CRM MARKET: Opportunities For Partners

Customer relationship management (CRM) solutions are today

recognized as tools that enable enterprises to gain efficiency in their

operations, reduce operating costs, manage customer retention efforts and

overall increase revenue.

With enterprises realizing the value of focusing closely on

customers, it is hardly surprising that CRM business has been growing at a fast

pace despite the slowdown in the market.

The telecom and service provider industry has deployed CRM

solutions to manage and drive high levels of customer service. While the telecom

industry is deploying CRM to understand its customers better, the call center

industry has implemented CRM to meet the high-quality standards demanded by

overseas customers.

There is a trend among enterprises to shift back-office budget

allocations to CRM solutions and redirect departmental budgets to multi-year,

cross-functional, board-level funding for CRM.

Which means enterprises want to treat CRM solutions as a total

end-to-end, cross-functional solutions for the entire organization instead of

modular and departmental products.

Recent Gartner Dataquest research that uncovers spending shifts

from the in-house developed projects to packaged products brings good news for

the CRM market.

The study outlines that there is a shift from client/server

architectures to web-based architectures and best-of-breed point solutions to

CRM suites offering total solutions.

Indian CRM scenario

An IDC report estimates that Indian CRM software market was

at Rs 23.7 crore in 2000-01. This is expected to grow at a CAGR of 44 percent

and total revenue figure is expected to reach Rs 147 Crore by 2005-06.

Among the vertical segments, banking/financial services have

the highest growth potential and have accounted for a 22 percent of CRM license

revenue. The telecom and communication segments too show a high demand. IT,

insurance and retail segments are considered to be the next adopters of CRM

solutions. Travel, hospitality and manufacturing industries are the other key

verticals that are looking for CRM solutions.

Arun Kumar Maheshwari, CEO, Trivium India Software, points

out that banking and financial services account for a large portion of the pie

and is currently the No. 1 adopter of CRM solutions. "The opening up of the

insurance sector to private participation is expected to push the implementation

of CRM solutions there as well," adds he.

Several entrepreneurs with financial muscle have got into CRM

business in recent times. These include companies like Syntax, Network

Solutions, BitPlus among others. Many of these offer modular CRM solutions that

are largely targeted at the SME segments.

The SME segment also needs a lot of education on CRM

adaptation including updations on what to expect from CRM implementation and the

long-term benefits.

Says Mayurnath KS, AVP and Director, Sonata Information

Technology (SIT), "At the moment the Indian CRM market is going through an

educational phase for the SMEs, wherein we are getting our customers to

understand the benefits they can avail from CRM."

SITL conducts the "Connected CRM" workshops for

their customers and partners, which helps them to understand the advantages of

implementing CRM solutions. Mayurnath is of the opinion that the educational

phase is usually spread from six to nine months before mass level adoption and

implementation can take place.

Currently in India, CRM solutions are going through second

level evolution, however it is still far away from full-blown adoption and

implementation of the same in the market.

SIT accounts for over 1,000 customers worldwide of which 15

are from the Indian market. This means that currently only 1.5 percent of the

company's business comes from India. But at the same time, Asia Pacific clocks

15 percent of their business, which indicates the growth potential of the CRM

market lying in this region.

Global CRM market

A Gartner study puts the global CRM software market at $10

billion in 2000 and expects this to double by 2003. At the same time the CRM

software and services market which was at $23 billion in 2000 is projected to

reach $76.3 billion in 2005.

Globally, many CRM software and services vendors have

achieved enormous growth over the past several years, largely due to providing

solutions that enabled enterprise clients to have an immediate positive impact

on their bottom line. Most successful CRM solutions offered rapid return on

investment (ROI) by directly increasing customer retention and acquisition.

During the past three years, the global CRM software product

market achieved explosive growth, from $830 million of new license revenue in

1997 to an estimated $3.7 billion in 2000. From 1998 through 2000,

year-over-year growth has been 63 percent, 57 percent and 76 percent,

respectively.

