Customers come in many shapes and sizes, and so too do customer relationship management (CRM) systems.
While much of the applications software industry is consolidating, the CRM sector is, by contrast, more diverse than it was five years ago.
New players such as Microsoft have entered the market and the range of choices is expanding rather than contracting thanks to new software-as-a-service (SaaS) offerings. These appeal to businesses that do not want the hassles of installing running CRM software internally.
In addition, there are open source alternatives to commercial CRM software such as SugarCRM, although analysts caution open source CRM is still an immature market.
Some vendor consolidation has take place in the CRM industry, particularly at the high end, where Oracle’s acquisition spree has left it holding five CRM offerings including those of one-time rival Siebel.
Smaller CRM specialists, including Pivotal, Onyx and E.piphany have also been acquired.
But unusually for the software industry, these acquisitions have not sounded the death-knell for any product. Onyx, for example, has just released a new version of its CRM software, while Oracle plans to keep supporting the legion of Siebel CRM users even after it brings out a new ”converged” product, dubbed Oracle Fusion CRM, which is still a couple of years away.
The massive shake-out that was predicted for the CRM industry a few years ago has not happened and according to some experts, it is unlikely to happen in the future.
”The needs of this market are so diverse that even though there will be vendors that claim to do everything, there is still room for smaller players,” says David Bradshaw, principal analyst at Ovum, the UK-based consultancy.
The industry remains fragmented because CRM is not a single homogeneous market but has grown from a collection of discrete applications. Siebel made its name with salesforce automation software, E.piphany´s strength is marketing automation, while Chordiant’s is call centre software.
The boundaries have blurred over the years, but there are still big differences between the CRM offerings of different vendors, and that is reflected in their respective strengths and weaknesses.
Given the huge number of offerings available – more than 130 – choosing a CRM system can seem a daunting task. But it’s relatively easy for a business to draw up a short list of contenders simply by looking at what rivals in the same industry are using.
The sales and marketing needs of an oil distribution company are quite different from those of a mobile phone operator, and their CRM needs are different, too. To get this industry-specific functionality in the past, businesses either had to build a custom CRM application from scratch or pay consultants to tailor off-the-shelf CRM offerings to their specific needs.
The job is now simpler as the CRM industry has developed industry-specific CRM packages and ”templates” that allow businesses to more easily tailor a generic CRM program to the requirements of a particular industry.
Despite the proliferation of vertically-focused CRM offerings, analysts caution that no CRM vendor can cover all vertical markets equally well.
Indeed some suppliers have historically chosen to focus on certain vertical markets – Dendrite, for example, concentrates on the pharmaceutical sector – and even all-rounders such as Siebel, now owned by Oracle, are still stronger in some industries than in others.
Siebel’s top vertical markets include financial services and hi-tech, while arch-rival SAP is particularly liked by manufacturers and consumer products companies.
One of the most interesting vertical markets for the big CRM vendors is the public sector, which ”historically has not made much use of CRM,” says Loic le Guisquet, who heads Oracle’s applications business in Europe.
The City of New York is a recent convert to CRM and uses the Siebel CRM product to power a call centre offering its citizens round-the-clock access to information.
Siebel was the first major vendor to realise the importance of creating CRM applications for specific vertical markets. More recently, it has tried to steal the limelight from smaller SaaS vendors by also producing industry-specific versions of its hosted CRM service, now known as Oracle Siebel On Demand following Oracle’s acquisition of Siebel in 2005.
The growth of SaaS is the most significant recent trend in the CRM industry. But its impact to date has mostly been limited to smaller businesses that lack the resources or IT skills needed to run CRM on their own computers.
”SaaS is much less important for the enterprise market and it is likely to remain so,” says David Hewson, founder of CRM consultancy Hewson Group.
Nevertheless, RightNow, a US vendor that gets most of its revenue from enterprise customers, argues the writing is on the wall for traditional CRM software. Five years ago, it got half its revenues from software licence fees but as the number of pay-as-you-go customers increased, it has decided to stop selling on-premises software and move to a pure SaaS offering. Most software vendors now have SaaS offerings, but RightNow claims the big vendors’ professed commitment to SaaS is half-hearted.
”Pay-as-you-go is a very different business model and it’s very difficult for a big software vendor like Oracle to adapt to that model,” says Joe Brown, who heads RightNow’s European business.
Oracle refutes the claim and says it lets its customers choose from SaaS, traditional on-premises software or a mixture of both – the so-called hybrid approach.
”With the hybrid deployment model, some users will be running on-premises software while others will be hosted on SaaS. There are huge benefits for enterprises in doing this,” says Mr le Guisquet.
Despite the hype around SaaS, analysts caution prospective CRM buyers from getting too distracted by the competing claims made for the two delivery models.
”The decision is not so much where you go for hosted or on-premises,” says Mr Bradshaw. ”The question is more comparing the characteristics of the various vendors’ offerings in terms of their CRM functionality, financial implications, speed of implementation and the IT overheads needed to manage them.”
