April 17, 2000

http://www.informationweek.com/782/crm.htm

Customer Service For Business Partners

Companies want CRM tools to manage business relationships

By Saroja Girishankar

ustomer-relationship management tools--a major competitive weapon to attract and keep consumers online--are promising to do the same for online business partners. While the importance of customer service for consumer transactions is well-known, its value for business-to-business commerce is just emerging. CRM for business communities goes way beyond the creation of profiles of customers' purchasing preferences; it deals with automating and seamlessly unifying online selling, marketing, and customer service. Further, it must integrate these transactions whether they originate over voice, E-mail, wireless, or Web communications. So far, no one package can do it all, but if business-to-business CRM achieves its goal, companies will better manage and cultivate thousands of customers and business partners online.

ChemConnect Inc.'s World Chemical Exchange, a global trading exchange for the $1.6 trillion industrial chemical market, is a real-time E-marketplace scrambling to create a brand name and customer loyalty among 4,000 companies in 110 countries that are registered as buyers and sellers.

ChemConnect wants a "360-degree view" of customers so it can track every interaction a customer has with the exchange. "Just as an [enterprise resource planning] system is the nerve center for a manufacturer, CRM is the nerve center for our chemical market exchange," says Raj Bhargava, senior VP for product planning and engineering at ChemConnect. "CRM helps manage the workflow among customer service, sales, and marketing for real-time E-commerce transactions."

ChemConnect's challenge is to entice customers to sign up, validate their membership, train them to use the site effectively without violating the anonymous trading policy, and ensure that they consummate transactions. A robust CRM solution could do the job.

But meeting those needs is a tall order. The E-commerce engine that customers log on to has to be integrated with customer-service software that processes and validates the ID request through credit checks and sends back the approval to the E-commerce engine, which in turn allows transactions. ChemConnect uses the Octane 2000 CRM suite from Octane Software Inc. to integrate E-commerce functions with customer-service activities. In the event a customer violates any exchange rules--such as typing a phone number or revealing one's identity--customer service is instantly alerted to instruct the E-commerce engine to suspend the transaction. The customer also has to be informed about the faulty transaction by E-mail, phone, or Web communication.

In addition to tracking bid postings, origins, and destinations, ChemConnect is about to use Octane's CRM software to let sales offices at five global sites, including London and Singapore, give existing customers new buying and selling options such as personalized sites. Octane 2000 automates sales, marketing, and customer service, while letting ChemConnect modify and map the application to its business logic and processes. Octane's graphical tool, called Studio, also lets ChemConnect developers personalize screens for customer-service representatives and customers, and draw in new customers. For instance, when customers abort in the middle of a bidding process, ChemConnect passes that information to customer service for follow-up and to offer buying alternatives. Meanwhile, at their personalized My ChemConnect site, customers get automatic alerts about chemicals available on the site.

"The tremendous pressure to retain existing customers and partners while cultivating new accounts is driving the demand for comprehensive CRM products that can automate and extend sales, marketing, and customer-service applications across channels and customers," says Karen Smith, a senior analyst at the Aberdeen Group.

Integrated CRM solutions are crucial for many traditional companies, too. Allianz Group, a $50 billion global financial and insurance services company that oversees

$400 billion in assets, needed to automate its 75,000-person sales force and integrate those operations with marketing and customer service for its institutional customers. It turned to TeamPoint, a CRM product from Point Information Systems Inc. CRM's "centralized repository and business process workflow" provides a unified view of Allianz customers, sales, and marketing operations, says Shawn Spott, manager of business services at Allianz Life Insurance Co. of North America, an Allianz Group subsidiary. "The goal is to have all interactions handled as a single, complete process instead of separate, isolated activities," he says.

Customer record-tracking is critical to businesses' online success, and, like Allianz, many are looking to CRM to provide a "cohesive, consistent, and synchronized view into all the major business processes," says Bob Chatham, a senior analyst at Forrester Research.

Unfortunately, CRM software developed from the ground up for the consumer market doesn't yet measure up for the business community, where automating sales and marketing, identifying the price that customers are willing to pay, and creating personalized promotions and product reviews are key. By contrast, online consumer markets create profiles of individual consumers and their buying habits and the primary interaction is over E-mail. Bell Canada's Bell Actimedia subsidiary, for example, offers dial-up and digital subscriber line service for high-speed Internet access to 600,000 consumers using Silknet Software Inc.'s Eservice product. Bell Actimedia has integrated Eservice with Remedy Corp.'s network alarm product; however, the ties are rudimentary and track basic network problems that only affect E-mail.

