So where do we go from here?

October 26, 2008 Richard Boardman

Well another week brings more economic bad news. Recession seems inevitable, so I figure it might be a good time to try and work out what it means for the CRM industry. Anyway these are my thoughts:

Firstly, you’d figure that people are going to spend a lot less on buying new CRM systems. For those that do decide to invest, then the decision making process is I suspect going to be longer, more complex, more competitive, with considerably more focus on the business case. CRM vendors take note; how you sell software will have to change. I think there will be a shift in thinking from ‘which CRM software do we choose?’ to ‘is this really going to give us a major payback in the short term?’

The market will consolidate. Pre-dot com bust, there were a large number of on-premise CRM vendors, post dot com bust the market consolidated dramatically. Then Salesforce.com came along and did a stellar of marketing themselves, and was soon followed by a wave of me-too software as a service (SAAS) CRM vendors. Some; probably many, possibly most, won’t survive.

I’m not sure on the on-premise CRM side there’s that much left to consolidate in terms of technologies, however the value added reseller (VAR) network that support technologies like Goldmine, Microsoft CRM, Sage CRM, SalesLogix, will struggle. These applications developed by the likes of Sage, Microsoft, and FrontRange are sold and supported more or less exclusively through a network of resellers. These resellers are generally small, typically turning over around £1 Million, and are rather more susceptible to the vagaries of the economy.

Even if your VAR survives the down-turn – and many won’t – it doesn’t mean you (as the owner of a VAR supplied CRM system) are going to escape the impact. As these businesses look to trim costs, the quality of the service may be impacted, and I suspect many VAR’s will cut back the portfolio of products they support. There’s been something of a trend in recent years towards VAR’s supporting multiple CRM products, and I suspect that in tougher economic times there will be a trend back to focusing on the core business, which may leave many clients effectively orphaned.

That said, even if your VAR or on-premise technology provider goes out of business, disruptive as this may be, at least you will still have a working system and you can look to make alternative arrangements at your leisure. If your SAAS provider goes bust there’s a big question as to whether you will have access to your own data, and even if you do manage to extract it before the lights go off, what are you going to be able to do with it?

The irony is that the better use you make of CRM technology, and the more it underpins the performance of your business, the more vulnerable you are to disruptions in the performance of your CRM vendor. Ultimately CRM vendor failures may in turn result in some of their customers failing too.

With less money being spent on new technology, I suspect firms will look harder at what they already have. There’s a considerable amount of underused CRM software out there, and considerable scope for companies to rationalise. All vendors will be hit by this, but in this respect I think SAAS vendors are particularly vulnerable. If you’ve purchased on-premise software it’s largely a sunk cost, with SAAS it’s ongoing expenditure, which, subject to contractual terms, can be terminated as required.

If vendors do decide to ditch software, I suspect the open source vendors will be key beneficiaries. The software may not be as feature rich, but then if you are one of those companies which for one reason (and it may be for very good reasons) or another are never going to use CRM technology well, it’s not going to make a huge difference anyway, so you might as well go for the low/no cost option.

On the other hand, for those who do decide to keep what they have, I believe there will be considerably more focus on wringing value from their investment. Perhaps this will finally mean the point that I’ve been banging on about for several years now, that CRM success is based on process, people, and technology, not technology alone, may finally hit home. In the absence of funds to lavish on new technology I expect the emphasis to shift to re-implementing existing technology in way that does add value.

There’s no doubt we’re heading for ‘interesting times’, but perhaps it will teach us an invaluable lesson along the way – the art of extracting value from technology.