The History of CRM -- Moving Beyond the Customer Database

By Lori Wilkerson
Posted Saturday, February 12, 2005

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 Evaluseek Publishing.

About the Author
Lori Wilkerson is a full-time freelance writer who has extensively researched CRM software, customer support software and live chat software. She has been a customer service representative in the retail and technology sectors and is currently honing her skills as a customer in the shopping malls of America.