CRM Goes Small To Get Big Again

Oracle isn't saying much about its plans to integrate Siebel Systems, either on a technical or strategic level, leaving pundits to speculate on what may be going on inside the head of Oracle CEO Larry Ellison. But when it comes to Ellison, people soon discover that like many of the companies he has acquired over the last few years, it's all about CRM. In this case, however, that acronym stands for Can't Read (his) Mind.

Certainly, Oracle's acquisition spree, which includes the pending acquisition of Siebel, PeopleSoft ($10 billion in December 2004) and, by default, J.D. Edwards and Vantive, which were previously acquired by PeopleSoft, will have a significant impact on the customer relationship management solutions market. However, other forces also are changing the look of CRM. Convergence and competition are combining with hard lessons learned in the go-for-broke days of the late 1990s (and go broke they did.)

Analysts have blasted some CRM implementations as too big, too expensive and too difficult to measure in terms of success — or payback. And vendors such as Oracle and Amdocs say they have learned their lessons, as have service providers. But enthusiasm for CRM solutions has not waned.

“CRM is trying to address some things the Tier 1 carriers know they need to address in a competitive environment,” said Larry Goldman, analyst and co-founder of OSS Observer. “It is probably more important in telecom than it has ever been. The more competition you have, the more customer-focused you need to be.”

Oracle's Yancy Oshita, senior director of global communications and media industries, acknowledged that the industry struggled with CRM in recent years but said vendors and service providers have changed their approach somewhat to deploying CRM in a telecom environment.

“Any IT project, particularly where you are changing business processes, is inherently risky,” he said. “CRM is even more risky because many of these processes, especially in telecom with their legacy processes, are going through extreme changes.”

A lot of industries have legacy systems, and a lot of industries have had success with CRM implementations. So what makes telecom so special?

“It's not like human resources, where every vertical market uses similar processes,” Oshita said. “When you get into service ordering for telcos that are offering circuit-switched services and VoIP services and lots of other services, all the setups required and the source systems and integration are unique to telcos.”

That, and the small matter that the idea of real-time has become a real demand. “We're not talking about data warehousing anymore,” Oshita said. “[Carriers] need access to customer data while they have their customers on the phone.”

One of the keys to CRM in a telecom environment is in helping the service provider transform their business model from a product, or network, focus to being customer focused, Goldman said.

The difficulty with this, he said, has been effectively linking CRM systems with the underlying systems used to support the customer, whether it's having the data to answer billing questions or getting the order right the first time.

Oracle says it has made some headway in this direction by following its corporate mantra of simplicity. In June, the company launched what it calls standard accelerators, which is a marketing term for pre-built implementations that use a codified set of wizards to supply all the logic required to set up a CRM software implementation as well as other software solutions.

These accelerators contain all the logic required for a business process related to back-office functions such as provisioning and order management. Oracle uses them to get instances of software up and running with customer data in a matter of days. “And it's not just about the speed. We take the inherent risk out of the process of changing business processes,” Oshita said.

As an indicator that CRM implementations and the ability to measure their success has improved, Oshita said recent deployments have already seen return on investment through three metrics: taking cost out of the business through automation; improved customer insight, which led to better cross-selling; and better targeted customer treatment, which led to better retention rates.

These three metrics will make the difference for service providers in a competitive environment, Oshita said.

“Network people won't win or lose on how great their network is but based on how well they know their customers and how much better they can take advantage of customer information in real-time.”

That is because among those with whom carriers will compete that have networks, they all have great networks. And among those with whom they will compete that don't have networks, all they have with which to compete is their customer service — and maybe a unique feature here and there.

As for the vendors, their biggest competition in the Tier 1 market remains the internal IT departments. “Telcos are more likely to want to build their own solutions than people in other industries,” Goldman said.

Although this makes it tough for companies like Oracle, Amdocs and others to secure the big CRM transformational implementations, it does open doors for their individual modules. It also opens the door for solutions from smaller, niche providers of CRM-based solutions — such as Salesforce.com, which does sales force automation, or E.piphany, which was acquired by SSA Global last week — and the myriad of specialized customer care and integrated voice response providers and business intelligence software providers.

“The small guys get used by the Tier 1s as they assemble their own systems. They can also win Tier 2 and Tier 3 business in their own,” Goldman said.

He also said the Oracle acquisition spree could help companies like Amdocs as well.

“To the extent service providers may be uncomfortable that Oracle is now the only other source [of full CRM solutions], it could help them,” Goldman said.

The possibilities have not been lost on Amdocs.

“It is reducing the number of choices in the market, that's for sure,” said Scott Kolman, director of product marketing for Amdocs.

He also said that the moves by Oracle validate Amdocs' view that the preference for best-of-breed software solutions has been replaced by best-of-suite solutions. (Both companies agree on this view.)

“Having a broad capability is the important thing to carriers,” Kolman said. “They aren't buying at the product level anymore. They buy at the solution level. Carriers want a solution to be delivered, regardless of how many products or partners it takes to solve.”

Kolman has also seen a shift in the way carriers are implementing those solutions and in the way they look for return on investment. They no longer go for the big payoff right away. Most implementations are done in phases, with the success of one depending on the success of the previous phase.

“They have a big picture plan, but they are creating measurable chunks — or phases — of projects and identifying what needs to be accomplished on each step of the journey. It's also an attractive plan to the CFO,” Kolman said.

Mostly, Kolman and others see opportunity in the potential distraction of Oracle's continuous acquisition integration. “When the Siebel acquisition is complete, Oracle will have between five and seven CRM product lines,” he said. “They will have their hands full for the next year or two just working out product rationalization, road maps, integration and organizational change.”

Oracle expects the Siebel acquisition to close in early 2006. Some analysts and at least one competitor have said they suspect Oracle might shut down Siebel's OnDemand CRM system because it is built on an IBM platform. However, in a corporate statement, Oracle said it plans to make Siebel CRM the centerpiece of its Fusion CRM product line. Oracle also plans to support Siebel systems running on IBM DB2 and Microsoft SQL Server.

Amdocs has its own integration challenge with the recent acquisition of DST Innovis, which expanded Amdocs' CRM capabilities into the cable and satellite communications businesses. However, the scale of integration is quite different.

Amdocs also recently acquired Longshine, which is a system integrator specializing in customer care in China. Again, not much of an integration issue but an expansion into new markets.

Vendors and Goldman seem to disagree on the level of opportunity in emerging markets like China and Eastern Europe. Amdocs' Kolman said that although providers in Eastern Europe and Russia are a little behind in adopting a customer focus, they are playing catch up at a very accelerated rate.

Oracle's Oshita said that without question the company is getting a lot of end-to-end software suite deals in emerging markets. It also is seeing traction with wireless operators and mobile virtual network operators.

As for the newly emerging ISPs and re-emerging CLECs, Oshita laughs. “It's difficult to predict what business model will work. The cost of entry is so much easier in businesses like VoIP, that it is hard to tell how the business model will work,” he said. “But one thing is for sure, they are all going after the same customer and will need to get the best customer view they can. That's why we see an uptick in general.”