CRM products traditionally offer one of two solutions: automated sales, marketing, customer-service, and contact-management capabilities, or automated problem management via business process workflow. Although vendors are starting to add Web-based solutions to their CRM or sales automation gear, Aberdeen's Smith says these are mostly piecemeal solutions, and that's a big problem for businesses. "Once you start peeling the onion skins of the CRM wares, you see that they are either focused on campaign management, sales automation, or sending mass E-mail promotions," says ChemConnect's Bhargava, "None consolidates customer and partner activities over multiple communications media."

CRM vendors tend to address niche areas. For example, Clarify Inc. offers call-center capabilities; Kana Communications Inc. focuses on managing inbound E-mail and Internet-based communications; and BroadVision Inc.'s forte is in Web-based sales functions. Siebel Systems Inc.'s strength is in sales, marketing, and channel support, plus call-center service. The recent spate of mergers and acquisitions--such as Epiphany Inc.'s purchase of Octane--may help. The combined company will merge Octane's inbound customer-service products with Epiphany's analytical and personalization software to provide a more integrated CRM product than either could offer alone. The companies say they plan to support video and wireless media at some point. Likewise, the merger of Kana and Silknet is expected to fuse Kana's E-mail capabilities with Silknet's automated sales, marketing, and customer-service functions (see story, p. 72).

Until the marketplace evolves, companies are managing with what they have. For Watlow Electric Manufacturing Co.'s 100 sales engineers, a CRM system from SalesLogix Corp. is a step in the right direction. The $250 million St. Louis company assembles heating products with internal components from its eight factories in North America. Before the SalesLogix system, Watlow sales engineers had to telephone each of the manufacturing facilities to track orders. The system now automatically queries the factories to assemble orders for heating products, saving four hours every week. That equates to nine extra sales engineers, at an annual payroll expense of more than $1 million. Watlow's customers also get order status online on a daily basis, compared with the several days they previously had to wait for information. The CRM system runs on a SQL Server database and is linked to Watlow's AS/400-based business system. "CRM is the heartbeat of our organization because we use the package as our strategic, global sales, and marketing instrument," says Mike Butts, global sales technology manager at Watlow Electric.

Despite these benefits, however, Watlow Electric spent more than $1 million and slightly more than a year installing a customized version of SalesLogix's sales automation, contact management, and CRM systems. The company is also considering SalesLogix's Interact.com portal, which has just launched subscription services for several CRM functions. This will let Watlow link to customers over a secure Web site and share order status and customer-service interactions.

Indeed, online businesses are racing to install and implement Web-based CRM solutions. But as early adopters, many are finding that costs often start at hundreds of thousands of dollars and run into the millions, with implementation cycles of a year or more and lots of in-house development work.

Aberdeen Group says Internet commerce and the need to connect businesses with resellers, partners, and customers has stretched the scope of CRM. Companies are hungry for front-end applications that unify back-end business processes for better customer and partner traction. Aberdeen Group expects the market to meet these demands. For example, Siebel is in the process of adding CRM capabilities that encompass both partners and customers. CRM software licenses, which also include help-desk products, generated $2.5 billion in 1998 and is expected to reach $5.6 billion by 2002, Aberdeen Group says.

Forrester Research says business commerce over the Internet far outstrips activity in the consumer area, justifying the need for better CRM functions. While overall E-commerce sales for the consumer sector will grow from $39 billion in 2000 to $184 billion in 2004, the business-to-business market will balloon from $406 billion in 2000 to $2.7 trillion in 2004, according to Forrester Research.

Speed to market coupled with the cost and effort of implementing CRM is driving many small and midsize companies to application service providers. Westburne Electric Alberta, a $150 million wholesale distributor of electrical products such as switching gears and programmable logic controllers, needed to let its sales team follow customers' orders from the first sales call to implementation and after-support, says industrial sales manager Jim Lyske.

For Westburne, the benefits of an automated, comprehensive CRM system were evident as it moved from an Excel-and Word-based database about customer leads and orders. But Lyske found that doing the implementation in-house would take at least two months and cost more than $350,000. So Westburne chose FutureLink Corp., an Irvine, Calif., ASP that deploys Onyx Software Corp.'s Front Office CRM suite, for automated sales, marketing, and customer service.

