester Research Canada, said Internet-based collaboration is not only the key for e-business of tomorrow, it is completely inevitable.
“It is not an option to put your head in the sand and hope problems won’t happen,” he said. “It’s also not an option to hope that your competitors will help pick you up when you have fallen down. They won’t. Every business is going to be impacted in some way by online trade. Trying to run away and pretend this is not happening is like trying to play chicken with a freight train with your foot tied to the track.”
A Forrester research study backs up that scenario. It found that while only 36 per cent of executives from 50 of the largest Canadian companies think that online trade is critical in 2001, 80 per cent think that is true for 2002.
However, Kendall said some things have to change in order for the Internet-based collaboration to be effective.
“Today’s approach to collaboration doesn’t work,” he said.
He continued that today’s applications for B2B don’t work because proprietary interfaces limit interoperability, rigid architectures limit flexibility and weak external processes limit collaboration. New applications will be what he calls “extended relationship management, or XRP, applications.” These XRPs will be hosted and configurable instead of installed and customized and there will be one per network instead of one per enterprise.
“Firms must prepare for the e-business voyage,” he said.
Alistar Sutherland, director of service and software at IDC Canada, delivered a similar message and added that continuing to use conventional methods to get and keep customers won’t work any more.
“Customers, being people, are fickle,” he said, adding that IDC research shows that 60 per cent to 80 per cent of customers who defect from a company were actually satisfied or very satisfied with the product or service they were with.
Sutherland said only 42 per cent of surveyed Canadian companies, including three levels of government, financial institutions, telecom and retail, have a CRM strategy.
“It’s a very under-served market,” he said. Cost and return on investment, reluctance to dedicating internal resources and a resistance to change were the top inhibitors for developing the strategy, Sutherland said. More than 10 per cent of respondents say executive awareness is the key inhibitor in getting a strategy in place, he added.
“Our research shows that almost 70 per cent of senior decision makers, mostly CEOs, have no direct accountability for CRM results,” he said. “How much incentive do they have to drive it through?”
Most companies dedicated a low, six-figure dollar amount to a CRM strategy, Sutherland said. The exception to that is telecom, where 30 per cent of companies maintain a seven-figure budget.
“It does show that it is a rich market,” he said. “The outlook for CRM is very bright in Canada and it will continue to be a high-growth area with a compound annual growth rate from 2001 to 2005 of 47.5 per cent, at which point it will have risen to an almost $2 billion market. If you look at CRM as a practice area it is now one of the largest drivers of solution spending and concern in the business community.”
Jacob Abramowicz, senior research analyst at E-Search Canada, said if companies hope to be successful with CRM strategies and become “customer-centric” they first have to look inward and become “employee-centric.”
“The value proposition is really simple; not only are you able to know more about your customer, and better able to serve and service them, you are also able to improve internal efficiencies when you become employee-centric,” he said.
E-Search Canada research shows that integration of ERP and CRM systems, with PeopleSoft, SAP and Oracle’s products including CRM capability as a key selling point of their ERP systems, the mid-market’s role in CRM as well as the what role the ASP model will play with CRM companies and prospective customers will be the key drivers that will lead CRM to the forefront.
“The mid-market is generating most of the revenue growth in Canada right now,” he said. “The Canadian economy is largely made up of the mid-market firms.
“We know that there are other solutions in the marketplace, we still think that CRM supply chain management and e-procurement are at the forefront of innovation,” Abramowicz said. “But in Canada, we still see a lacking of understanding of what CRM means, let alone what it means to the model.”
IDC Canada in Toronto is at http://www.idc.ca
Forrester Research Canada in Toronto is at http://www.forrester.com
E-Search Canada in Toronto is at www.esearch.com