SO: Are companies implementing the next generation of CRM technology differently?
Freeland: How clients look at CRM has certainly changed over the last 10 years. In general clients are very skeptical of monolithic software approaches. In that respect the clients are changing their approach to implementing technology. They are much more sophisticated in their purchase of CRM products. 10 years ago there weren’t a lot of software alternatives, today companies have a lot of alternatives in terms of building in-house solutions or subscribing to on-demand solutions. Companies are being much clearer internally about the value they hope to get out of a CRM solution before leaping in and making a purchase decision.
SO: Does monolithic equate with package software? Is there a resistance to buying a complete suite of products as opposed to creating something more tailored for the organization’s needs?
Freeland: Yes, I think there is some resistance. Most of the larger corporations are especially reluctant to run all the risk and incur all the cost of a full scale transition away from their legacy systems toward a single software package. They are much more interested in best of breed. They are also interested in buying components that complement what they have internally as opposed to implementing a single company’s products across the board.
SO: Why is that? Is it because they were burned in the past, or do they feel the solution vendors are offering are the right fit, or are they doing that to maintain multiple vendors?
Freeland: A lot of companies do feel they were burned in the past. Many felt they were sold a bill of goods - the answer to their customer challenges was all about implementing technology. As we all know now, winning the war for the customer is more involved than just installing technology. In the past many companies also neglected certain key factors when implementing technology that had a big bearing on the degree of their relative success. So for example, companies would implement new CRM software without taking the time and having the attention to detail to get the customer data right. So you could implement great technology, but still not get it right with the wrong quality of customer data.
For all those reasons I think organizations are a lot more cautious, and are trying to get much more internal clarity in terms of what they are trying to achieve from their CRM initiatives before buying a software package. Companies are also weighing the benefits of getting everything from one vendor versus the benefits of best of breed and integrating different software components themselves. They are also more and more focused on the need to tie their CRM application into their ERP applications.
SO: So are companies coming to regard CRM as just another component in their overall solution?
Freeland: Yes and for those companies there are pros and cons of going with a single vendor versus having multiple vendors. Most companies don’t want to have only one vendor they deal with across the board. On the other hand, companies appreciate the simplicity of not having to deal with too many vendors. Different organizations are making different choices. Some are opting for best of breed and some are opting for an integrated suite of solutions from a single vendor.
SO: How is Siebel Systems responding to this trend?
Freeland: This is still a work in progress, but I believe Siebel is serious about moving away from only selling package products to making parts of their solution available as components. It is still early to see if strategy gets as much traction in the marketplace as Siebel is hoping.
SO: Why are companies interested in component software?
Freeland: This comes back to the fact that most clients don’t want to sign on for a single monolithic architecture that makes them beholden to a single vendor. And at the end of the day, most vendors would prefer to be the sole source of technology. Most customers want the ability to mix and match components in a way that provides best of breed in their CRM applications and best of breed in their ERP. Those companies will be suspicious of vendor approaches to own the unifying architecture.
SO: Does that create an opportunity for new competitors?
Freeland: Brand is very important when it comes to buying decisions. Even though the landscape is more competitive than it was a few years ago, customers don’t have to go to vendors that don’t have a lot of brand presence at this point. Most organizations want to know there is some stability in the vendors they are dealing with, and the big vendors, the Siebels, the SAPs and increasingly The Salesforce.coms have that advantage over new entrants. CIOs have enough choices in front of them; the companies they favor now will be around for a while.
SO: Does this mean an end to competition in the Enterprise Software market?
Freeland: There are two opposing trends taking place in the market right now. One is industry consolidation, the other is creative destruction. In the past, creative destruction has won out. All the general ledger systems like McCormick & Dodge were replaced by suites like PeopleSoft, SAP or Oracle so the forces of creative destruction have prevailed over the forces of consolidation. But the market may be changing now, we will have to wait and see. I don’t think the marketplace is going to want one solution to anything. In general, clients like best of breed, clients need flexibility, clients want to mix and match products. In a large global company it would be impossible to impose a single solution even if you wanted to. While I think there is going to be some consolidation, I also think there is always going to be room for innovation and creative destruction. There is going to be a lot of competition in this sector so it is important for Siebel and the other providers to continue to invest and differentiate their solution.
SO: Do you think services firms are undervalued relative to software firms?
Freeland: These are two very different business models. Software companies have the advantage of scalability, if they can in fact stick to their knitting and reinvest in market leading intellectual property. In contrast to a software company, a services business isn’t saddled with an installed base, legacy code and a support infrastructure. As technology changes, it’s easier for a services business to change on a dime and not beholden to yesterday’s technology. There are benefits to both business models, at the end of the day what I like about the services company model is the fact that a well run organization over the decades will go through multiple waves of technology and have the opportunity to lead the market. A software company, if they are not careful to keep themselves market relevant, face the risk of being forced back on their heals and reacting rather than initiating changes in technology. Software companies can be like fireflies and come and go. They may burn brightly for a while and then it is off to the next thing. The market is consolidating so the events of the past may not be as likely to occur in the future, but that’s the contrast I would make. Which model do I like better? I like the services model of being constantly able to change and stay ahead of the market.
John Freeland is the global managing partner of the Accenture Customer Relationship Management service line, responsible for the company's CRM business worldwide. In his 25 years of experience at Accenture, Mr. Freeland has advised clients in many industries, particularly in financial services, on how to create more profitable customer relationships and superior brand value. He holds an MBA from Columbia University's Graduate School of Business Administration.
Hi John. Here I am fooling around on the internet and up you come with my name! For your information I am a Scot with Irish ancestory on my mothers side and descended from a scot on my fathers side. How on earth did you arrive at where you are now?
The Freeland name is quite rare, there are not many of us around!
It would be nice to hear from you.
Regards
John McDonald Freeland
Posted by: John Freeland | June 26, 2006 at 03:59 PM
Hi John... I thought you left Accenture? Did you return, or didn't you leave after all?
I'm now living in Maine, project managing an Elec. Medical Record system implementation. A big question is whether to stay with our current billing system, or use the billing module of the EMR package we bought. I did a Google for sole source vs. best of breed, and up you popped! Of course, I always knew YOU were best of breed... !
Hope all's well with you. Steve
Posted by: Steve Mortimer | December 15, 2006 at 11:09 AM