Customer relationship management or CRM as a model has it roots in three primary areas: call center systems, help desk applications and sales force automation, or what some have called the “front-office functions.” In the mid-1990s several platform providers like Siebel and Clarify (now Amdocs) emerged, driven primarily by acquisitions, to offer consolidated functionality across the entire front-office, while the “back-office” providers like SAP and Oracle generally remained focused on areas like finance, supply chain management and as it emerged, e-business.

In a way, the consolidation of front-office and back-office functionality under one umbrella—like we see with the Oracle-Siebel deal and saw before that with the PeopleSoft-Vantive deal—has been a long time coming. The benefit of having one database and common set of end-user tools is attractive. Plus, the return on traditional, stand-alone CRM investments has been mixed at best, especially when it comes to large-scale deployments. I know of several global organizations that have spent more than $100 million on CRM projects and are still uncertain what real value they have received!

It’s (Still) About the Customer
Despite its name, one can argue that the greatest shortcoming of CRM is that it never really was about directly helping customers. Solutions were sold to executives running call centers or sales organizations as a way to wring out inefficiency, force standardized processes and gain better insight into the state of the business. In particular, what most CRM and CTI systems provided was a way to track customers, route and facilitate inbound communications and report on the progress of various marketing, sales or support activities.

But what these solutions generally did not address was the need to help organizations resolve customer problems, answer their questions faster or help customers solve their own problems. For this reason, we have seen a slow but steady shift in focus and investment from automating core internal front-office functions to streamlining edge processes like online customer support, product returns or account management.

In parallel, there has been a recent wave of innovation powered by Internet standards, open source software and on-demand delivery models, as well as a renewed interest in areas like knowledge management and what some are calling service resolution management or SRM. As defined by leaders in this sector like Knova Software, SRM aims to improve access to corporate knowledge by breaking down silos, simplify the authoring and capture of new content and provide more consistent answers across all sales and service channels.

Other innovators who are filling the gaps inherent in “old-school CRM” include e-commerce and personalization pioneer ATG; RightNow with its innovative on-demand customer support and self-service offerings; e-billing and online account management specialist Netonomy; Genesys and Talisma with their customer interaction management solution platforms; and content optimization specialist SafeHarbor. At the same time, several vertical solution providers like Astute Solutions and Chordiant have created next-generation applications which fill industry-specific requirements.

A New Model for CRM v.2
What is the future of CRM—or CRM v.2 if we decide that CRM v.1 is, in fact, dead? First, there must be a core driven by business rules and even knowledge management, rather than just a database. Second, solutions must address all modes of interaction, whether with an agent or salesperson, on the Web via self-service, or peer-to-peer via user forums and other collaboration techniques. Third, solutions must be adaptive, by applying analytics and personalization approaches, so that organizations can anticipate customer needs, proactively push out solutions, recommendations or offers based on who the user is, their skill level, what their preferences are, etc.

More generally, the on-demand delivery model appears to be here to stay, although we feel that all deployment options should ideally be supported. The use of open source and developer source-based components such as those from Jive Software are also gaining momentum, especially for multi-channel “edge” functions like customer forums or enterprise instant messaging.

For the design center, we look for CRM v.2 to be simpler to use, more open and more adaptive. It also must be inherently multi-channel, as Gartner’s customer interaction hub model suggests. The customer adaptive solutions theme announced at Siebel CustomerWorld also seems on the right track. And there is the argument being made by Greg Gianforte at RightNow that on-demand delivery coupled with open source infrastructure may be the most efficient way to bring these types of applications to market, a view that has a lot of merit.

So, while CRM as a model is continuing to evolve, as a market it is definitely entering a phase where “big-bang” deployments are likely to be the exception, and ways to more efficiently reach underserved users and improve responsiveness via add-ons like user forums, a self-service knowledge base or customer analytics become the focus. Solutions will also need to be integrated, if not as part of one platform, at least in terms of common standards, and a common focus on the customer rather than only customer processes. The future of CRM as a viable approach and market depends on it!

Allen Bonde is the senior vice president of strategy & marketing at eVergance, a management consulting and systems integration company focused on CRM optimization and Web self-service. Prior to that, he was the founder of strategic advisory firm ABG, Inc., a practice expert at McKinsey, director of management consulting at Extraprise, and an analyst at the Yankee Group.