An IDC Viewpoint

The World is Changing — Are You

Changing Enough?

David Bradshaw
Research Manager, Applications and Solutions, IDC EMEA

Giuliana Folco
Research Vice President, European Industry Solutions

In a period of increasing economic uncertainty, the short-term FIGURE 1

business imperative for many organizations is to cut spending
Responses to the Question, “Which of the Following Business
and reduce budgets. Yet customer retention and acquisition Initiatives Are Leading Your Company Business Strategy Agenda?”
are still necessary to keep revenue flowing in an environment
of increased competitive and budget pressure. How can Sales
organizations focus on both their customers and their costs? productivity/performance 4.78
improvement
Customer relationship management (CRM) technologies provide
Customer care/service
a compelling, proven approach to improving customer acquisition enhancement
4.71
and retention. Yet in many companies, there is a disconnection
between the business imperative of CRM and IT initiatives to
IT organization
responsiveness and 4.63
support it. In order to survive in these in tough times, it is time efficiency improvement
for organizations to evaluate how cloud-based CRM can help
Product or services
adapt to the new “business as usual” without incurring the risk innovation/development
4.54
and cost of traditional CRM software.
Efficient sourcing and
4.50
procurement
Adjusting to the new “Business as Usual”
We know that these are tough economic times, and no
1 2 3 4 5

companies are exempt. In the U.K., the CBI’s latest quarterly

(n = 250, business size 50–300 employees)
small and medium-sized enterprise (SME) trends show a drop
Source: IDC 2009
in employment, contracting orders, and overall sentiment falling
at its fastest rate since October 2001. Business conditions
are similar in other European countries. While the economic The CRM Imperative for SMEs
predictions are still uncertain, organizations must adapt to this
new environment until late 2010 or beyond. But what does this From the first two priorities, we can conclude that that there is
new “business as usual” look like? a significant opportunity for CRM technology to play a strong
role in modernizing and improving sales and support operations
In the current environment, companies face increased competition in SMEs.
in both customer acquisition and retention. IDC survey results
show that only 27.4% of SMEs with 50–300 employees are The third priority, improving IT responsiveness, also appears to
anticipating an increase in their sales, while only a year ago, be served by effective application of CRM technology. Moreover,
57.2% of SMEs were anticipating an increase. the effective use of technology can be very cost-effective in
this area, reducing costs while improving performance. We
In response to the shortage of customers in the market, the top conclude that IT should play a major role in shaping technology
business priorities for companies in this segment are improving to support CRM initiatives in SMEs.
sales productivity/performance and customer service/care, as
shown in Figure 1.
Interestingly, the third priority is focused on improving IT
responsiveness. Clearly, organizations recognize the role that IT
has in enabling them to respond to change. If ever there was a
call-for-action for IT to help, now is the time.
However, alarmingly, IDC found that CRM was the seventh IT
priority, behind security, business process management (BPM),
enterprise resource planning (ERP), and other initiatives. Why
should this be? Figure 2 shows the responses to the question,
“Why is your organization currently not using or not considering
a CRM solution?”
FIGURE 2
Responses to the Question, “Why is Your Organization Currently Not
Using or Not Considering a CRM Solution?”
Not part of organization's
strategy/business model
Project doesn't demonstrate strong
ROI
Not gaining executive management
support or organization buy-in
Lack of technical expertise/skilled
personnel in-house
Lack of project funding/high cost
Not enough scale in sales activity to
justify project
Lack or insufficient acceptance in the
customer base
0 5 10 15 20 25 30 35 40 45
(%)
(n = 240, size of business 50–300 employees)
Source: IDC, 2008
Clearly, the perception is that CRM has no role in business, is
expensive to purchase and implement, and is complex to deploy,
and as a result, has a poor ROI. This perception of CRM is driven
by companies’ early experience during the initial growth of CRM
in the 1990s.
The failures of big-bang, large-scale CRM deployments and
complex IT projects have been well documented, analyzed,
and understood. As a result, CRM is now far more effective at
enabling organizations of all sizes to improve the performance
of their marketing, sales, and customer service functions by
providing tools, automation, and centralized access to customer
information across the business.
It’s Time to Re-Evaluate how CRM can Help you —
In the Cloud
In our view, cloud computing is well suited to SMEs, as it
typically reduces overall costs while delivering high levels of
usability and functionality. With cloud-based CRM applications,
CRM capabilities are accessed over the Internet, in the same way
that you access Google or Amazon.com. This addresses many of
the issues that have dogged CRM in the past.
The differences between cloud-based and on-premise software
begin at the very start of the buying process. Because software
does not have to be loaded onto the customers’ servers and the
clients typically run in browser windows, prospective buyers can
try the full system before they buy at the very start of their buying
process. There are significant benefits to this. A wide range of
users can try out the system, and this use of the real system can
educate users. Also, it can significantly reduce the requests for
changes to the software (via configuration). However, perhaps
the most important benefit is that it significantly reduces the
risks involved in purchasing, as the buying company is buying a
known set of services not a promised set of specifications.
Cloud computing has another important advantage, it reduces
much of the need for upfront spending on applications software
licenses, infrastructure software, and the servers needed to run
the system. Instead, customers pay a monthly subscription fee
that is a fraction of the license fee on competing on-premise
products. Another key benefit is that implementation time is
generally very quick — subject to the amount of data that has
to be uploaded and the amount of configuration users choose
to do.
It is also a great leveler — small and midsized companies can
get the same capabilities as the large companies at a price per
user that they can afford. Also their users can get the same
capabilities wherever they are located as long as they have an
Internet connection or a reasonably capable mobile device.
Yet, many SMEs feel uncomfortable with having their data and
processes running on someone else’s system, particularly in the
midsized sector. Companies need to trust that their data will be
safe in the cloud. Leading cloud providers have invested heavily
in secure systems and processes to manage confidential data. In
addition, vendors can achieve independent certification against
ISO 27001 and SAS 70 Type II standards to ensure they comply
with information security best practices.
Summary
IDC believes that small and medium companies need to think
seriously about whether they are doing enough to keep their
customer relationships going through the crisis, while at
same time increasing efficiency and reducing costs. For some,
introducing or upgrading their CRM systems will be a necessity.
The good news is that software as a service makes this far
more manageable and affordable, even in the current economic
situation.
To quote from Charles Darwin, “It is not the strongest of the
species that survives, nor the most intelligent that survives. It
is the one that is the most adaptable to change.” In practical
terms, it will be the businesses that continue to innovate that
will survive and potentially thrive in and beyond the economic
downturn.
Having the right CRM capabilities can not only help retain
customers and maintain sales in the downturn, but also inform
and enable innovation while helping companies do more
with less. It is therefore our view that small and midsized
organizations seeking improvements in the way they manage
customer relationships for profit are well advised to evaluate
cloud-based CRM as a potential solution to these requirements.
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