The History of CRM -- Moving Beyond the Customer Database

Customer Relationship Management (CRM) is one of those magnificent concepts
that swept the business world in the 1990’s with the promise of forever changing
the way businesses small and large interacted with their customer bases. In the
short term, however, it proved to be an unwieldy process that was better in
theory than in practice for a variety of reasons. First among these was that it
was simply so difficult and expensive to track and keep the high volume of
records needed accurately and constantly update them.

In the last several years, however, newer software systems and advanced
tracking features have vastly improved CRM capabilities and the real promise of
CRM is becoming a reality. As the price of newer, more customizable Internet
solutions have hit the marketplace; competition has driven the prices down so
that even relatively small businesses are reaping the benefits of some custom
CRM programs.

In the beginning…

The 1980’s saw the emergence of database marketing, which was simply a catch
phrase to define the practice of setting up customer service groups to speak
individually to all of a company’s customers.

In the case of larger, key clients it was a valuable tool for keeping the
lines of communication open and tailoring service to the clients needs. In the
case of smaller clients, however, it tended to provide repetitive, survey-like
information that cluttered databases and didn’t provide much insight. As
companies began tracking database information, they realized that the bare bones
were all that was needed in most cases: what they buy regularly, what they
spend, what they do.

Advances in the 1990’s

In the 1990’s companies began to improve on Customer Relationship Management
by making it more of a two-way street. Instead of simply gathering data for
their own use, they began giving back to their customers not only in terms of
the obvious goal of improved customer service, but in incentives, gifts and
other perks for customer loyalty.

This was the beginning of the now familiar frequent flyer programs, bonus
points on credit cards and a host of other resources that are based on CRM
tracking of customer activity and spending patterns. CRM was now being used as a
way to increase sales passively as well as through active improvement of
customer service.

True CRM comes of age

Real Customer Relationship Management as it’s thought of today really began
in earnest in the early years of this century. As software companies began
releasing newer, more advanced solutions that were customizable across
industries, it became feasible to really use the information in a dynamic way.

Instead of feeding information into a static database for future reference,
CRM became a way to continuously update understanding of customer needs and
behavior. Branching of information, sub-folders, and custom tailored features
enabled companies to break down information into smaller subsets so that they
could evaluate not only concrete statistics, but information on the motivation
and reactions of customers.

The Internet provided a huge boon to the development of these huge databases
by enabling offsite information storage. Where before companies had difficulty
supporting the enormous amounts of information, the Internet provided new
possibilities and CRM took off as providers began moving toward Internet
solutions.

With the increased fluidity of these programs came a less rigid relationship
between sales, customer service and marketing. CRM enabled the development of
new strategies for more cooperative work between these different divisions
through shared information and understanding, leading to increased customer
satisfaction from order to end product.

Today, CRM is still utilized most frequently by companies that rely heavily
on two distinct features: customer service or technology. The three sectors of
business that rely most heavily on CRM -- and use it to great advantage -- are
financial services, a variety of high tech corporations and the
telecommunications industry.

The financial services industry in particular tracks the level of client
satisfaction and what customers are looking for in terms of changes and
personalized features. They also track changes in investment habits and spending
patterns as the economy shifts. Software specific to the industry can give
financial service providers truly impressive feedback in these areas.

Who’s in the CRM game?

About 50% of the CRM market is currently divided between five major players
in the industry: PeopleSoft, Oracle, SAP, Siebel and relative newcomer
Telemation, based on Linux and developed by an old standard, Database Solutions,
Inc.

The other half of the market falls to a variety of other players, although
Microsoft’s new emergence in the CRM market may cause a shift soon. Whether
Microsoft can capture a share of the market remains to be seen. However, their
brand-name familiarity may give them an edge with small businesses considering a
first-time CRM package.

PeopleSoft was founded in the mid-1980’s by Ken Morris and Dave
Duffield as a client-server based human resources application. In 1998,
PeopleSoft had evolved into a purely Internet based system, PeopleSoft 8.
There’s no client software to maintain and it supports over 150 applications.
PeopleSoft 8 is the brainchild of over 2,000 dedicated developers and $500
million in research and development.

PeopleSoft branched out from their original human resources platform in the
1990’s and now supports everything from customer service to supply chain
management. Its user-friendly system required minimal training is relatively
inexpensive to deploy. .

One of PeopleSoft’s major contributions to CRM was their detailed analytic
program that identifies and ranks the importance of customers based on numerous
criteria, including amount of purchase, cost of supplying them, and frequency of
service.

Oracle built a solid base of high-end customers in the late 1980’s,
then burst into national attention around 1990 when, under Tom Siebel, the
company aggressively marketed a small-to-medium business CRM solution.
Unfortunately they couldn’t follow up themselves on the incredible sales they
garnered and ran into a few years of real problems.

Oracle landed on its feet after a restructuring and their own refocusing on
customer needs and by the mid-1990’s the company was once again a leader in CRM
technologies. They continue to be one of the leaders in the enterprise
marketplace with the Oracle Customer Data Management System.

Telemation’s CRM solution is flexible and user-friendly, with a
toolkit that makes changing features and settings relatively easy. The system
also provides a quick learning environment that newcomers will appreciate. Its
uniqueness lies in that, although compatible with Windows, it was developed as a
Linux program. Will Linux be the wave of the future? We don’t know, but if it
is, Telemation’s ahead of the game.

The last few years…

In 2002, Oracle released their Global CRM in 90 Days package that promised
quick implementation of CRM throughout company offices. Offered with the package
was a set fee service for set-up and training for core business needs. .

Also in 2002 (a stellar year for CRM), SAP America’s mySAP began using a
“middleware” hub that was capable of connecting SAP systems to externals and
front and back office systems for a unified operation that links partners,
employees, process and technologies in a closed-loop function.

Siebel
consistently based its business primarily on enterprise size businesses willing
to invest millions in CRM systems, which worked for them to the tune of $2.1
billion in 2001. However, in 2002 and 2003 revenues slipped as several smaller
CRM firms joined the fray as ASP’s (Application Service Providers). These
companies, including UpShot, NetSuite and SalesNet, offered businesses CRM-style
tracking and data management without the high cost of traditional CRM start-up.

In October of 2003, Siebel launched CRM OnDemand in collaboration with IBM.
Their entry into the hosted, monthly CRM solution niche hit the marketplace with
gale force. To some of the monthly ASP’s it was a call to arms, to others it was
a sign of Siebel’s increasing confusion over brand identity and increasing loss
of market share. In a stroke of genius, Siebel acquired UpShot a few months
later to get them started and smooth their transition into the ASP market. It
was a successful move.

With Microsoft now in the game, it’s too soon to tell
what the results will be, but it seems likely that they may get some share of
small businesses that tend to buy based on familiarity and usability. ASP’s will
continue to grow in popularity as well, especially with mid-sized businesses, so
companies like NetSuite, SalesNet and Siebel’s OnDemand will thrive. CRM on the
web has come of age!

This article on the "The History of CRM" reprinted with
permission.

Copyright © 2004-2005 Evaluseek Publishing.

About the Author

Lucy P. Roberts is a successful freelance writer providing practical information and advice for businesses about everything related to CRM software solutions and live chat software. Her numerous articles include tips for saving both time and money; product reviews and reports; and other valuable insights for persons searching the Internet for information about how CRM software works and related topics.

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