Why The CRM Wars Matter

The battle for market share between the leading vendors of CRM systems may not appear to be something you should worry about, but it could affect far more than whose logo you see in your system. While we focus on the developments in mobile and Cloud, a war is brewing under the radar as CRM is becoming more deeply integrated with back-office systems, and control of this portal could determine control of both your technology stack and user experience.

The CRM landscape has changed dramatically in the last year or so. We went from seeing the rise of Software as a Service (SaaS) based offerings such as Salesforce.com which had looked to displace more traditional offerings, to a world in which Salesforce.com was itself being challenged by new rising challengers and the evolution of the old world. With this blog I want to explain why CRM has become so important and share my experiences on what the state of the market means to you.

First, some disclosure: I work for a company which, among other things, sells integration of CRM to other systems. We do not advocate a particular company and support all major CRM systems.

What’s been happening?

CRM wars are no new thing, in fact they have certainly been around since Oracle and SAP entered the front-office market in the late ‘90s, but I’m really interested in the latest round which arguably started with IBM’s decision to kick out its legacy 67,000 seat Siebel implementation (not only is Siebel Oracle’s big enterprise-grade CRM and one-time biggest CRM competitor, but the IBM account may have been the world’s largest Siebel implementation) with the mid-tier SugarCRM.

Following this, Oracle recently announced that it had bought the marketing automation platform Eloqua. Meanwhile, in April SAP lost its top spot (in terms of CRM revenue) to Salesforce.com, while Microsoft’s Dynamic CRM is working more closely with Oracle and SAP.

It might be interesting that a very large and conservative enterprise like IBM chose a relative newcomer like SugarCRM, and I’ll come back to that, but why should you really care? The CRM war clouds are gathering again, and it’s just starting now.

Perhaps the most telling sign that we are entering the future is that my company is now being brought into opportunities at the sales stage, rather than implementation. Before, integration was seen as a tool that was used when needed, but increasingly our relationships with CRM vendors are becoming a selling point.

Why should I care about CRM?

In recent years, CRM tools have become less like an automated Rolodex and integrated with a host of other enterprise tools, from enterprise social media through to the big back-office financials: now, if a salesperson wants a quick creditworthiness check on a customer, that’s easily accessible through the CRM. Likewise, if sales want to check on a customer’s support issues, or see when they last paid or if there are outstanding invoices, they can see this through the CRM.

What this means is that the CRM tool essentially becomes the front end of many enterprise systems, the portal through which they are accessed, and as the front end it is the pinnacle of user experience for most enterprise users. This is only going to increase as the rise of a more mobile-first workforce means that many users will mostly access enterprise systems through a mobile app which delivers the functionality and workflow they need right to their fingertips.

Granted, there will always be some users (accountants for example) who work primarily in the back-end systems but we’re really concerned here with the rest. As users need more and more functionality delivered through a simple, user-friendly portal the temptation will grow to plug in more and more modules delivered by the CRM vendor.

This means that by extending or withdrawing support for other tools, a CRM company could in theory pressure their clients into decisions regarding the back-end stack. This is of course more of a concern with some companies than others, both because of what technologies they have and their sales culture, and in reality we see a mishmash of technologies. However, it has been suggested that this logic was behind IBM’s decision to move away from Siebel, as the implementation was a legacy from before Oracle’s acquisition.

What kind of pitfalls are there?

If you’re wondering whether there are concerns for CRM implementations beyond this “big-picture” enterprise view, I recently spoke to a VP of Marketing who had just finished a CRM implementation (and who asked not to be named here), and her story is very typical of what I see with my customers. This company had bought the CRM having really bought into the “straight out of the box” promise of SaaS, but now feels that deeper understanding of the solution may have been necessary.

Essentially, the problem is that while vendors sell CRM solutions with industry standards built in, customers don’t realise that integration doesn’t happen out of the box. The reason that industry-wide open standards are important is that they make integration easier.

A case in point is the price book, a feature which allows you to upload your pricing and have it accessible to sales without the danger that they will change the pricing. As it turns out, it is possible to change the pricing in this CRM implementation because all the sales team have to do is change the unit volume; so extra work was required to ensure the system would only accept natural numbers (so that a discount cannot be applied by selling 0.8 units, for example).

This is not a problem, because rather than seeing this as a negative, with foresight it is possible to use customised, instance specific coding to get around these problems rather than implement the whole model out of the box.

What does the future look like?

The case of IBM and Sugar is also relevant because of what it says about the CRM market and what large customers actually want, showing that this round of CRM wars is just beginning and that there’s a lot to play for. When asked why IBM chose Sugar, an IBM executive referred to Sugar’s open source nature, the look and feel of the user interface, and the flexibility to run Sugar on-premise.

That last one is particularly interesting, because it seems counter-intuitive in these days of Cloud, but it does make sense. Not only does IBM have a lot of users to pay for monthly, but they work in different countries and need extensive customisation. Further, IBM has a large technological capability and its own technologies and tools which it needs to integrate with such as Lotus Notes and DB2.

This all implies that the value IBM saw in SugarCRM was flexibility, ease of customisation, and maybe an ability to play nicely with existing tools. There is no doubt that this is a game changer for Sugar, which can now compete for enterprise RFPs as the provider to IBM rather than a mid-tier company, but also for the rest of the CRM market.

For Oracle, it raises the question of customers’ willingness to be tied to a stack and an aging technology; for Salesforce, it puts a question mark against the viability of the Cloud-only, minimal customisation business model. And for all players in the CRM space, it shows that even the biggest customers are opening up to a world in which we buy the best fit of each technology we need and then integrate them, rather than wall-to-wall purchases from a single vendor.

This is where the value of a process-driven integration tool (unlike ETL) which doesn’t require the customer to invest in an additional portal. Instead, by focusing on workflows sales, marketing, operations, technical, and managers can all use the same systems but with only the functionality that they need. The CRM battle is going to affect the entire enterprise, and this is only going to become more significant with the rise of BYOD and mobile application interfaces that need to be sensitive to the device they run on.

I suspect that vendors are taking this more seriously than customers, who are still mixing and matching products. I wonder whether we will see a return to the sort of tactics used by SAP in the 80’s where they sought to control the entire software stack. This is all just starting, so I’ll let you know what is happening as more details emerge. Watch this space…