From evolution to revolution
this issue we will run a series of articles on e-business.
The first of the series talks about Customer Relationship
Management, (CRM) and why it is important in today's
is 10.30 in the morning. Kate, a young woman living
in Boston, is waiting for her appointment with her
doctor. She has been feeling unwell. The beaming doctor,
after a check-up confirms her pregnancy. Jubilant,
she rushes home to break the news to her husband.
the same day, Robert meets Jake, Kate's husband, at
his office. He shows to a bewildered Jake, his company's
brochures for baby cradles. Jake protests that he
neither has a child, nor was expecting one. Just then
the phone rings and Kate announces the expected arrival.
Needless to say that Robert walks out with a plum
is a busy business manager. On his trip to London,
he finds time to buy the birthday gift for his fiancée
living in Paris, from the supermarket chain. He likes
the gold watch, but would like a different strap and
his name etched on it. Moreover, he would like the
gift to be delivered to his fiancée's home.
On reaching back to his home in New York, he calls
the local number of the supermarket chain, ready to
give the details of his purchase, and enquire if the
gift was delivered. When the phone is picked, the
operator, without asking for any introduction, greets
Morning, Mr. Smith. Your gift was delivered yesterday.
Thanks for doing business with us". Mr. Smith
is bewildered but, of course very happy, wondering
how on earth did the operator 'recognize' him.
you are surprised, don't be. Welcome to the world
of Customer Relationship Management, the management
mantra of the new millennium.
is it all about?
Broadly speaking, Customer Relationship Management
or CRM is a web enabled marketing, sales and service
application integrated across all customer contact
is a tool that seamlessly integrates into the enterprise
information system. The Internet has revolutionized
the way business is done and has virtually taken the
enterprise information system within the reach of
customer. It can be accessed through the call centers,
through the Internet and increasingly through mobile
devices. See Figure 1.
size and key players
The worldwide CRM market consists of two broad segments:
The CRM products and the CRM services. Both the segments
have shown astronomical growth during the past couple
of years and as per the projections of the leading
market research companies, CRM products and services
will grow, over the next five years with a Compound
Annual Growth Rate (CAGR) of 49 per cent and 29 per
cent respectively, well above the overall expected
CAGR of the IT industry of 11 per cent.
Research, Inc, predicts the Customer Relationship
Management (CRM) market will reach $16.8 billion by
the year 2003, CAGR of 49 per cent over the next five
firm also predicts that the European CRM market will
grow to $4.3 billion in 2003 from $500 million in
1998, with a compound annual growth rate of 53 per
cent, exceeding the 44 percent CAGR expected in North
America over the same period.
Customer Relationship Management Revenue, 1998 - 2003
1998 1999 2000 2001 2002 2003 5 Year
$2.3 B $3.7 B $5.4 B $7.9 B $11.5 B $16.8 B 49%
Source: AMR Research, 1999
Aberdeen group forecast that the CRM product market
(Independent Software Vendors) to grow to close to
US$ 13 billion by 2003.
top vendors, based on 1998 total company revenue,
were Siebel, Vantive, and Clarify. ERP vendors are
beginning to have a tremendous impact on the CRM market,
with Oracle and Baan capturing two of the top five
positions in overall CRM revenue. The marketplace
has become even more fragmented with Peoplesoft's
acquisition of Vantive and success of a number of
forecasts that the total worldwide market for CRM
services will grow from US$ 34.42 billion in 1999
to US$ 125.2 billion by 2004.
and Worldwide CRM Services Revenue,
1999 and 2004 ($M)
Country 1999 2004
United States 18,845 63,854
World Wide 34,420 125,205
Source: IDC, 2000
CRM services consist of six major segments:
1. Consulting services (IDC projects growth from US$2.2
billion to US$ 7.1 billion by 2004 at CAGR of 26per
cent, compared to CAGR of 12per cent of IT & Business
2. Implementation services: This makes the second
largest segment of the CRM services and will grow
from 19per cent in 1999 of the market to 25per cent
of the market in 2004 (as per IDC's forecast).
3. CRM Outsourcing services: IDC forecasts that this
market will grow from US$ 23 billion to US$ 75.1 billion
4. Training services: The CRM training market is forecasted
to grow from US$ 2.2 billion in 1999 to US$ 9.1 billion
by 2004 at a CAGR of 33per cent.
