A call to the small
When your customer's workforce is tiny, does investing in CRM make sense?
For many small to medium-sized firms, CRM has typically sounded something like this: "Oi, John! Fred's on the phone. When did you say his order would be ready?"
This kind of exchange epitomises both the opportunity and the challenge in selling CRM to SMEs. For many small companies, systems for recording knowledge of customers and interactions with customers are rudimentary. If everyone works within earshot, why invest in technology when information can be retrieved just by shouting across the office?
A growing number of vendors must think they can answer this question, because several of the software world's heavy-hitters, including Microsoft, Sage and SAP, have joined specialist CRM vendors, such as FrontRange, Maximizer, NetSuite and salesforce.com, in competing for SME sales. Their approaches may be different: Microsoft is building its own CRM suite (see box, page 27), Sage acquired ACT!, SalesLogix and Accpac, and SAP has added CRM functionality to its Business One and mySAP ERP offerings. But they are all eyeing the same pie.
There is no reason why any should go hungry. Analysts such as Gartner and Datamonitor have reported strong growth in SME CRM sales while corporate spending has dropped, and the predictions for future growth are rosy.
"Recent research has shown that only nine per cent of SMEs have adopted some form of CRM technology, although this is changing fast: current estimates are that the CRM market for SMEs is likely to grow by about 21 per cent per annum," says Andy White, business development director at FrontRange.
Both incumbents and new boys agree that the SME market has special requirements. "CRM offerings must be built specifically for SME customers, because scaled-down enterprise products are too complex for smaller organisations," says Jason Nash, product manager at Microsoft CRM.
But products for SMEs shouldn't necessarily be simplistic. CRM can now offer SMEs far more than just contact management, important though this remains. Today's products include salesforce automation (SFA), marketing automation, customer service, diary and calendar management, opportunity management and forecasting, client profiling, statistical and analytical reporting, mobile and internet access, and integration with many back-office functions from personal productivity tools to accounts and ERP. The aim, says Nash, is to deliver customer insight rather than mere sales automation.
So customers that think they are already using CRM could be living in the past. "SMEs have been buying simple contact management products such as ACT! for years," says Roger Peacock, sales manager at Sage and FrontRange reseller Concentrix. "But today's generation of CRM solutions offer much more - such as integrating with their web site or offering internet-based access - and there's an opportunity for resellers to help SMEs upgrade to, or install, the latest solutions."
Impressive though the available features are, few SMEs will want all of them, particularly at first. Most prefer a modular approach. "SMEs typically buy a product for a certain proportion of its functionality, rather than all of it," says Stephen McAlister, director at reseller Aspire Technology. "This can allow a more targeted competitor to offer a cheaper product that addresses the customer's needs very specifically. A packaged approach would allow very clear definition of a subset of the product's functionality at a clearly defined price."
One solution is the hosted approach, with the customer renting the CRM software and data storage space from a service provider. This has the usual benefits of the ASP model, among them per-click pricing with no up-front capital cost or extra hardware requirements, and no worries about backing up critical data, combined with the ability to access current data from any location without having to replicate it.
Microsoft does not believe the market is yet ready for hosted CRM, although it is keeping a watching brief. But other vendors, including FrontRange and Sage, are positive, with Sage promising announcements in this area very soon.
Vendors' ASP models often bypass the channel and go direct, but Concentrix has found a more lucrative alternative in custom hosted CRM. "Instead of a customer sharing its CRM platform with thousands of others, it has a dedicated CRM system installed in the reseller's data centre and managed as an all-inclusive service," says Peacock. "We recently deployed a custom, hosted Sage CRM service, beating off salesforce.com which offered its shared platform with the data hosted in the US."
With a range of solutions and a range of ways to obtain them, all that remains is to persuade SMEs to buy one. There are signs that a combination of IT awareness and business necessity - including the need to satisfy more demanding customers and to access information more quickly - is starting to fuel demand.
"Historically, this market has almost exclusively required a 'push' sale from the channel," White says. "Now, however, there's a demand from SMEs, adding a 'pull' element for the first time. We're seeing many more inbound requests for CRM-type technology, which reflects a greater maturity on the part of a market which increasingly knows what it's looking for."
CRM is bought by SMEs across all sectors, as almost any type of organisation may be anxious to improve its marketing and customer relations. Resellers are even reporting interest from universities and colleges as they face mounting pressure to treat students like customers.
Some vendors such as Sage claim there is a market among SMEs of all sizes, but to date the bulk of CRM sales seem to have been for 30 or more users, implying that it is the medium, rather than small enterprises, that form the mainstay of the market. "Sharing information (informally) is easier in small organisations, and although there's a lot of talk, it's hard to convince them to part with the money," says Jason Newell, marketing co-ordinator at reseller Raven Computers.
If resellers face resistance, Simon Smith, product manager at Toshiba Business Communications, offers a check list of questions resellers can put to a dithering prospect: "How much does a lost order cost? How much would losing a single customer cost over a year? Do they know when a customer has been lost? How many could benefit from the sale of an additional part of the product portfolio?"
Return on investment (ROI) is a key issue, especially after the high-profile failure of a number of CRM implementations in the past few years, but it can be demonstrated. "Our customers typically experience 20 per cent uplift in sales with a two per cent rise in gross profit while recovering 15 per cent of lost business, which can deliver payback in as little as three months," claims Julian Cook, vice-president of product marketing at sales intelligence software vendor Vecta.
