Analyst briefs industry on ” CRM” approach

It’s been called the largest engineering project on the planet. The Central Artery/Tunnel Project in Boston is on par with some of the great man-made structures of the last century – the Panama Canal, the English Channel Tunnel and the Trans-Alaska pipeline.

The Big Dig, as Bostonians

know it, is a US$14 billion, monumental undertaking that will dramatically reduce traffic congestion and improve mobility in the city, while at the same time ready Boston and New England for economic growth in the coming years.

The project has been a decade-long headache for commuters travelling to the city core, but officials promise that in the end, it will deliver.

While the size and scope of such a project is difficult to fathom, the same issues that have plagued the Big Dig can also be used to describe some CRM implementations, according to Meta Group analyst Steve Bonadio.

“”It’s complex, its costly, there have been massive over-runs in budget, there’s a lot of politics going on and there’s a lot of special interest groups who want things done a certain way. To a large degree there’s some corruption too,”” says Bonadio, the firm’s director of CRM Research.

“”That’s not to say there is a lot of corruption in organizations, but I think the issues are very similar.””

That’s because many enterprise companies are a hodge-podge of operational systems, legacy systems, ERP systems, customer databases, third party systems, a Web site, and custom developed systems. It’s hard for organizations to reconcile these systems and manage the technology, Bonadio says, while looking at the business process and integrating them.

Before embarking on a CRM project, Bonadio says companies must put in place a well-thought out business plan constructed with an iterative approach that requires to a large degree, a blend of people, process and technology to get it right.

CRM was one of the few software sectors that did not see a dramatic decline following the dot-com meltdown and weakened economy. In fact, according to Meta Group, CRM spending has jumped from 15th in 2001 to a projected second place in 2002. (Systems integration is No. 1.)

“”What happened in 1998 and 1999/2000 was very simple – someone in the organization said ‘We need to do CRM and we need $20 million to do and it.’ So it was ‘Ok, fine, here’s the cheque.’ They did it and it failed or didn’t demonstrate any value at the end of the day and they unplugged it – a lot of that happened.””

But the economic reality of CRM today is organizations have to build a business case before the project goes ahead. That business plan should contain components that address strategy, financial goals, risk-management and success factors, he says.

The trend now is what Meta Group calls “”guerilla CRM”” – in which small groups bite off a mini-project and disappear with it until they have results.

“”We’ve seen small business groups and IT groups within organizations who are saying ‘Let’s take a project that’s manageable’ – something small and implement the technology and get quick, short-term wins and make some money for the company, or save a million bucks for the company.””

An example is Sony Canada. A year ago the company decided it needed to boost its ability to manage advertising campaigns to stay competitive. Using SAP campaign management, they went live in 10 weeks last October, just in time for the Christmas season. Within another 11 weeks the call centre followed. However, the company didn’t turn on the integration to the back end ERP system in the first phase.

“”They wanted to manage campaigns and they weren’t as concerned about the cost of campaigns they just wanted to manage it. Cost is important too, but it wasn’t their first priority,”” says Richard Elliott, vice-president of strategic initiatives with SAP Canada. “”It was revenue-focused – they wanted to get an advertising campaign out quickly and the revenue generated was the driver.””

Sony will be turning on the integration in the second phase, says Elliott. “”They know they are going through the value chain approach but are getting there incrementally in little bites with returns along the way.””

Bonadio says there are core questions that must be answered before CRM construction can begin.

“”You have to ask, ‘What do we want to do and how do we want to treat customers?’ That has to be the overriding issue you are trying to address. ‘How do we want to transform our business to better meet the needs of our customers – to sell them more, to service them more effectively?'””

The next question should be how do we want to re-engineer our business processes to enable customer treatment? How do we support the specific treatments of different customer segments?

And while technology is not the totality of a CRM strategy, like the underground expressway being constructed in Boston, it does support the strategy and the processes. Bonadio says it should be viewed as a three-legged stool that includes operational capabilities, analytical and then collaborative technology, not fixating on any one or the other, but implementing gradually and trying to keep the stool balanced.

Comment: [email protected]

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