Beware Little CRM Tools

CRM Technology Rule #1

Avoid small CRM software vendors.

When it comes to CRM, 99% of the time, technology doesn’t matter. But here’s when it does matter: You don’t want to be on a rinky-dink little CRM platform and have it go out of business or get bought, choose a beloved, large-scale CRM platform only to see it go to seed.

Having an entire ecosystem is a big deal. People have learned that lesson the hard way with CRM. Even a $5.85 billion company such as Siebel can be bought, and see its fortunes change. What’s happened since Oracle closed its acquisition of Siebel in 2006? Just one major release. Whereas in the same time frame, Salesforce.com put out four releases per year, and added such features as Twitter, Facebook and Microsoft Outlook integration.

Cross The CRM Software Chasm

My “avoid small CRM players” argument has been dinged as a “sales pitch.” But I’d argue that it’s really a reality pitch. (And for the record: Innoveer doesn’t sell or profit from the sale of any CRM software purchase.) In my reading of Geoffrey Moore’s Crossing The Chasm, when a market becomes mature, it collapses to a leader that has about 80% market share and earns probably 90% of the market’s revenue. Meanwhile, every other company is fighting for the 10% of revenues left over.

With the market-leader’s dominance comes a related, platform effect, meaning that the market leader naturally attracts and fosters a large ecosystem of third-party experts, who make possible and reinforce the vendor’s success.

Numbers also tell the story. How much does a company spend on CRM software R&D? For Salesforce.com, with 6,000 employees, 2010 spending on R&D was $132 million. Compare that to some of the smaller players, such as SugarCRM, which doesn’t disclose revenues but has 154 employees on LinkedIn, or Sword Ciboodle, which has 109 employees on LinkedIn.  Do their revenues even add up to what Salesforce.com or Microsoft spends on CRM R&D every month?

Preview CRM Success +5 Years

Picking the non-commoditized option is a sure way to hurt yourself. Now, while Moore’s argument is a great, broad-strokes concept, the CRM market is still evolving. Meaning that when it comes to picking the non-commoditized option, we’ve always recommended that companies look at the top options: Oracle CRM On Demand, Salesforce.com, and Microsoft CRM Dynamics. For life sciences, also evaluate Cegedim, and if you’re an SAP shop, by all means investigate using SAP for CRM.

Pick The Gorillas Or Start Job-Hunting

If you’re an IT manager, sales executive, or marketing executive, and you pick a solution that’s not the gorilla in that space, you need to have a really good reason for doing so. Otherwise, you’ll be looking for a new job.

For example, before selecting new CRM software, Innoveer client Aggregate Industries asked Gartner Group which CRM vendors it could take a “long journey” with. In other words:

• Which software vendors will likely still be in business in a few years?
• How does their functionality compare?
• Will they maintain their products for the long term?
• Do they boast an ecosystem of third-party consultants, vendors, support and maintenance options?

Based on the company’s needs, and Gartner’s assessment, Aggregate produced a short list: Oracle CRM On Demand, Salesforce.com and — possibly — Microsoft CRM.

CRM Smackdown Draws Heavy Hitters

Both my analysis of cloud versus on-premise CRM software and smackdown of CRM vendors have drawn complaints from smaller CRM vendors, who ask why I’d recommend just the large players.

Here’s the short answer: If you’re going to buy a CRM product, buy it from a company that’s not just going to be around for a while, but also growing and aggressively innovating. Because outside of the market leaders, except in some very specific situations, the little contenders don’t add up.

Learn More

Which CRM software is best? Read our CRM Smackdown to find out.

But to ensure that your CRM program excels, don’t start with technology. Instead, ensure your CRM program achieves your business goals. To help, review our “top 10” marketing, sales or service steps to see how your program compares to best practices and our benchmarks.