How Prepared Is the Services Industry for CRM?
Topline Results from the AFSMI CRM Preparedness Survey

(Originally published in the January/February 2003 issue of AFSMI's Sbusiness.)

By William K. Pollock, Leo A.P. Moerkens, and Scott Cabral

The AFSMI CRM Preparedness Survey
Earlier in 2002, AFSMI partnered with three member consulting firms, Strategies For GrowthSM, Hands-on Management Consultants, Inc., and Peritum Consulting, to design, develop, and execute a membership-wide CRM Preparedness Survey. The primary reasons for conducting the survey were to:

  • Fill a distinct, and immediate, need for a comprehensive program of CRM information, sponsored by, and made available directly through, AFSMI to its membership base;
  • Collect, analyze and distribute data and information reflecting the worldwide CRM arena through a strong, professional, objective and "seasoned" focus; and
  • Deliver a full package of meaningful, valuable, topical, current and informative CRM-related materials to AFSMI and, ultimately (through AFSMI), to its worldwide membership.
The survey was electronically distributed to a worldwide base of more than 5,500 AFSMI members and associates in July 2002. Responses were then collected during the months of August - September 2002. A total of 356 completed responses were returned from a base representing all types and sizes of services organizations, and supporting all types of customers, as follows:

Annual Sales/Turnover (in US $):

  • Small (less than $50 million): 40.8%
  • Medium ($50 million - $499 million): 31.7%
  • Large ($500 million or greater): 27.5%
Total Employees:
  • Small (less than 100 employees): 27.0%
  • Medium (100 - 999 employees): 37.8%
  • Large (1,000 or more employees): 35.2%
Type of Services Organization:
  • Manufacturer/OEM: 39.0%
  • Software Support: 11.5%
  • Logistics, Courier or Transportation Services: 11.2%
  • Others: 38.3%
Principal Job Area/Position:
  • Services Manager/Other Services Management and Staff: 46.2%
  • Corporate Management/Executive/Administration: 36.8%
  • Others: 17%
By geography, while more than one-half of the respondents (59.0%) were physically located in the United States, just over two-thirds (67.4%) reported that their respective companywide CRM programs were being managed from the States.

By completing the CRM Preparedness Survey, all respondents received "instant assessment" feedback via e-mail, providing them with executive-level comments and guidance with respect to each of their specific responses for more than 45 questions.

This article represents the first publication of the preliminary, top-line results of the survey, and will be followed-up later in the year with other AFSMI-sponsored publications and events including a continuing series of Sbusiness articles and columns, as well as an executive-level "white paper," a detailed CRM Survey Report, and a survey-based CRM Preparedness Webinar (in May 2003).

How Important is CRM?
The very first question asked in the survey addressed the issue of the importance of the present or planned CRM program to the organization's overall business strategy (Figure 1). Responses to this question were not surprising, except in their intensity, as nearly 95% of respondents indicated that CRM is "important" to their organization - with 38.2% indicating it is "essential." All told, less than 5% believe CRM is not important or not applicable to their respective organizations.

Figure 1

As such, we believe that CRM is now both widely accepted, and firmly entrenched, in the psyche of worldwide business environment - and particularly for services organizations. There are still many opportunities for businesses to begin thinking about implementing CRM - but the window of opportunity is closing, and now is the time to either jump on the bandwagon, or getting left behind. In an environment where more than 80% of your peers believe something to be either "very important" or "essential" to their overall business strategy, then perhaps it is time to "join the crowd." In today's economic environment, being a follower is not necessarily a bad thing - if by not following, it means that you will not be able to compete!

Where Does Your Organization Presently Stand on CRM?
Most of the survey respondents are currently in the initial stages of CRM implementation. In fact, nearly one-quarter (22.2%) have no formal plans to implement CRM at all. However, almost one-in twelve (7.9%) have already approved a CRM program, and more than one-quarter (26.4%) are presently in the design phase. Another one-twelfth (9.0%) are in the pilot stage, and almost two-fifths (19.1%) are presently rolling out their CRM programs. At the time of the survey, just under one-sixth (15.5%) had already completed their CRM program implementations.

At the indicated pace, by mid-year 2003, an estimated 35% of the survey base will have rolled out their CRM implementations, with another 9% estimated to complete their implementations by the end of the year. As such, nearly half of the survey respondents will be expected to have their CRM implementations completed by the end of 2003, with almost another one-quarter following by the end of 2004. Therefore, while only 15.5% of respondents had completed their CRM implementations by mid-year 2002, almost five times as many can be expected to have done so within an approximate two-year period.