Embracing eCRM

eCRM solutions are becoming more popular globally, simply

because of the ease of accessibility by users of such solutions. Comments Aseem

Sinha, AVP, Intelligroup Asia Private Limited, "Users are out on the field

most of the time and they need to access the central CRM solutions from wherever

they are." This only emphasizes the fact that the Internet will be the most

popular mode of deploying CRM solutions.

There is another reason why eCRM solutions are becoming

popular. Enterprises have built their IT infrastructure for the Internet

economy. Says Suresh Gundappa, CEO, Protocol Telecom Solutions, "Since most

companies have built their IT infrastructure based on Internet economy, eCRM

solutions becomes the obvious choice for them."

Also the combination of Internet and mobility to access

information acts as a vehicle to drive eCRM solutions at remote places.

Several companies have ready-made information which can be

pushed through web and at the same time they also have customers who are

responding to the way information has been provided to them. "I certainly

see an exponential growth for eCRM this year," adds Suresh.

Sharing the same opinion, Mayurnath of SIT says,

"Currently the growth rate may be around 20 percent but should soon catch

up."

He feels that most of the organizations are in the wait and

watch mode, and popularity of eCRM solutions will bounce back when economy

becomes stable.

Of course, eCRM solutions will begin to thrive in an

environment that has some specific ingredients. The maturity of the environment

has to happen at two levels. One at the product level and two at the Internet

adoption level.

In the product maturity level, the eCRM products need to

increase the breadth and depth of the functionality to make a strong impact on

the enterprise CRM needs.

At the same time, the traditional CRM products need to

re-architect themselves on a three-tier architecture to make themselves

Internet-enabled.

"On the Internet adoption level, there needs to be far

more maturity on bandwidth availability that will attract enterprises to deploy

more of their applications on the Internet," says Anurag Mehrotra,

GM-Business Application/eSecurity, Wipro Infotech.

There is also a need for more acceptability of the Internet

as a safe and reliable medium for enterprise-level CRM transactions.

Kapil Dev Singh, Program Manager-Software and Services

Research, IDC India, says, "Dotcom was one immediate hope, but we feel

integration with web will finally happen over a period of time for the CRM

adopters."

However, one more aspect of integration is with analytical

applications like data warehousing and data mining which will come with a higher

usage experience of eCRM solutions.

Packaged vs customized applications

Players in the CRM market have mixed reactions on the

advantages and drawbacks of packaged software as against customized

applications. The customized applications have two advantages.

First, a difference in the cost for implementing customized

software as the user only pays for the required functionality. Second, the

software is designed in tune with the organizational culture.

However developing customized CRM applications involves time

and skilled man power which have pulled down the demand for these solutions.

According to Aseem, the standard CRM solutions always appeal

more to clients than a customized application as the former have been tested and

proven over a period of time. "These vendors have got success stories to

tell," he says.

The customized applications on the other hand will have their

own development, testing and most importantly stabilizing time.

This typically results in wasting a lot of time on

non-business issues.

At the same time, there are others who see very little

difference between packaged solutions and customized applications. Says Sunil

Sathi, Associate Consultant, CRM group at iFlex Solutions, "We have to

select a module that caters to the need of the client and then customize

it."

Explaining the customi-zation process, Sunil says that iflex

has a partnership with Oracle and the company's client will buy a license for

Oracle's product range. iflex then customizes the solution to suit the client's

need and charge them for the customization.

Opportunities for partners

The traditional channel network is certainly going to play a

major role in promoting CRM solutions in the Indian market. However, channel

partners in this space will have to focus on delivering real business value in

terms of services and maintenance of the CRM solutions to clients rather than

just specifying the benefits of such a solution.

The preferable channel that is currently adopted by CRM

vendors to push their solutions in the market to cater large accounts are

systems integrators and consultants. However to address the SME segment, the

traditional channel network is the preferred mode.

This segment is close to the channel from whom SME customers

source various business applications and software. Trivium offers SimpleRM

Level1 version and SAP came up with the Accelerated CRM package both targeted at

the SME segment. These packages allow companies who are not too clear about

taking a plunge into CRM.

These solutions also offer the flexibility to scale up to

more modules to suit a client's requirements. Trivium and SAP have tied-up with

several channel partners to consult and implement CRM solutions in the SME

segment.