"Typically we'd expect to see ROI within six to 12 months, as long as customers keep developing and training users to ensure they maximise the potential," Peacock says. "An SME CRM solution may cost as little as £10,000, which is less than the cost of employing an extra person to conduct all of the tasks CRM automates."
The current trend for measuring ROI is taken so seriously that Microsoft has even developed an ROI calculator for its Microsoft CRM product. Other key issues, says Nash, are persuading SMEs not to cut corners or seek to drop the price by abandoning essential training and consultancy; and convincing them that CRM must be closely tied into the business and supported by its key managers and stakeholders.
Doing CRM properly is hard work, but it's worth it, and the IT industry needs to convince SMEs of this, argues Gerry Carr, CRM solutions marketing manager at Sage. "There is some pain in defining a project, investing in processes and getting users to understand and use the technology," Carr says. "But this is nothing compared with the benefits of organising well-founded and understood processes, underpinned by technology that provides convenience and speed when handling customer transactions, and insight into how you are doing business and how to do it better."
Integrating CRM into a customer's business requires skill and experience, and it is usually the reseller's job to provide it. CRM is about business processes, people and best practice advice, so it is definitely a consultancy sale. "If you don't have CRM experience you shouldn't sell it," says Annette Giardina, CRM business director at Aspective, one of the UK's most successful CRM resellers. "We've seen a lot of people trying to come into the market who don't understand CRM, and they struggle."
According to Peacock, over the first three years of a CRM project the average customer spends as much on professional services as on the software itself. This is just as well because CRM software margins are as competitive as any other software market. Customers are more likely to pay a premium for add-ons, Peacock adds.
Although the cost can vary widely, the average SME CRM sale is worth about £50,000 to £80,000. Decision cycles tend to be longer, but otherwise it is perfectly possible to make SME CRM sales pay, Giardina says. "Mid-market firms tend to buy in smaller chunks but they keep buying," she adds. "They may only spend £15,000 at first, but then you may get three or four more deals during the year, where you don't have to make much sales effort because the customer knows you."
If the customer is new to CRM, Aspective finds the best approach is to install the software out of the box, let the customer understand what it can do, then come back later to customise it. Experienced CRM users tend to know up-front what customisation they want, but of course there are not so many of these in the SME sector - yet.
MICROSOFT'S CRM OF THE CROP
Since its UK launch in December 2003, Microsoft's mid-market CRM offering - imaginatively named Microsoft CRM - has been implemented by 150 firms. It sounds like a modest achievement for the world's most powerful software firm but, as Apay Obangoyway, software business manager at Ingram Micro, points out, this is more than any other CRM vendor achieved in its first year.
Microsoft might have achieved more if its accreditation process had been smoother. Jason Newell, marketing co-ordinator at reseller Raven Computers, says: "We've had really clued-up guys failing exams, and they couldn't understand why." Microsoft acknowledged the problem and Raven's technicians are passing their exams, but the reseller has not yet been accredited.
Obangoyway says: "Partners can earn up to an additional 30 per cent direct from Microsoft on initial licence and service, if they're certified on Microsoft CRM, and serve as the pre-sales advisor."
Some resellers are not yet convinced. "When MSCRM 1.0 was released it offered the functionality that other CRM vendors were offering three years ago," says Roger Peacock, sales manager at reseller Concentrix. "They released version 1.2 to offer some added functionality. But there are still some big functional gaps. Some of these are filled by add-on products."
Other resellers are more positive, however, among them CRM reseller Aspective, which is MSCRM-certified. Aspective's CRM business director, Annette Giardina, says first releases of CRM software have limited functionality but expand as they mature. The sales functionality is already strong, she says, and although marketing and services are weaker, Microsoft's roadmap promises to strengthen them.
CALLING ALL CUSTOMERS
If CRM is about managing and improving interaction with customers, it makes sense to integrate it with one of the key physical media of that interaction: telephony. If calls reach the right person, at the right time, with the right information, the customer experience is likely to be improved.
"The CRM reseller has an opportunity to resell telephony products," says Simon Smith, product manager at telephony vendor Toshiba Business Communications. "Computer-telephony integration (CTI) and call centre technologies offer excellent potential for the CRM vendor."
Automated call distribution, or ACD, which helps route incoming calls to the most appropriate person, is gaining in appeal. By linking PBXs to back-offices databases and CRM systems, the PBX can make routing decisions based on known data about the customer. When the call arrives at the right person's desk, screen-popping technology can give them essential customer information, improving efficiency and giving the customer the feeling that the company knows what it is doing.
Andy White, business development director at FrontRange, says: "Full integration provides SMEs with a range of benefits, including reduced total cost of ownership, lower administration, maintenance and database management, and a reduced need for physical hardware. We see integration as key from a telephony perspective."
CONTACTS
Aspective (01784) 410 420
www.aspective.com/smartcrm
Aspire Technology (020) 8487 8700
www.aspiretechnology.co.uk
Concentrix (01509) 235 000
www.concentrix.co.uk
FrontRange (01189) 387300
www.frontrange.co.uk
Ingram Micro (01908) 260 160
www.ingrammicro.co.uk
Maximizer (01628) 587 777
www.max.co.uk
Microsoft (0870) 601 0100
www.microsoft.com
Raven Computers (01274) 200 400
www.raven-computers.co.uk
Sage (01189) 270 100
www.sage.co.uk
SAP (0870) 608 4000
www.sap.com
Toshiba Business Comms (01932) 841600
www.telecoms.toshiba.co.uk
Vecta (01865) 381 700
www.vecta.net