The Trendline

How hot is customer relationship management (CRM)? Peoplesoft bought the No. 4 purveyor of CRM software -- Vantive -- in 1999, and Peoplesoft already gets more revenue from its CRM offering than it does from its flagship human resources software. That should give you some idea.

The Promise

The area is hot because the promise is big: Know thy customer in a deeper (read: more profitable) way. Depending which vendor you listen to, CRM products analyze customer lifetime profitability and purchasing patterns, identify market segments and opportunities, coordinate customer contact channels, corral sales leads, measure service quality, improve brand loyalty, and turn lead into gold (though that last module costs extra).

The Pitfalls

Unfortunately for CRM, relationship management is an oxymoron. Customers don't want to feel "managed" any more than spouses or friends do.

Actually, the biggest problem with CRM software is that customer relationship management isn't "" software. CRM is an attempt at codifying "customer first" corporate values, practices and processes. It's a corporate culture and a priority-setting management discipline. In other words, if you've identified the most desirable customer segment on Earth but they still can't get their e-mails answered, you aren't doing CRM in a meaningful way. "A lot of people still think CRM is a box of software, and a lot of them are slogging through implementations that won't do anything for their companies," because the company hasn't first taken stock of its customer-facing processes, says David Dobrin, a partner at Benchmarking Partners in Cambridge, Mass.

And even when the processes are examined and revamped, there's still a mountain of work to climb. Most companies need to reconcile a variety of customer, product and financial legacy databases to get the kind of big-picture customer views that true CRM demands. Worse, customer contacts now stream in through a broad variety of channels: sales personnel, the Web, call centers, e-mail, fax, kiosks and more, and the customer experience must be identical no matter what channel is used. A product or service provider not only must be equally responsive to all those forms of contact, but also has to integrate the customer information that comes in through those myriad ways.

But there is some good news, according to Dobrin. For starters, sales forces have traditionally resisted attempts at automation; CRM vendors, notably market leader Siebel Systems, are moving away from the command-and-control model that made sales folk squirm. Siebel is reworking the software to be less dictatorial (sales staffs sometimes felt that CRM software had a "big brother is watching" taint). Also, CRM is so hot that a great many vendors are working to increase the capabilities of their offerings and to hammer away at the tremendous data and systems integration challenges. Two years ago, Dobrin says, CRM packages were extremely limited in scope, whereas today they show signs of depth. (Some packages let salespeople call in and receive automated sales leads, for instance.) Software packages formerly known as everything from sales-force automation to computer-telephony integration vendors like Nortel [Networks], Lucent [Technologies], Cisco [Systems] and Genesys [Telecommunications Laboratories] are working in CRM today, and the growing interoperability of their offerings means less pipe-fitting work for CIOs.

The Prediction

CRM can be done and can be valuable. But anyone who expects to plug it in, turn it on and reap loyal customers is in for a sad surprise.

This story, "CRM" was originally published by CIO.

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