Beyond ERP: CRM, The Nucleus of the E-Business Strategy

The business world is poised for another era of unparalleled dynamics inspite of the general slowdown of the global economy. The ever-growing proliferation of the internet, both wired and wireless, has made life easier for the competition; markets are becoming increasingly transparent, with shorter time-to-market cycles, product and offerings increasingly homogeneous and signs of saturation are appearing in many market segments. Gone are the days where you had a technological edge over your archrival. Locational advantages, too, are becoming less and less of a factor. Because it is just as easy for customers to buy from a supplier on the other side of the world as it is for them to deal with you. So what key differentiating factor do you have? The secret to continued success lies in Customer Relationship Management (CRM) by winning new customers and ensuring their long-term relationship.

CRM is a fancy term for an age-old practice, and something we used to take for granted. In the past, salespeople responsible for selling large-ticket items have always managed the customer relationship by monitoring their customer's specific requirements, shipment dates and after sales service. Often they have done so by making frantic calls to the warehouse, demanding information stored in standalone systems. Today, CRM retrieves customer data from the central enterprise database, which creates technical efficiency. But more than that, CRM can bring employees from different divisions together as a team to better serve the customers. CRM combines many of the traditional marketing and sales techniques that have been in the past, used well by themselves; for example database marketing, telemarketing, sales force automation, web personalisation and call center support.

In today's cyber age, to truly prosper, enterprises must develop an integrated digital nervous system of relationships encompassing customers, partners, suppliers and their internal systems and become an extended enterprise. This integrated network should be globally accessible, virtual, secure, scalable, inter-operable, and efficient and will determine the success and failure of the enterprise. Nucleus of this integrated digital nervous system is CRM.

IT applications have rapidly evolved and CRM is one of the latest, although the earlier phases are still with us. According to Karen Voghel of destinationCRM.com, worldwide CRM revenues are expected to grow from S$34.4 billion in 1999 to S$125.2 billion in 2004 – double the expected increase in the overall IT services market. According to International Data Corp (IDC) reports, the CRM segment is expected to grow at an annual growth rate of 29% through 2004. As IT evolved to be generally available, relatively affordable and broadly deployed, these factors had largely levelled the strategic advantage that were created by merely acquiring and deploying applications. This led to the need for enterprises to focus on the quality of integrating business processes. Enterprise resource planning (ERP), focuses on optimising the performance of an enterprise by synchronising the supply and demand, input and output. While leading ERP applications turned out to be standard, ERP systems did have major payoffs for enterprises in transforming the legendary IT infrastructure and on cleaning the software incompatibilities and data "mis-matches", which made the Y2K transition smoother than anyone ever envisioned.

But today, ERP is nothing but a standard in most of the organizations. Since it didn't include a customer management aspect, CRM was the next logical step. This logical progression is driven by CRM applications that enable extended enterprises to focus on customer partnerships. A primary objective of CRM is to provide enterprises with a complete 360-degree view of the consumer and to enable 1:1 marketing. CRM involves improved and increased communication between an enterprise and its customers, as well as within the enterprise itself. CRM requires a fundamental shift in the information flow within an organization from quantitative data to qualitative data. If you could sum up in one word the benefits of CRM, that one word would be "smart-relationships". The web has shifted the balance of market power decisively towards the consumer.

The Enterprise Resource Planning systems (ERP) were crucial in linking up the myriad of internal networks in an enterprise but were primarily inward looking. However, CRM is an amalgam of data mining, customer profiling, sales force automation, channel management, call centre management, segmentation algorithm and other software that extends beyond the enterprise and designed to optimise revenue, profitability, and customer loyalty. CRM has rapidly matured in the last few years and integration between CRM systems and ERP applications are becoming more common, if not commonplace in enterprises. The focus has been on implementing CRM for traditional front office suites supporting marketing, sales and service automation. CRM is a technological strategy that focuses on customer service, sales, marketing and support communications, processes and practices. New customers are gained, and existing customers are retained and purchase more in greater quantity or more frequently. End consumers benefit by receiving superior service and getting the products and services they want, when they want them.

Internet and wireless technology has put the customer at the centre of an enterprise. By implementing a CRM, organisations are enjoying measurable improvements in their business reflexes, better and faster strategic thinking capability and closer, better and life-time relationship with the customer. The internet has changed the balance of power between businesses and consumers, giving consumers access to more purchasing information, channels and choices. The watchword today is, dragging your feet on service and delivery is likely to make the consumer drag in a new competitor (supplier) with the click of a mouse. With the proliferation of the internet, CRM has advanced to e-CRM. Some have claimed electronic CRM (e-CRM) as the "killer app" for enterprises in an increasingly competitive market place. Proponents say that companies will benefit from huge cost savings and increased revenues while consumers will benefit from on-demand access to products and services, less hassles with better and swift support, and less expensive services.

e-CRM solutions are generally grouped into two categories, web-based solutions and web-extended solutions. Web-based CRM solutions are designed from the ground-up for the internet and focused on sales (e-commerce) functions. Leading vendors in this category include Netgain, Upshot, Firstwave and Sales Vision. Web extended CRM are originally designed for enterprise users with extensions to include interfaces for the web. Some leading vendors in this category include SAP, Clarify, ONYX, Trilogy, Oracle and Siebel Systems.

E-CRM is by far the biggest and most complex venture in the history of IT, even bigger than the ERP of the previous era. Datamonitor reported that almost four times as many web-based transactions are abandoned than completed. They also estimated that "an average online company could have improved its online sales revenue by almost 35% last year if it has provided better online customer service for potential customers". However, any e-CRM software is not the panacea as most of them were born out of the mini crisis that companies faced when flooded with inbound emails. To be effective, CRM applications must integrate seamlessly with all corporate applications and systems internal and external to the enterprise. This includes ERP, transactional applications, legacy data sources, third party applications as well as e-commerce applications. Unless disparate systems are interconnected, the information they contain cannot be leveraged to their best advantage. E-CRM is an outward looking system that integrates front and back office systems into a format that is acceptable to the outside world. The challenge is to ensure that these applications are integrated seamlessly into a scalable, secure, clean and manageable environment. Secondly, the organisations must recognize that CRM, whether "e" or not, is a starting point not the end result. The implementation strategy must start with the customer and be based on his or her requirements and expectations. These requirements drive the consumer behaviour, the functions and processes deployed, and, the CRM technology to support the desired outcomes. Thirdly, recognition that a consumer based strategy cannot be developed overnight; it evolves over a period of time.

Few years from now and beyond, most of the customers will still prefer the face-to-face communication, on top of email, web-chat, VoIP, Web call and collaborative browsing. CRM, however, will be a lot more routine and pervasive in enterprises. Customers will continue to use multiple points of contact including internet, call centres, sales representatives, and new media may emerge. The key to success is integration with the different points of contact and blended media to be the true "killer app". How this is achieved will continue to evolve and change, but the core concept will always remain the same.

For more information, contact Anton Ravindran at anton@genovate.com.