Bulk of the revenues would continue to come from USA
while Latin America is likely to be the fastest growing
evolution of CRM
It is not suddenly that the business managers have
realized that the customer is supreme or the need
to render personalized service. However, it was not
possible to address the preferences of a massive group
of widely dispersed individuals. Neither the tools
nor the technology was available. The smart business
managers did the next best thing, which was to conduct
a market research and classify the market into broad
segments with different preferences. The product managers
would (and still do) then position their products
catering broadly to these segments.
information systems have evolved tremendously over
the last three decades and so have the communication
systems, as shown in Figure 2. While ERP, the management
mantra of nineties offered the means to optimize resource
planning at the enterprise level encompassing every
area of the enterprise on a real time basis, there
was still no means to connect to the customer. The
customer had just too many locations.
The commercial penetration of Internet into the homes
changed everything. It provided the means to take
the integrated enterprise information system to the
customer's living room. He could buy, sell or bank
sitting there, while uniquely identifying himself.
has led to the evolution of CRM, which uses the Net
to integrate the customer contact points directly
with the enterprise. It provides the means to interact
with every customer individually (thereby interacting
with million or even billions of customers). The interactions
over a period of time create history that is available
to the field sales/support personnel at the touch
of a button.
business in the CRM era
CRM has revolutionized the way the business is transacted.
Customization and personalization has been radically
redefined. There was a time when companies could do
business by making a range of products, and the customers
could choose from the available product range. Now
the customer demands 'Merawala
And the companies have to gear themselves to deliver
the 'Mera wala' products to the customers.
is the great enabler that makes it possible to achieve
this level of customization in a cost effective manner.
Right from a highly focused marketing to the transaction
and after sales support, CRM provides a cost effective,
easily accessible and cost effective interface.
enabling the direct customer interaction, CRM has
changed every sphere of activity. The products must
have modular designs that can be easily customized.
Even the warehouses are changing from being just storehouses
to those having the facility for 'Assemble to Order'.
The customization increases the product variety multifold
and it may not be economical to store such huge variety.
The intelligent warehouses, as they are popularly
known as, stock the knocked down modules and assemble
them on the receipt of order. The interaction cycle
using CRM is shown in Figure 3.
fuel efficiency was the selling proposition for automobiles
in the seventies, sportiness in the eighties and safety
in the nineties, customization is the selling proposition
of the new millennium. The e-sales concept is increasingly
becoming significant in volumes for most American
and European manufacturers. The interactive e-Store
front of the manufacturer permits the customer to
configure his own
automobile the kind of upholstery, music system, accessories,
customer preferences which were captured
through the earlier interaction automatically create
work orders and the customized product is delivered.
Even though the product is highly customized, there
is hardly any additional cost involved. More companies
are focusing their growth strategies around direct
sales through the Net.
Travel and transportation industry has been almost
revolutionized by CRM. For them CRM makes the difference
between being in business or out of it. Financial
services, insurance, investment banking, education
and utilities are the other large scale adopters of
CRM in the services sector.
concept of retailing has been redefined with CRM.
Product industries are using it for marketing as well
as after sales support. Increasing number of product
manufacturers are able to retail directly, thanks
should you adopt CRM?
are realizing those who are not able to come up with
effective CRM strategies risk being edged out of business.
Customer is the king and the business strategies must
be built for ensuring customer loyalty. It costs six
times more to create a new customer than retain an
trends in CRM
CRM matures, distinct trends are emerging.
solution: Enterprises are increasingly showing an
interest in the buying a hosted solution from the
trend is likely to increase as the enterprises would
prefer to concentrate on their core businesses and
let the ASPs provide updated solutions.
solution: There is an increasing trend to integrate
the CRM activities with the supply chain, manufacturing
and B2B market places. This trend is likely to increase.
of marketing and branding services: Internet marketing
and branding is a different paradigm with different
set of rules. Specialized services, with the convergence
of marketing and CRM professionals are fast emerging.
warehouses: Even as enterprise rush to warehouse their
own data captured at interaction points, data has
become a commodity. It can be bought, sold, shared
and leased. There are companies whose only business
in data transactions.
is to India what oil was to Gulf. It is therefore
no surprise that the Indian companies are jumping
into the CRM bandwagon to seize a chunk of the global
market, both products as well as services.
is vast talent pool; India is fast becoming an important
development base of major CRM companies. This trend
is likely to increase in the future. Call centers,
catering primarily to the American and European markets
are coming up in and around the metros. With the easing
of infrastructure constraints, India is likely to
emerge as a significant player in this segment.
of CRM by Indian companies is at an infancy stage.
