These days, most businesses are asking not whether they need customer relationship management applications to help them develop profitable relationships with their online customers, but which applications will allow them to accomplish that goal.
The CRM market offers a confusing spectrum of solutions that frequently fail to integrate either with other solutions or with legacy systems present within an enterprise. Spending time and capital on such problematic solutions can allow rival businesses to win market share as they gain and retain customers of their own.
In response to the competitive urgency of understanding, anticipating and servicing the needs of their customers, more businesses are outsourcing their CRM projects to CRM companies that offer the skills, technology and infrastructure to provide rapid results.
Despite concerns about issues such as application design or data control, the technological and analytical demands of a truly effective CRM solution are beyond the capabilities of most companies. Outsourcing removes this burden, letting companies devote resources to their core competencies and leave specialized vendors, often with vertical market expertise, with the task of transforming customer data into actionable marketing information.
The primary goal of any CRM application must be to give businesses a comprehensive understanding of their customers so they may develop relationships that increase loyalty, retention and profitability.
Businesses expecting this kind of detailed customer information rely on information technology departments to capture data from multiple sources, integrate the data in a centralized warehouse for analysis and distribute the results of that analysis to various customer contact points around the enterprise.
This effort, however, frequently results in internal inertia caused by the incompatible needs, resources and capabilities of marketing and IT departments. An outsourced CRM solution can bridge the gap between these departments by providing the infrastructure and data analysis required to create marketing intelligence from raw data.
Even for companies that have IT and marketing departments working toward a common CRM goal, there are benefits to the outsourced model. Most important are the potential cost savings. A marketing database and related applications represent a significant investment for many companies. The cost of hardware and software for managing customer relationships often approaches $1 million for an average-size customer base.
For companies with millions of customers and prospects, costs will be even greater. Part of the reason is that such projects are often large enough to require their own resources — dedicated servers, backup platforms and software licenses — but not large enough to fully justify the cost of each component. For instance, servers must be purchased to accommodate peak demand periods from users as well as future growth in demand, but they often will be underused much of the time. By contrast, a hosted solution not only leverages preconfigured and tested applications, but also can pass on the benefits of keeping pace with costly technological changes as the costs are shared among many clients.
In addition to the hardware and software, building and managing a marketing platform require an investment in human resources. Beyond the costs of integrating packaged CRM applications, companies need to train or hire IT and marketing staff to realize the full capabilities of each application. Internal resources often are underused during routine activity and overtaxed when new development occurs. Service providers, however, are able to spread out their human resources more efficiently than many companies.
Even more importantly, critical analysis of customer data requires skills and training frequently absent among internal marketing and IT departments. An outsourced analytical vendor offers the skills of statistical analysts conducting data mining, segmentation and predictive modeling on data integrated from online and offline sources.
Customizable, client-specific analysis can give companies a clear, competitive advantage when trying to identify and reach their most profitable customers. Automated data mining software applications, because they describe and report on past customer activity, often lack the ability to forecast future customer behavior to meet specific objectives.
Another advantage of an outsourced solution is quicker time to market. It is a simple fact of many corporate IT projects that development usually takes longer than planned. This results mostly from competition for resources and because, too often, user and developer teams tend to reinvent the wheel.
Add to this the time for selecting and buying hardware and software, integrating components and developing applications, and delays seem to be predestined for many projects. Outsourcing lets companies take advantage of service providers that already have standard configurations for hardware and software and may have systems that can be put into operation immediately. Companies that choose a vendor with experience of CRM business requirements can skip the learning curve and profit immediately from shared knowledge and practices.
The advantages of outsourcing seem even more compelling compared with the risks of inhouse solutions that often take a year to install, may prove costly and are frequently ineffective. Of course, guarantees are needed within the service-level agreement regarding concerns over integration, data control and security.
For example, the service provider must be flexible and supportive in returning the data, should the relationship end. But once these assurances are given, the provider swiftly can begin to stream customer data into its existing marketing platform to provide actionable marketing information for companies that need to identify, target and reach their most valuable customers.
