Tech Guide: Vertical CRM Stands Up to Scrutiny

"It's important to take a hard look at the functionality that exists within the vertical software," says William Blundon, chief marketing officer at Extraprise, a systems integrator with a focus on CRM. "Every investment bank does business the same way, which makes customizing a package to this vertical fairly easy, but that's not true of every vertical." Blundon points to the automotive industry to demonstrate the other extreme--an industry with many different pieces, including different requirements for automotive manufacturers, suppliers, and retailers.

And remember that even if you choose one of these highly vertical systems, such as a one specifically geared to retail banking or automotive suppliers, it still must be customized to some extent, because no two companies--even those in the same industry--have the same business processes. Conventional wisdom says customization should be limited to the business-unique features, enabling companies to be up and running quickly, for as little cash outlay as possible. Blundon recommends using the 80-20 rule, which says that companies shouldn't consider a vertical CRM solution if they require more than 20% customization. That means evaluating both the uniqueness of your company's needs and the requirements of your industry.

Finally, you should make sure that what you see is what you get. While some vendors are creating truly targeted applications, others simply change screen labels and add specialized database fields, pronouncing the result a vertical application.

"The problem isn't that some industries call customers 'clients' and other call them 'business partners,' it's that something like number portability or meter reading in utilities really are very different business processes," says Erin Kinikin, a Forrester Research analyst. "You can't just change the semantics and expect it to work. You have to deal with the real processes."

Kinikin says enterprise vendors are taking steps away from this approach, but it will take time. In the meantime, companies should ask plenty of questions to ensure that they are getting a product that will work for them.

Looking Forward (And Backward)
Vertical CRM is on an up cycle: Vendors are enthusiastic about the technology's promise, leading some to claim that vertical CRM is one of the few bright spots on the technology landscape today. Eyram, for example, believes that more than 50% of Pivotal's revenue will come from vertical markets in five years--a much greater percentage than today.

Experts believe that consolidation of this confusing marketplace will accelerate over time, causing vendors to carve out their niches more clearly. To survive, some smaller vendors may change their business models to become consulting organizations--much like what Pivotal is doing--or begin offering more highly tailored solutions. As consolidation occurs, the market will continue to have room for both true vertical specialists that live or die in a single industry and CRM providers that span multiple industries.

Further down the road, Fletcher believes the industry will experience a sense of déjà vu as vendors begin offering more generalized CRM toolkits that make it easier to customize applications. "Look at Siebel. They have 20 or 24 different vertical application areas, but if you look at their underlying architecture, they are beginning to offer software components or building blocks that will allow integrators to more easily create highly customized applications," he says.

The industry also may come full circle as enterprise vendors create more synergy between ERP and CRM offerings--this time, with a vertical focus. The result, says Rod Johnson, VP of customer management at AMR Research, may be industry-specific, vertically-focused applications that become something of a CRM-ERP hybrid.

"CRM is an artificial market, because everything goes toward business processes, and there is no such thing as a CRM-only business process," Johnson says. "Deploying CRM in a silo doesn't make any practical sense, so the industry will start thinking about rebundling the ERP and CRM markets to deliver specific processes for specific industries."