by JD Sartain

How the Internet of Things Drives CRM Investments

News Analysis
Apr 03, 20145 mins
Big DataCloud ComputingCRM Systems

Customer relationship management will be at the heart of companies' digital initiatives for years to come, Gartner says. What's more, the billions of devices connected on the Internet of Things are joining cloud, social, mobile and big data technologies as the fifth driver of CRM investments.

Organizations are leveraging customer relationship management (CRM) technologies as a major part of their digital initiatives to enhance the customer experience, according to a recent Gartner report. Demand for modern technology customer relationships is driving refreshed or expanded integration and usage of all areas of CRM software. The outlook continues to be positive for CRM as buyers focus on technologies that enable more-targeted customer interactions in multichannel environments.

“CRM will be at the heart of digital initiatives in coming years. This is one technology area that will definitely get funding as digital business is crucial to remaining competitive,” says Joanne M. Correia, research vice president at Gartner. “Hot areas for CRM investment include mobility, social media and technologies, Web analytics and ecommerce.”

Internet of Things Joins Cloud, Social, Mobile, Big Data

The main drivers behind CRM — cloud, social, mobile and big data technology — are being joined by a fifth factor: The Internet of Things, where sensors connecting things to the Internet create new services previously unimagined.

As cars, buildings, bodies and even chairs are connected to the Internet, and as the price of sensors and communications drops, the Internet of Things will transform the automotive, construction, healthcare and hospitality industries, among many others. At the forefront of this shift will be sales, marketing and customer service departments that promote, sell and support these new services, Gartner says.

In the sales, marketing and customer service departments, marketing is being forced to monitor, communicate and engage in social commerce business with several hundred public social networks. Customer service has to respond to tweets and Facebook and LinkedIn discussions, Gartner notes, as new service channels and sales now use social media as a source of new leads and intelligence on prospects.

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Smartphones, tablets and mobile apps force change at an even faster rate than social networks. Connections to the Internet via smartphones will exceed PC users by the end of 2014 and smartphones have already overtaken PCs as the most common tool for accessing social networks in most countries, Gartner says. Bring your own device (BYOD) policies are springing up around the globe as IT departments are forced to support a proliferation of devices. It is tablets, however, that are causing the most disruption, as sales departments and board directors purchase them first and demand support later.

Marketing departments have been most impacted by the explosion in customer information available to businesses during the past five years. Predictive analytic models for customer churn analysis, product and service recommendations direct to the customer and/or prompts for salespeople are all becoming more sophisticated. Thus, the big data is available and the tools are emerging, but the problem is the lack of skills and resources to use big data tools.

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The cloud and CRM have a long history together, starting with the rise of application service providers in the late 1990s. In many ways, the low-hanging fruit for cloud adoption has already been picked, according to Gartner. The remaining areas of CRM application functionality will be ever harder to adopt in a cloud delivery model, so the switch to cloud will steadily slow.

Correia says these five drivers spur a “critical need” for more traditional, operational CRM. “This further validates businesses’ focus on enhancing customer experience and consistent investment in CRM software, especially in CSS, marketing and sales software,” she says.

Line-of-Business Buyers Have Different CRM Requirements

Gartner expects CRM market growth to stay moderate in 2014, following three strong years of investment. CRM software revenue is forecast to reach $23.9 billion in 2014, with cloud revenue accounting for 49 percent. SaaS- or cloud-based CRM deployments currently represent more than 40 percent of all CRM deployments and look set to reach 50 percent during 2015.

The largest spending industries include banking, insurance, securities, telecommunications, pharmaceutical, consumer goods, manufacturing and IT services, “as they have the widest use of different types of CRM applications and technologies,” says Ed Thompson, vice president and distinguished analyst at Gartner. “All these industries are also increasing investment in emerging economies, further driving spend.”

Customer support and service (CSS) involves IT leaders, vice presidents and directors of customer service in customer support/relationship initiatives. They look at targeted uses of big data analytics, peer-to-peer communities and the evolving customer engagement center — seen as the next generation of the customer service contact center — for critical processes and technologies. A central focus of the CSS organization is engineering consistent, differentiated, cross-channel customer experiences, all while supporting the need for increased use of customer self-service.

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Ecommerce is top of mind for CEOs, chief marketing officers (CMOs) and senior executives as they seek the capability to improve overall customer experience, profitability and sales. At the same time, marketing technology is a hot area for IT investment, but solution decisions are increasingly being driven by CMOs and the marketing organization, with little to no IT involvement.

CIOs need to work more closely with CMOs and marketing leaders to adapt to the increasing technology demands emanating across the marketing organization. Mounting pressure on CMOs to drive growth, improve accountability and reduce costs pushes marketing organizations to make significant marketing technology investments across a broad set of applications and functionality.