It was Benjamin Franklin’s belief that the only certainties in life are death and taxes. Were he around today, he might be tempted to add “and customer databases,” because sooner or later every company reaches the point when the lists, records, and ad hoc scraps of information have to be stored away on computer files.
Until recently, “stored away” is where everything tended to remain. It took the customer services revolution of the Nineties to prompt marketing departments to start talking to their IT counterparts and for people to realise the potential worth of the information locked away in their customer records.
The past ten years have seen a rapid evolution from basic information systems to sophisticated customer relationship management (CRM) programmes. However, the common denominator that links them and almost every customer communications strategy is the database. So central has it become to commercial and administrative life that the industry has attained a multi-billion pound turnover per year and helped many IT consultants acquire soccer-star riches and rewards.
With CRM and its electronic sibling poised for take off, the loudest debate concerns where is the industry heading. Bespoke solutions or off-the-shelf packages? Outsourcing or in-house? To use application service provision (ASP) or not to use application service provision? With so much money and vested interest at stake, it’s not surprising that opinion is divided. Just ask a gathering of consultants the question “Is there any point spending two years developing software which can be brought off the shelf, with pre-built reports and all sorts of gizmos?” and then go and kick a nest of particularly grumpy hornets – the latter will probably generate a less animated response.
The benefits of developing bespoke software are obvious. You can start from scratch, build the system to your exact specifications and keep tight control over it, without worrying about managing outsiders. But thereafter the reasons to custom build get harder to justify, particularly for smaller companies (SMEs) and internal departments with limited budgets (though even the largest companies, with seemingly bottomless funds, are not averse to getting it badly wrong when it comes to managing customer information).
For one thing, there aren’t many organisations that could live with the timescale involved in developing a tailor-made system. “It takes years and a great deal of driving force for a company to create marketing software from scratch – yet most marketing directors stay in one job for less than 18 months,” says Sybase Europe head of business intelligence Sean Kelly. “When the instigator leaves many software schemes are shelved or simply ignored. To realise the full benefits, a system needs to be operational within weeks rather than years,” he adds.
Any longer than this and the initial advantages of customisation begin to evaporate, as the original requirements and specifications become less relevant. This is perhaps another way of saying that companies are not very good at deciding what they want or what their future needs are likely to be.
“It’s not just a question of ‘buy-in’ or ‘build’. Choosing a suitable database management system requires careful planning and a comprehensive audit,” says Eurodirect senior product manager Leanne Douglas. “Questions need to be asked such as how is it going to be used and by whom? Are the skills available for in-house management or should it be outsourced? What outputs are required in terms of automated management information, reports, triggered mailings, canvassing lists, etc? They all need to be evaluated and assessed,” she adds.
A thorough audit usually identifies whether an off-the-shelf solution will do the job or whether a series of packages and/or development work is needed. But if there’s a downside to general purpose software, it is that commercial pressures often drive the design towards the lowest common denominator. Because of this, off-the-shelf-packages attempt to be all things to all people, rolling database management, contact management and telemarketing all into one system.
But software solutions aren’t governed by their own special set of laws. Mike Fisher, database consultant at software specialists Zelpha, says: “The 80/20 rule still applies. Getting the best or top 80 per cent of insight from data can be achieved by using only 20 per cent of any software’s capability. It’s only when trying to obtain the last 20 per cent of insight that it becomes necessary to use the full capability of the system. Even taking into account today’s intense demands, software is more than ahead of present day requirements,” he adds. “There is a large amount of software and systems on the market to fulfil this need.”
John Regan, managing director of database analysis agency Cognisance, agrees. “The only reason to build your own software is to solve a problem which is genuinely unique or to exploit a new idea,” he says “There are few problems which haven’t already been solved, so there is little point in re-inventing the wheel,” he adds.
In fact the major issues are less to do with technical concerns and more related to the availability of in-house resources and IT staff. “The real pressure point is the lack of well trained and experienced analysts. The tools and software show us the way, but we need drivers to read the map,” says Fisher.
It is this, perhaps more than anything else, that is the crunch factor for small businesses. “When you look at the possible options for running an IT facility, unless you have the requisite in-house skills which can be expensive, outsourcing can be an attractive option,” says software specialists Alchemetrics Chris Duncan.
“Of course it depends on requirements, but it removes a lot of the headaches and expense involved, such as deciding which technology to use and the need to hire and retain IT staff,” he adds.
But resources are not the only issue. The move towards CRM means there is now a far greater emphasis on information-driven customer reporting rather than the technically driven solutions of the past. It means that old patched together software solutions simply can’t deliver the level of business intelligence required for today’s strategic decision-making. “Good CRM must provide insight into decisions when dealing with customers as well as being adaptable,” says Sybase’s Kelly. “When it comes to analytical CRM there is no solution which will fit across all industries,” he says.
A company that is serious about CRM could face an expensive bill for customised software. This might create a gap between the rich and poor enterprises as the big companies, which can afford personalised applications, exploit their competitive advantage. But there are still ways for smaller companies to benefit. “Not all CRM solutions have to be incredibly expensive,” says software company SAS Institute business solutions marketing manager Peter Dorrington. “A good approach is to adopt a hybrid solution. As long as it’s scalable, companies should start by buying just what they need most and develop the solution in line with the business.”
Application service provision
But one of the most eagerly anticipated developments is the arrival of ASP, where CRM and other e-commerce solutions are stored on remote servers and accessed by customers via the Internet. ASP means that businesses can get their hands on software that previously may have been out of their reach, for reasons of expense, storage or lack of expertise to manage it on a daily basis.
“ASP is a win-win situation for corporate end-users and software vendors,” says Jasper Garland, strategic marketing director with Internet consultancy, Cobweb Solutions, which specialises in providing e-commerce solutions for SMEs. “There’s no capital investment required because customers rent the software. Because it’s held remotely there’s no installation or maintenance costs. It’s also managed externally which means that it can be customised to meet the company’s requirements. It will make the market for software a very competitive place over the next few years,” he adds.
All of which is good news for companies that are committed to developing integrated CRM strategies. But could it be that the technology has arrived too early? According to a survey, conducted by Simpson Carpenter Research, on FTSE 100 companies, company politics rather than technology or financial issues are seen as the main barriers to the adoption of a CRM approach. A worryingly high figure of nine out of ten companies said that competing business units could not agree, have different cultures and have too many conflicting agendas for CRM to succeed. Office politics? Now there’s one of life’s certainties that Mr Franklin overlooked.