This "boom" in CRM implementation will mean - at the very least - the following two major trends: (1) the position of "wait and see" with respect to CRM is a fast-closing window, and one that will disappear within the next two years, and (2) there will be many opportunities for CRM consultants and software companies to increase their client bases during this same period.

Which Functions are Included in the CRM Strategy?
On the basis of the survey results, it is clear that most of the "obvious" front-office functions are included in the respondent's CRM strategy (Figure 2). Functions such as sales (80.6%), customer care (76.1%), tech support (74.4%), field services (72.8%) and marketing (71.1%) are all included in the organization's CRM strategy by at least 70% of respondents. Other functions, such as order processing (62.6%), professional services (59.6%), and e-Business/e-Service (57.9%) are also included by a majority of respondents. However, partner/channel management (44.1%) and depot services (43.5%) are included by somewhat less, as many services organizations do not necessarily have these functions in place.

Figure 2

The responses to this particular question reinforce the belief that the most obvious customer-related functions are most likely to be included in the overall CRM strategy (e.g., sales, customer care, tech support, etc.). However, this exposes the possible risk for some organizations that if they do not include some of the other less "obvious" elements of the business in their CRM strategy, they may still not be able to provide the full measure of customer support required - and demanded - by their respective customer bases.

For example, among the 24.2% of the respondent base that has a partner/channel management function, but is not including it in their CRM strategy, we foresee the strong possibility of a potential problem in their ability to "reign in" their channel partners to deliver the required levels of supply chain support to meet the end users' overall service delivery requirements. As a result, we also foresee the need for many services organizations - even those that have already implemented CRM - to expand their scope to also include these not-so-obvious elements of the total supply chain delivery channel.

How Well-Defined are Your CRM Goals?
With respect to how well-defined CRM goals are within the organization, there is good news and bad news. The bad news is that, overall, CRM goals are not always very well-defined. In Sales organizations, respondents indicate that their CRM goals are virtually at only the "somewhat well-defined" level (i.e., rated at only "2.97" on a scale of "1" to "5"). Among Marketing organizations, CRM goals are even less well-defined (i.e., rated at only "2.81" on a scale of "1" to "5"). However, while still alarmingly low, the Services sector reflects the highest level of CRM goal definition, squarely at 3.33 (on a scale of "1" to "5"), about a third of the way between "somewhat" and "very" well-defined.

The fact that all three major segments reflect relatively low levels of CRM goal definition supports the finding that, apparently, many organizations get started on their CRM programs without conceptualizing and/or designing adequately from the outset. The potential downside of beginning an effort this big - and this important - without a clearly-defined set of goals is that if the goals are not well-defined, the benefits of the CRM program cannot be properly measured or managed. We have seen too many cases where CRM programs falter and die - midway - because management is unable to identify whether any realistic goals are being met, because they had not taken the time - at the outset - to set realistic goals, identify the proper units of measurement, and established a team to manage the attainment of pre-specified goals.

How much does CRM Cost?
The survey respondent base consists of a wide variety of small, medium, and large services organizations of all types and categories. As such, the range of dollar estimates for the total cost of their CRM implementations also ranges - well - all over the place (Figure 3). Approximately one-third (31.2%) of respondents indicate they have spent (or plan to spend) less than US$100,000 for their CRM implementations. Of course, these represent the smallest of the respondent organizations. However, an equal amount (31.2%) also indicate that their CRM implementations cost (or will cost) more than US$1 million - primarily the largest of the respondent organizations. All other respondents indicate expenditures somewhere in between.

Figure 3

It has been our experience that those organizations spending less than US$100,000 for CRM either do not have a realistic budget to embark on the CRM process, or do not realize the full extent of the significant efforts - and expenditures - that will be required. On the other hand, those organizations that spend more than US$1 million are truly serious, and realize that CRM requires a significant expenditure.

Does your Organization have a Plan for CRM and, if so, Does it Have a Dedicated Project Manager?
Presently, more than four-fifths (82.7%) of respondents indicate that they either have a formal plan for CRM (42.6%), or are working on one (40.1%). Just over one-in-seven (13.7%) presently do not have a formal plan for CRM.

However, even more surprisingly, while more than three-quarters (77.6%) have/had a dedicated CRM project manager, roughly one-sixth (16.6%) do/did not. The question arises, how can an organization commit to the time, resources and expense of undertaking an effort as large - and, again, as important - as CRM without at the very least naming a dedicated CRM project manager? The only reasonable explanation might be that, in some cases, CRM is perceived by some companies as being merely an "automation" issue, and not a fully-developed CRM program initiative. We would further expect the CRM implementations at these companies would therefore only provide the benefits normally associated with automation-oriented projects and would not yield anywhere near the full complement of CRM program benefits.

