InformationWeek
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March 26, 2001 |
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When Customer Care Counts
Despite the slow economy--or maybe because of it--CRM projects forge ahead
By Steve Konicki (skonicki@cmp.com) and Jennifer Maselli (jmaselli@cmp.com)
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edEx Corp. is trying to bear up under the economic slump that's curtailed demand for its services, contributing to a 3.5% decline in earnings for its last quarter and lowered expectations for its current quarter. The package-delivery company is scrutinizing all aspects of its IT operations to ensure efficiency, but there's one project in particular that's got management's full approval: FedEx is deploying customer-relationship management software in its call centers.
With good reason. As companies struggle to deal with the slowing economy--and the effect it's having on their IT budgets--one thing they don't want to do is disenfranchise customers. Many are pushing ahead with CRM projects that were launched last year; others are getting started now. "The feedback we're getting is now is the time to leverage investments that tighten our relationships with customers, because it's the strength of those relationships that's going to help us during downturns," says Craig Watson, CIO of FMC Corp., a diversified manufacturer in Chicago.
IT advisory firm Gartner estimates the market for CRM apps will grow 30% to 35% this year, about half of last year's rate but still healthier than most other software categories. That's "extremely strong in an economy like this one," Gartner analyst Tom Topolinski says.
Just last week, market leader Siebel Systems Inc. disclosed multimillion-dollar contracts with AT&T Wireless, Bank of America, and French bank Transatlantique for its lead-tracking, sales-force automation, customer service, and other E-business modules. The software will unify Bank of America's disparate customer data, support cross-selling efforts, and help customers help themselves on the bank's Web site, a spokeswoman says.
Enterprise resource planning vendors are seeing a lot of interest in their CRM products from ERP clients. Earlier this month, Gillette Co. revealed plans to extend its use of SAP's mySAP.com CRM software globally after successful deployments in Germany and the United States. Other recent converts to SAP's CRM suite include Advanced Micro Devices, Brother International, and Philip Morris U.S.A. PeopleSoft Inc. counts GTE and Novell as new CRM customers and says it expects CRM software to account for a big part of the 35% sales growth it's expecting this year.
FedEx can't afford to ignore its customers in a weakened economy that has also taken a toll on rival United Parcel Service Inc., which last week said first-and second-quarter profits would be below estimates. Three months ago, FedEx launched what it calls its e-CRM project, which will leverage an enterprisewide infrastructure to move data seamlessly between Web and call-center channels. "Customers wanted a complete record of their interaction, a single point of contact," says Sheila Harrell, VP of customer service, strategic planning, and analysis.
This fall, FedEx plans to begin using two Clarify CRM applications from Nortel Networks Corp., one to build and maintain customer profiles, the other to route calls to the most appropriate customer-service representative. The goal is to transform call-center reps from order-takers into problem-solvers.
Online brokerage Quick & Reilly Inc. in New York is using Siebel's sales-force automation tools to offer its customers investment options based on what it already knows about them. Edward Gary, assistant VP of CRM solutions at Quick & Reilly, says the firm in the last two months has seen a noticeable increase in sales in a special products unit that includes mutual funds and bonds, which he attributes in part to the Siebel applications. The software has also improved the company's ability to respond to customer inquiries. "Siebel is more valuable now because it helps us retain customers during a time when many financial customers have a tendency to switch brokerages," Gary says. Although Quick & Reilly's IT budget is being tightened, an upgrade to Siebel 2000 is a top priority this year.
For IT managers, these customer-oriented projects raise a question: What software to use? Vendors that specialize in CRM may have the most fully featured applications, but there can be advantages to using a CRM suite from an ERP vendor, especially if a company already uses that vendor's other products. CRM software that's an integrated part of an ERP suite presents a compelling sales argument, says AMR Research analyst Dave Boulanger.
If CRM applications require integration with a different vendor's back-office apps, that can add time and cost to implementation and upgrade projects. AMR estimates software license fees are only a quarter of the cost of deploying a standalone CRM package; integration and implementation costs make up the balance.
United Asset Coverage Inc., a privately held telecom and office equipment maintenance services business in Naperville, Ill., chose Oracle, based in part on those kinds of considerations. The company made its decision to deploy 32 modules of Oracle's 11i E-Business applications suite, about half of them CRM applications, just as the economy began its descent. On the choice of a pre-integrated application suite, chairman and CEO Pat Martucci says, "We needed to make sure the software would work, and we needed the potential for immediate return on investment."
By May, United Asset Coverage expects to complete a rapid deployment of Oracle's financials and human-resources applications. The first phase of its CRM project, due to go live in October, is next, CRM VP Brad Snook says. The goal will be to help identify prospects while also managing sales, contracts, service delivery, and the company's new and refurbished parts business. What's more, the company thinks CRM will help it hold down administrative costs and maybe even improve its already-impressive customer retention rate.
FMC took the opposite approach, choosing Siebel's applications over those of an ERP vendor with both front-office and back-office support. FMC's energy systems and food technology groups last year implemented Siebel's software as part of a broader strategic goal to "take over" certain business functions--such as asset management--for its business customers, CIO Watson says.
It's all part of what Watson calls "customer value penetration," which he describes as "becoming more and more important to our customers, and to our customers' customers, so the notion of doing business without us is unthinkable." FMC wants to provide information-based services to help customers manage efficiency, yield, and safety of production lines. "Siebel will be a critical component of delivering those services," Watson says.
No one's suggesting that CRM applications can compensate for all the ill effects of a slower economy, and the promised benefits of CRM projects can be less than expected. Gartner analyst Robert DeSisto warns that as many as 85% of companies that buy CRM software to automate sales efforts don't pick the right tools because they fail to define business objectives or develop processes for meeting objectives.
Dave Root, CFO with Eagles' Flight Creative Training Excellence Inc., knows firsthand that successful CRM projects require buy-in from personnel. For seven months, the Guelph, Ontario, corporate training firm has been running Siebel apps to get a better view of its customer base, but the payoff is slow because some employees have resisted the extra data entry required by the software. That was "a huge culture change we didn't prepare for," Root says.
Resistance is diminishing though--enough so that again this year, Root plans to spend half the company's IT budget on CRM initiatives. "We're better equipped to more quickly recognize when there's a slowdown in a sector so we can more aggressively pursue other sectors," he says.
Another potential roadblock: It can be difficult to gauge the return on CRM deployments, and that could stand in the way of CRM projects at some companies. "As CIOs debate IT budget cuts, they'll look to keep the things that show clear ROI," says Brent Thill, an analyst with Credit Suisse First Boston.
Even so, anecdotal evidence is encouraging. FWMurphy Manufacturing, a maker of engine and compressor controls in Tulsa, Okla., says it's having the best sales month in its 60-year history, and Siebel apps helped. The company's sales process is now more efficient, says VP of operations Mitch Meyers. Better customer service and increased sales--no wonder CRM applications are selling these days.--with Beth Bacheldor, John Foley, and Cheryl Rosen
Photo of Gary by Melanie Weiner
Photo of Martucci by Jeff Sciortino
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