Satyavrath Krishnaswamy, Director, Business Development CRM,

Asia SAP adds, "SAP has a huge installed base and we have two

implementation partners, Siemens Information Systems and HCL Infosystems."

According to him, SAP finds this distribution model to be a

very effective set-up to implement CRM solutions. Also these implementation

partners have their own channel network spread across the country and this helps

in attaining geographic reach and enables close relationship with customers.

What the traditional partners should have is the skillset to

deploy and maintain the entire CRM solution. To put together everything in a

coherent manner may be a difficult proposition for a channel partner.

To address this issue, CRM vendors have offered significant

level of technical support for its partners. Anurag of Wipro Infotech says,

"The support needed from a CRM vendor is not only in terms of understanding

the technical details of the package but also how it integrates with back-office

systems." Several CRM vendors have been organizing training and

certification programs at regular intervals.

Globally, ASP has been one of the most successful channels of

deploying the CRM solutions. In India however, organization-wide deployment of

CRM on ASP model is yet to be realized.

There are companies like Protocol which address integrating

contact centers with CRM software. Says Suresh of Protocol, "We bring in

skillsets of application, telecom, domain knowledge to consolidate the needs of

our customers." However, the key here is to acquire the know-how to

integrate these solutions on multiple vendor platforms.

Commenting on the partnership relationship with Protocol's

principals, Suresh says, "Our partnership with CRM vendors like Cincom,

Opentide is complete. We invest in technical skillsets and R&D facilities,

whereas principals will bring in their domain and integration experience across

various platforms and industries."

This kind of approach is necessary for companies in the CRM

space as it helps partners to have a total transparent and co-operative

partnership with their principals to know "where not to sell their product,

rather than where to sell"

Impact of economic slowdown

The long-term outlook for the CRM sector is vibrant and

capacity enhancement is happening both in the domestic and international market.

However, the industry in India is at a critical juncture. We

have to acknowledge that the US call center market is growing and a fair amount

of that business is expected to come into the country.

There is an obvious decrease in the IT spending of most

companies, especially in the US due to the slowdown. However, Indian industries

are just about realizing the potential of CRM and hence the investment on this

strategic initiative are on the increase. This is validated by the number of CRM

sales activities that are happening in the Indian market.

Rajashekar Reddy, MD, Inza CRMTECH says that the economic

slowdown has not affected the CRM market growth. "Customers are investing

in CRM activities as the advantages of implementing it is measurable in the

current economic environment," says he.

It is critical for companies to hold on to customers,

particularly in the current recession. The cost of getting additional business

from existing customers is about 10 times lower than getting new customers. Thus

there has been an increase in the buying pattern of CRM solutions in the market.

Also, the impact of the economic slowdown has made CRM

solutions more visible because these solutions directly impact the bottom line

and make it healthy.

The only certain way to grow is to retain existing customers

and offer them more value added services so that revenue generation will have a

positive impact.

"If you look at service providers in last few months,

their major investments have been in customer care solutions," says Suresh.

Thus the demand for customer-centric solutions such as CRM products should only

grow in the current economic downturn.

Bottomline

CRM solutions are in high-demand, but don't let your guard

down. Competition is increasing everyday, and clients are targeting on the rapid

return of investments (ROI). In the current economy, what's hot today may be

stone cold tomorrow.

The future of channel partners in the CRM space equally

depends on following the shift of trends as much as releasing on what's hot

today.

In order to succeed, channel partners in the CRM space must

deliver solutions to cater to the customers requirements and continue to do so

as the market evolves. Today's economic challenge puts the pressure on sales and

marketing, but caution has to be taken not to divert away from regular

technology updates.

What one needs to understand is that the driving factor for

the popularity of CRM solutions has been the customer-centric operations. With

the increasing emphasis on customer driven business processes, the demand for

these solutions will only grow further.

Sunila Paul in Bangalore with inputs from Vinita

Suvarna-Bhatia in Mumbai, Mohit Chhabra in Delhi and Zia Askari



in Hyderabad