While it previously took 90 days to convert a customer lead to an order, it now takes 30 days, Lyske says, and the price tag was 20% less than doing it in-house, with a flat fee of just $200 per user per month for Westburne's sales force of 60. Better still, the services were up in just four days.

Even those who have spent considerable time and money installing CRM and sales-automation software say they would prefer subscription ASP services. Even if a company successfully implements CRM in-house, maintaining and upgrading applications still involves additional IT staff and support costs. Although most companies and E-marketplaces are using internal IT resources to customize and install CRM solutions, many will rely on ASPs for ongoing hosting, maintenance, and support.

But ASP offerings often fall short of user expectations, too. Westburne's Lyske wants his ASP to offer integrated CRM and back-end services. "What we ultimately need from ASPs is a total end-to-end IT software solution that offers and integrates 17 different software, ranging from ERP to E-commerce, CRM, and asset and order management," Lyske says.

While Lyske's dream of services nirvana might not be at hand, CRM vendors such as Onyx Software have developed hosted versions of their products and have extensive arrangements with ASPs. Onyx this month launched two portals and forged channel partner agreements with seven software vendors to augment its Front Office 2000 suite. A majority of others vendors are either developing or plan to create CRM software for ASPs.

If CRM offerings were online and used the Extensible Markup Language as an interoperable way to tightly tie together disparate products, they would come closer to users' needs. Standards-based Java business objects and Microsoft's Component Object Model for distributed objects are among tools that would help synchronize customer communication over the phone, E-mail, wireless devices, and the Internet.

So far, Octane has developed what it calls an Internet-relationship management product--CRM for the Internet--that uses XML. Onyx, Pivotal, and SalesLogix are also adding communications and business-process capabilities, while Epiphany, Kana, and Silknet are creating functions through acquisitions and mergers. Traditional CRM vendors, including BroadVision and Siebel, plan to add XML marketing and buy-side capabilities in the next few quarters.

Equipp.com, a Web intermediary that facilitates sales of industrial machinery, launched its site in January using Octane's 2000 CRM software as a sales-automation tool. Octane gives Equipp.com's salespeople the latest information about customers' buying habits and serves as a business tool for managing marketing promotions. Equipp.com can then figure out which machines should be sold at what price and create pertinent marketing promotions.

In less than two months, the sales-automation software eliminated manual processing of 2,300 call-center, E-mail, and Web inquiries. As a result, 10 fewer customer-service agents were needed, saving $500,000 on the annual payroll budget. "We are a support marketplace that facilitates transactions between suppliers and buyers," says Doug Hegebarth, Equipp .com's chief technology officer. As such, "customer records are the heart and soul of our business."

Online businesses know that keeping their internal sales, marketing, and customer-service groups on the same page about customers' purchase preferences and requirements is key to success. "Customer information is the single most important asset we have," says James Chilton, VP of IT at Project Software Development Inc. and its subsidiary MRO.com Inc. PSDI is a $140 million vendor of enterprise asset and maintenance solutions with 6,000 business customers. MRO.com is an E-marketplace that offers maintenance, repair, and operations supplies, launched in July; it has 10 suppliers and targets PSDI's 6,000 customers.

PSDI and MRO.com are using Siebel 99 CRM software to "provide real-time support internationally" to sales teams and to forecast potential revenue, Chilton says. Recently, the system proved its value when PSDI's chief operating officer resolved within minutes a problem from an unhappy Australian customer calling at midnight. He used Siebel's real-time information about the customer, including orders and history of support calls. Chilton says it would have taken several hours, if not days, using the Lotus Notes software the company previously used for CRM and sales activities.

But PSDI also had to face implementation costs of $6 million over five years, plus the hassle of deploying skilled IT staff to manage the CRM system, so instead it's considering an ASP to manage it for the same amount.

It's frustrating for companies that want to implement systems but are stymied by the offerings. "We want integrated CRM solutions now, not later," ChemConnect's Bhargava says. For many online businesses, integrated CRM solutions are the linchpin that links E-commerce transactions and customer communications. And if the market doesn't provide the solutions, they will have to do it themselves. No less than their business depends on it.

Photo of Bhargava by Richard Morgenstein
Photo of Hegebarth by Robert Burroughs