How Long before You See Results?
For many, this is not the $64 question - it is the $640,000 or $6.4 million question. More than half (57.0%) of respondent indicate that they expect to see "measurable results" within the first year of CRM implementation (Figure 4). If true, this would suggest that many organizations have taken the approach to implement CRM in stages - or modules - in order to realize measurable benefits along the way. This helps to reinforce the strengths of the CRM project team throughout the course of a typically long implementation cycle, as well as providing the ability to "throw management a bone" every once in awhile by providing them with some "real" cost savings that can be directly attributable to the CRM venture. In these case, the CRM management team typically identifies some "low hanging fruit" to go after early on in the process, so they will have some early results to show management, thus extending their useful CRM implementation (and internal funding) cycle.

Figure 4

Still, another 43.0% indicate they expect 1 to 3 years or more to go by before they anticipate seeing any measurable results. While these are typically the larger CRM implementations, among the larger organizations, many organizations have learned that they must still be able to show some measurable results all along the way - or else, they may find themselves in situations where neither internal support, nor funding, will continue to come their way. The old adage certainly applies in these cases - you have to show some results to justify your expenses.

Will you Buy or Build Your CRM Software?
If CRM follows the same path that other major software applications have followed over the past decade or so, we would expect about three-quarters of the market to utilize off-the-shelf software products in their initial CRM implementations. According to the survey results, this is, in fact, the case. The survey shows that nearly 90% (89.5%) of respondents indicate that they are either using (or plan to use) off-the-shelf, commercially-available software (31.4%) or customized, commercially-available software (42.2%) to power their CRM programs.

However, more than one-fifth (21.0%) also use (or plan to use) either custom, in-house/bespoke software (15.9%) or custom third-party developed software (5.1%). We have also seen several instances where, due to mergers, acquisitions, and/or consolidations, organizations are "forced" to use both off-the-shelf and custom-developed CRM software solutions. It is noted that some problems usually occur when different departments within the same organization use different software, but this is not unique to the CRM environment.

The secret to success is, for whatever type of software is selected, that it is flexible enough to implement in all of the internal environments, and that it performs the way it is supposed to perform - that is, that it has al of the required functionality and flexibility to support a large, growing and evolving customer-focused environment.

Conclusion
CRM is what organizations put into it. Nothing more, and nothing less. The trouble is that too many organizations still do not recognize the importance of planning for CRM. They understand that CRM and e-Business are important - in fact, essential - but they still do not quite know how to go completely about implementing and managing it. This is where we believe outside assistance, provided by qualified specialists in the field, can be of significant help both in getting an organization kick-started in CRM, as well as mentoring an organization that has become bogged down in a seemingly never-ending CRM program with no direction and little to show management for all of the organization's expenditures and efforts.

Whether it is as simple an effort as assisting in designing, executing and analyzing a Customer Needs & Requirements Assessment/Satisfaction Survey; as narrowly defined as performing the required systems integration and implementation tasks and activities; or as conceptual as assisting in the design and scope of the overall CRM program effort, outside consulting assistance may have its place in the organization.

Ultimately, the CRM program must belong to you. It must be developed by you, incorporated by you, measured by you, and managed by you. However, in the meantime, you will undoubtedly require some assistance in order to make it all happen.



For more detailed survey results, watch for an announcement from AFSMI as to the release of the AFSMI CRM Preparedness Survey - Executive Summary, later in the first quarter of 2003. "How Prepared Is the Services Industry for CRM?" will also be the topic of a one-hour AFSMI Webinar that Bill Pollock will be presenting in May 2003. Visit AFSMI's website at www.afsmi.org for more information, or to register for the May 13, 2003 Webinar.

William K. Pollock is president of Strategies For GrowthSM, a services consulting firm specializing in strategic business planning and customer satisfaction research. He may be reached at 610-399-9717 or via e-mail at wkp@s4growth.com.

Leo A.P. Moerkens is president of Hands-on Management Consultants, Inc., an international management consultancy firm that assists clients in developing and implementing business improvement programs. Leo can be reached at 203-888-1671, or via e-mail at LMoerkens@hands-onmc.com.

Scott Cabral is president of Peritum Consulting, Inc., a firm specializing in CRM solutions design and implementation. Scott can be reached at 858-259-1414, or via e-mail at scott.cabral@Peritum.com.


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