The CRM enabled companies include Modi Xerox, Tata
Telecom, TVS Electronics, HP India, Tata Infotech,
Carrier Refrigeration, Tata Teleservices, Satyam Infoway,
Planet M, and Epicenter Technologies among many others.
even has a CRM Foundation in New Delhi, founded with
the purpose of assessing and improving CRM practices.
Founding members include Tata Telecom, Escotel, Modi
Xerox, Global Groupware, AC Nielsen, Carrier Aircon,
and Motorola India, among others.
A CRM solution is not a stand-alone solution that
could be implemented in isolation to the enterprise
information system. It marks a shift of the focus
from product centric planning to customer centric
planning. A prudent CRM strategy is essential for
a successful adoption of CRM. Some of the critical
success factors that must be evaluated are:
Identify the mission, objectives and goals: Technology
has radically changed the business environment. A
detailed business strategy analysis lays the foundation
for engineering an information system for the enterprise
that will fulfill the current and the future needs
of the organization.
2. Identify and prioritize what functions need to
be automated: A CRM automation audit shall help create
a roadmap to complete automation. There may be processes
that are inefficient and automating them without re-engineering
is not a desirable solution.
3. Gain Top Management support and unequivocal commitment:
No CRM strategy can ever succeed unless the top management
is totally committed to its success.
4. Employ technology smartly: Technological obsolescence
is a real threat. A long term vision and prudent planning
is a must. As a thumb rule, look for open architectures,
scalability, and integration into existing systems,
reliability, and support etc. Evaluate options and
take an informed decision. Keep in mind that it may
be too expensive to reverse this decision.
5. Involve users early: Involve the likely users early
in the process. They know their needs best and can
best help define the new system, for they are best
aware of the old one. It is important to make then
participate in the process and 'own' the solution.
6. Prototype the solution: Deploy the solution on
a smaller scale and test all the functions, instead
of jumping to the 'big leap'.
7. Training: The paramount importance of training
cannot be over emphasized. This is one of the single
most prevalent reasons for failures/incomplete success.
A smart manager would realize that training costs
more than the combined hardware/software cost over
the solution lifecycle.
8. Allocate responsibility: It is important to ensure
maximum uptime and reliability of the system so that
the users may not loose faith. Make one department/person
responsible for the CRM system.
9. Cross department management team: Form a committee
with people from sales, marketing and service departments
apart from the information systems department to monitor
the CRM project.
10. Keep the employees motivated: Technology usually
breeds fear and insecurity. It is desirable to 'sell'
to system internally before implementing it to avoid
Enterprise managers are more obsessed with the product.
However, experience shows that even the best product
fails to meet the desired end goals if the implementation
is improper or the training inadequate. Rushing to
implementing a CRM system without a prudent evaluation
and audit usually results in a failure. The choice
of an experienced and able consultancy organization
is usually very critical.
Technology has been a major driving factor for CRM
and is bringing radical changes. The developments
in several technological areas are likely to have
a major impact on CRM. Some of the areas are listed
sensing: passwords continue to be the least user friendly
and the most un-secure link in the CRM chain.
advancement in biometrics will soon make it possible
to make a foolproof recognition through voice, live
fingerprint or image. The system would automatically
identify (and not just verify) the user. Peoplesoft
has already announced that it is working on voice
There has been an enormous advancement in this area.
Rapid developments in the mobile computing and data
access devices are likely to be a major growth area
for CRM. The global marketplace is all set to shrink
to a palm top.
signatures and secured identification technologies.
with B2B marketplaces: Many argue that online marketplaces
will drive sales in the coming decades and branding
will no longer be important. Even if such a postulation
is far-fetched, there can be little doubt that enterprises
will integrate the CRM solutions with B2B market places.
Agarwal, team leader, Quark Systems, Chandigarh. He
can be reached on email@example.com
The contents of this article are the author's own
and expressed in his personal capacity, without any
association whatsoever, expressed or implied, with